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Weekly Market Wrap

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Special Release from the 10th Annual Silver Summit

Exclusive Interview with Silver Expert David Morgan, editor of Money, Metals, and Mining

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Don't want to listen? Read the podcast below!

Announcer:

Welcome to Money Metals Exchange's weekly market wrap podcast. Helping precious metals investors during these treacherous times. Now, here's this week's market wrap with commentary and analysis from the fastest growing precious metals dealer in America, Money Metals Exchange.

Mike Gleason:

Hello everyone, this is Mike Gleason and welcome to a special edition of the weekly market wrap podcast.

I'm reporting to you today from the Silver Summit in Spokane, Washington. It's the biggest event of the year for silver investors.

I've had the pleasure of meeting a lot of great people here with interesting insights to offer. And later in this podcast we'll have a special interview with leading silver expert and keynote speaker here at the Silver Summit, David Morgan.

First, though, I want to share some of my observations from the Silver Summit as it kicked off on Thursday.

I'm impressed with the high level of enthusiasm I'm seeing here, especially considering silver's lackluster performance over the past year and a half. Most of the conference attendees seem to be hardy, long-term investors who aren't discouraged by temporary price pullbacks. They know where the fiat monetary system is ultimately headed, and that's for a major meltdown.

In the crowded main speaking hall we heard from multiple analysts and from several corporate presenters, including Phil Baker, CEO of the largest U.S. silver producer, Hecla Mining.

Baker noted that annual silver demand of nearly one billion ounces comes mostly from various consumer product applications. Uses for silver constantly expand as technology expands.

Baker said that half of all current silver uses have emerged since World War II. And he expects that an old use – that of silver as a store of value – will play a leading role in driving prices higher.

All it takes is a tiny percentage increase in the number of individuals who want to own silver as an investment to cause prices in this tight market to skyrocket. That's what we expect will happen as the emerging currency crisis unfolds. And that result will be a manic move in precious metals.

As long as silver remains below its 1980 peak of approximately $49.50 an ounce, we can't seriously consider the possibility that a mania phase has begun. So for now, conditions for accumulating silver remain favorable.

Turning to this week's market action, prices for silver, gold, and the platinum group metals recovered on Thursday after selling off earlier in the week. Gold bounced off a support level at $1,700. And silver closed back above $32 an ounce as we headed into the final trading day of the week.

The metals are well-positioned to rally from here off short-term oversold technical readings – especially as November approaches, which tends to be the best month of the year for the metals.

But alas, it is an election year – one that features a very tight race for the presidency and for control of the Senate. So we can't rule out strange machinations and manipulations in the days ahead.

In the long run, however, the fundamentally flawed U.S. dollar points to an upward revaluation of precious metals, regardless of the election outcome.

Now, for some more in-depth insights into the silver market, here's our exclusive interview with one of the most widely respected silver experts in the industry, David Morgan...

Stefan Gleason:

David, welcome.

David Morgan:

Thank you Stefan. It's great to be with you.

Stefan Gleason:

This is the 10th anniversary of the Silver Summit. You were instrumental in putting this together. It's a tremendous collection of people and, can you just take a moment and tell us a little bit about the Silver Summit. What is the purpose and the history?

David Morgan:

The history is myself and a few others had the idea that there was no silver centric conference anywhere in the world. Since the silver valley is very close to Spokane, and Spokane was actually built on the silver market, believe it or not. We thought it might be a good thing to try and so we started about, as you said, ten years ago, we had our first Silver Summit. It took place in Coeur d'Alene, Idaho and we had 112 people.

What was so interesting about those 112 people is they were from Belgium, Ecuador, South America, Australia, Paris, all over the planet. The Silver Bulls are really enthusiastic about the metal but basically the idea is to, as you said earlier, it's a forum for the industry, be it mining, be it bullion dealers, be it hard money advocates, be it whatever related to the silver industry. They're represented at this conference or at this summit.

Stefan Gleason:

It's a tremendous success so far and we're looking forward to the rest of the conference. There's been a lot of speakers and there's a lot of presenters and booths. What would you say are the most noteworthy developments right now in the silver market that people should know about?

David Morgan:

I'm going to approach that question from a lot of different angles. One, I'd say on the industrial side is that silver is the indispensible metal as it's referred to by the Silver Institute. The high-tech world that we live in relies on a lot of rare earth elements. Silver isn't a rare-earth element but it's a strategic metal and it's used in anything electronic or electrical. Because of that fact, it's uses are compounded year after year after year.

If you go back about a decade, the industrial use of silver is about 35 percent of the market. Now, it's about 55 percent. We continue to use it in our iPhones, our iPads, our desktop computers. It's used in clothing. It's used in a lot of applications it was never used before and that trend continues.

The other part would be on the market side or the investment side. That waxes and wanes like anything so our price does move up and down. In fact, it's one of the most volatile markets out there because it's such a small market. Nonetheless, there seems to be an increase in investment demand.

If you look at the Silver Eagle Program, for about the first ten years when it was initiated in 1986, for about ten years, it was roughly sold roughly ten million ounces on an annual basis. A few years back that doubled at twenty million ounces. In the last year, we were up over forty million ounces. Certainly, the silver story as an investment is getting out to the American public and it is also getting out worldwide. I see a lot more investment demand coming in to silver over the next few years. I also see, again, more industrial demand, probably in areas that none of us even thought of so far.

Stefan Gleason:

There's, obviously on the margins, a tremendous amount of investor interest coming in, in the retail bullion market. We're seeing that at Money Metals Exchange a lot of folks, for the first time, are buying precious metals and getting comfortable with the process and then increasing their positions. It's really encouraging, people know they should buy. They're hearing the story. It's still a very small percentage of the American people, but it's promising.

