Thomson Reuters GFMS is one of the world’s leading economics consultancies specializing in precious metals, base metals, and steel. It provides top-quality research to private clients, but also publishes content for public consumption. Last year, Thomson Reuters GFMS said silver would push above $40 but not reach $50 – they were basically right, with silver surpassing $49 but being unable to get a foothold in the $50+ range. This year, they say the same thing is likely to happen. They were right in 2011, so we should all be listening to what they say for 2012.
Last year, when Thomson Reuters GFMS said silver should blast through the $40 mark and approach but not reach $50, the majority of analysts were bearish on silver. As of the start of 2012, this was true again. And yet, silver has produced big gains in the first quarter of the year, gaining 19.2% in January and 10.8% in February – even after losing 11.4% in March, silver was still up 17% for Q1-2012. Now, closing most recently at $31.72 per ounce, silver is down for the first three weeks of April, but still up big for the year, and a per-ounce price of $40 would put it up 26.1% from where it stands now.
While silver was up 17% in dollars for Q-1, it was also up 12% in pounds and euros, 7% in Swiss francs, and 20% in Japanese yen. This underscores the fact that silver’s demand is international in nature, and with the ongoing financial crisis in Europe, worldwide demand is likely to push the precious metal to the $40 level, where it will stay – see Silver Monthly’s Is 40 the New 30?
Of course, silver has broke $50 in the past – way back in 1980 – and $50 in 1980 money had a lot more purchasing power than $50 in 2012 money, thanks to the Federal Reserve’s program of systematic debasement. In fact, if silver reached an inflation-adjusted all-time high, that would be $130 according to the Bureau of Labor Statistics, and their numbers understate the effects of monetary expansion. Why shouldn’t silver be able to equal what it did in 1980, adjusted for inflation? For that matter, why shouldn’t it be able to surpass that plateau, given the more dramatic nature of pendulum swings over time, and the slew of global economic problems that sages like Ron Paul could only hint at a quarter-century ago?
Austrian economists predicted the fall of the Soviet Union just as soon as the totalitarian nation-state came into being. They didn’t say when the Evil Empire would fall, only that it would. When the USSR did meet its end, it happened quickly. This, too, will be the fate of the U.S. dollar, and quite likely, the entire world fiat-money system. The people who were prepared for the Soviet Union’s demise made out like bandits – are you going to be prepared for the collapse of the dollar? Silver at any price under $40 appears to be a bargain, and once it breaks and stays over $40, you’ll lament that you were able to buy “on the cheap” but didn’t.