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Silver Price in 2013 to Increase on Flight to Safety Belief
Pinnacle Digest writes: In his latest article Joe Russo, of Elliot Wave Technology, discusses the dire situation the US economy finds itself in. Although the US has yet to deal with severe consequences of over-spending and a lack of production, like Europe has, its day of reckoning is approaching.
Russo states that “Here in the US, which is one of the last nations on the list scheduled for an outbreak of widespread trauma, a growing number of people have begun questioning seriously the reliability of financial markets, paper currencies, politicians, and governments.”
This is a dangerous spot for the country to be in. Both international investors and its own citizens are losing faith in the government’s ability to manage the economy and its own currency. If things get progressively worse, the top pops off and the country’s currency crumbles. Many believe this to be inevitable. Don’t forget that the Fed has been buying the majority of US debt for the last four years. If the country was relying on international investors, pension funds and its own citizens to support its debt, it would have been insolvent long ago.
So what happens if the US dollar crumbles like many assume it will?
Or perhaps a better question is, what happens leading up to the US dollar crumbling?
People look to protect their wealth by purchasing hard assets, such as precious metals, when fiat currencies are abused by governments and central banks. It is a once in a century event when such a sentiment shift occurs, and their are small openings for investors to capitalize.
Russo states “Historically, amidst these types of one-in-a-century events, there exists an extraordinarily heightened level of both risk and opportunity. Alongside a legion of well-respected economists and financial analysts, we share with them a strident conviction that one of the major opportunities currently at hand rests in the aggressive acquisition of historically accepted forms of hard money, which everyone in the world recognizes as gold and silver.”
Russo, along with our team at Pinnacle, believes that in a situation like today’s economic environment, where the largest economy in the world is on the verge of a major and painful restructuring, there lies tremendous opportunity. While we don’t necessarily believe silver presents the best opportunity (we favor gold), Russo is extremely bullish on the metal. He states “For a host of fundamental reasons, silver in particular, continues to present one of the greatest opportunities of all time.”
Despite silver going on a parabolic rise in 2011 to almost $50 an ounce, and many market analysts stating its bubble had burst, Russo begged the differ. These are, as he mentions, 'once in a century' times we are in and a hard currency, such as silver, thrives in this environment.
Russo states “We based our convictions then [May 2011] as well as today, upon the clear evidence of an insoluble arithmetic quagmire culminating from decades of egregious political expediencies, which shall continue propelling the world rapidly toward a highly disruptive rebalancing of monetary and fiscal accounts.”
Perhaps the most compelling argument Russo makes in his recent article, from a technical analysis standpoint, is that during the predictable collapse in silver’s price after its parabolic rise to $50, horizontal support remained at $26.70. And Russo stated in his report that “Though the (4) wave downward consolidation may complicate further still, there is good reason to believe that its bottom is intact at 26.07. If this proves to be true, then the odds increase that silver will trade above 50, 80, and quite possibly well above $100 dollars per ounce before it ever sees fit to revisit the 26 handle – if at all.”
From that perspective, the risk/reward in going long silver makes it very attractive at this moment in time.
Russo’s technical analysis is well respected and he is a student of history. While this recent report of his is more focused on the intrinsic value of silver, he doesn’t ignore the fact that gold is poised for a massive increase as well. He’s not focused on short-term movements for these two precious metals, but more of the bigger picture. The long-term future of fiat currencies, in particular the dollar, look extremely bleak. Government spending is out of control and no one politician has the power, nor the motivation, to stop kicking the can down the road.
We leave you with this quote from Joe Russo and encourage you to read his full report:
“There are 100 ounces of paper derivative promises for every 1-ounce of actual physical gold and silver. In other words, just like a fiat currency such as the US dollar, there is virtually nothing of tangible value backing delivery these paper contracts, which are the current means of price discovery on the exchanges. In short, if you wish to take delivery on your futures contracts, it is likely the exchange will offer you cash instead. This translates to an outright default, fraud, and breach of contract.”
Click here to read Joe’s report.