People are taking matters into their own hands and getting out of paper money and getting into physical silver and gold. What are your thoughts on the sort of debate or the decision that people have to make when they decide "okay, I want to get into the precious metals market." There's mining stocks, there's ETFs, there's physical bullion. How would you start if you were advising somebody who hasn't yet bought? What would be the first thing they should do, the second thing they should do, and so forth?

David Morgan:

I've been very consistent on that point and I'll continue to be so. I'm an advocate from day one that if you're going to get into precious metals, get precious metals. I'm not a bullion dealer so I don't have anything to gain other than that's the most important part of a precious metals portfolio is a portfolio itself. Coins or bullion, or both, very small I'd say.

Coins actually are preferred and, for my way of thinking, but if you're a big investor having bars is fine as well. I would consider a mix for most people and if you have a low budget, go with coins. Once you've established a bullion position that you're comfortable with, then you can look into the mining shares for added leverage. They add leverage on the way up and on the way down.

We've done extremely well with our picks over the years. Not to say that, the market does what the market does and at times we're flat or losing money on paper, but overall the biggest gains I've had have been in the stocks, not in the bullion itself, not counting my trading in the leverage markets which I'm not going to address in this interview. Start small, start simple, and I actually outline that in the ten rules of silver investing and how you really should start in the market and basically answered that question. I'm starting with bullion and then moving into the mining shares later on.

Stefan Gleason:

Yeah, you've been consistent about that and we totally agree, obviously. On the stock-picking side, you're newsletter does have a tremendous track record. Every month you publish your list of top tier, second tier, and more speculative picks and the track record is fantastic. Obviously, there's always going to be some that don't do so well but some of the winners you've picked have really been impressive over the last few years. There's a lot. There's hundreds of mining companies out there...

David Morgan:

Thousands.

Stefan Gleason:

Thousands. So you need the advice of somebody who's on the inside, who's analyzing these people. Knows the personnel, knows about it, and how to analyze a balance sheet and how to analyze a geological report and so forth. It's obviously much more speculative as you pointed out. We're headed into an election here very soon and everybody has their own crystal ball but what does David Morgan think is going to happen and, particularly, how will that effect, if at all, the outlook in the near term and the medium term for the precious metals market?

David Morgan:

I think on a long-term it doesn't matter who wins the election. It won't have any effect. That's on the long-term basis. On a short-term basis, it possibly could. I can't outthink the public but generally speaking if Obama got in again, and that's what I expect to happen, I think you'll see a pretty good serge in the precious metals near term.

If Romney were to get in, I think the market might proceed to think things will change and there might be some slight sell off in the metals and I think it might stagnate and go sideways for a brief time. Reality would hit the markets realizing that it doesn't really matter who's in office. These policies really cannot be changed and you would see an increase in the price of precious metals over time.

Really, I'm benign on the whole thing. I really don't have a strong opinion either way. What I do know is that the system itself is what the problem is and a politician that gets up there and waves his arms and blows a lot of hot air at the public, I think that's really what you're watching, it's kind of a comedy act at this point.

Stefan Gleason:

Certainly good entertainment. We'll find out the result and we'll find out the impact soon. Putting all that aside, going out on a limb here, do you have any price forecasts for 2013 at this point?

David Morgan:

I definitely do. I think we've built a base long enough after the big run up from roughly $26 to $48 in the end of April 2011 and we've washed out into the current timeframe where we've been in about the $30-$35 range. I've predicted $35-$40 by the end of 2012 and I really expect to see $65-$70 by the end of 2013. I think once we've cleared the $48 nominal high that we saw in 2011, silver, knowing this market well, can move from the $50 level to the $60 level in a matter of a few weeks.

What people don't understand about the futures market is that the leverage that is available in those markets, in a small market like silver or platinum or palladium, in those very small markets like that, just a little bit more buy in will send the price up very, very strongly. The other thing about a new high is there's nothing more bullish in the commodities market than a new high.

The reason for that is that everyone that owns it gets greedy and they're going to hold their position because they don't know how high is high. The tendency is, again, anymore buy in pressure at all will push the price higher. Of course, what happens in those instances is that the CME will come in and start raising margin requirements to try to calm the market down and they'll continue to do so until they get the effect that they want. There are people with other opinions than that but that's mine.

Stefan Gleason:

David, that's great insight, obviously speaking from decades of experience. You kind of nailed this from the beginning. You've been encouraging people to buy silver for the last fifteen years. Those that have been listening to you up to this point have done extremely well. You expect, and we certainly agree, that there's a lot more to go in this bull market. The story is just beginning and it's going to get interesting. We appreciate your stewardship and your leadership and insights and also for spending the moment here with us on Money Metals Exchange and our weekly podcast to share your thoughts.

David Morgan:

My pleasure Stefan. Thank you for the opportunity.

Stefan Gleason:

Again this is Money Metals Exchange's weekly podcast, Stefan Gleason, President of Money Metals Exchange. Thanks for listening and tune in next week.

Announcer:

Thank you for joining us for this edition of the Money Metals Exchange Weekly Market Wrap. Be sure to come back next week, and don't forget to subscribe to our weekly podcast through iTunes. For answers to all of your questions, or to discretely and securely buy or sell gold or silver coins, bars, and rounds, call 1-800-800-1865. Our knowledgeable and no-pressure specialists are standing by between 7:00 a.m. and 5:30 p.m. mountain time, Monday through Friday. Visit us at www.MoneyMetals.com or call 1-800-800-1865.

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