David Morgan: Short term outlook of silver price and why to invest in silver

David Morgan is the editor of the globally respected investment newsletter “the Morgan Report”. We highly recommend subscribing to his premium service, for the combination of timeless insights he provides as well as accurate interpretations of day-to-day evolutions. On his publicly accessible webblog, he shared his view on the short term outlook of the silver price. He also stressed the need to be invested in physical silver and repeated the benefits of investing in silver.

In his short term outlook, David Morgan confirms yet again that the fundamentals have never before been better for both gold and silver. It doesn’t matter if the price is not reaching all-time highs today, like it did in 2011 (when the silver price topped beginning of May and the gold price surged to all-time highs in the beginning of September). David’s interpretation of the current silver price action :

  • Silver is experiencing a period of consolidation, after its parabolic move of 2011. From that point of view, it’s understandable that the evolutions in Europe are not sending precious metals prices higher. At the same time, the US dollar is widely perceived as a safe haven, which is putting pressure on precious metals prices. David’s opinion is that we are in the process of a bottom formation.
  • The fundamental picture in China is very strong for silver. Over the past decade, the  investment demand has exploded and David expects the growth to keep pace, industrial demand is strong and expected to remain like that, psychology among individuals and professionals is positive. In sum, the Chinese are not in a hurry but they apply a steady accumulation strategy.
  • Gold and silver mining shares should have bottomed.

About this week’s price action, David thinks it’s good to see silver again at the same level as before the historic surge of 2010/2011.

What’s the most fundamental reason to invest in silver? David Morgan answers that if you understand today’s economic problems, the worsening debt crisis, what’s going on in Europe … then you understand you need to be into precious metals. If you do not understand those evolutions, then you’ll probably don’t see why you should own gold or silver.

From a more economic point of view, David Morgan gives two explicit reasons on why to invest in silver.

  1. During the past decade, we have seen both deflationary and inflationary fears several times. Both gold and silver surged in that environment in the long run, although there have been temporary contractions in the short run. While both metals tracked each other closely, silver did react in a more intense manner, both to the downside but also to the upside. So going forward, either in a deflation or in a inflation, silver is expected to be a good investment choice.
  2. Professor Roy Jastram pointed out in his book “Silver the restless metal” that silver (not gold) is the best solution during an inflationary depression. Now David is not saying that we WILL have an inflationary depression, but at present time ALL the trends point into that direction.

David shares his insight about the values of gold and silver on a more personal level. The main principle of most people is to have stability in their life. The only constant in everyone’s life however is change. Now the key role of gold and silver is that they can bring stability, they can proivde a constant in people’s personal finances. That’s an important benefit in the current global circumstances, where instability is to be found almost everywhere (food, water, politics, finance, etc). From that point of view, David advices to hold as a minimum 10% of physical silver; you can own more if you are aware of your choice, understand what is driving the metals and if your personal profile / circumstances allow you to do so.



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