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February 21st, 2012
Dominique de Kevelioc de Bailleul: As the latest news from Tehran suggests Iranian oil exports to France and the UK will be cut off in response to EU sanctions on the world’s fifth largest oil producer, the oil price inches to a breakout price above $105 per barrel. Silver, too, is again prepping in sympathy for the possibility of a major move up to test $37, which, if cleared, could prompt traders to eye the last bastion of resistance at $50!
In essence, by his latest move, the confident and smiling and Ahmadinejad has told the Obama Administration to ‘bring it on’ and be thrown out of office as the US teeters to a market-driven bankrupt, not unlike Russia 1989 following its war with Afghanistan. Get my next ALERT 100% FREE
Iran’s oil ministry spokesman Ali Reza Nikzad-Rahbar stated on the ministry’s Web site during the weekend that “crude oil exports to British and French companies have been halted,” adding, “We have our own customers and have no problem to sell and export our crude oil to new customers.”
The threat of $150+ (maybe more likely $200) oil price from an attack on Iran during an election year will most assuredly usher in a Republican, and Obama knows it. Inflation will kick him out of the presidency as fast as Jimmy Carter tumbled out of the Oval Office in 1980—over the same issue: Iran.
“Above $115, there really isn’t any technical resistance until the $140 level, near the all-time high,” technician Dan Norcini told King World News. “If we see two consecutive closes above $115, you dramatically increase the odds that crude oil will be revisiting the all-time highs near $150. . .”
On the other hand, the inflation that’s already primed into the financial system can be masked by a war with Iran, providing perfect cover for the Fed and its drive to lower the value of the U.S. dollar. Could Obama benefit politically as a war-time president? History shows Americans rally around their president during war irrespective of his popularity prior to the war.
What this may mean, is silver (NYSEArca:SLV) bugs could soon have their day in the sun despite the blatant dereliction of duty at the CFTC to put an end to JP Morgan’s criminal enterprise.
So, it turns out, instead of the ‘good guys’ ensuring a free market in silver, Iran, backed by the might of Russia and China, could free silver from the financial repression scheme of US policymakers.
The chart, below, shows the relationship between the oil and silver price. As oil ran away from the silver in 2008, silver caught up with crude during the monster silver rally of July 2010 – April 2011, taking the price of silver from $18 to nearly $50 within eight months.
How high the silver price can achieve during the next rally could pop some eyes for sure.
The silver market is razor thin. And with reports from both Eric Sprott of Sprott Asset Management, Goldmoney’s James Turk and the U.S. Mint indicating that the number of dollars moving into the silver market has equaled the amount of dollars moving into the gold market for months following the violent 50 percent silver correction last year, it’s difficult to imagine anything but spectacular moves to the upside could result.
Sprott recently told the Silver Doctors:
“ . . . [investors are] buying 50 times more physical volume of silver than they are gold. And when you go to the US Mint site, they sell the same number of dollars of silver as gold. Which means people are buying 50 times the volume of silver than gold.
“But when you look at what’s available to buy- you know we produce 80 million ounces of gold a year, and maybe 70 million of that is available for investment, and we produce 900 million ounces of silver, and theoretically let’s say 200 million ounces are available for investment, well that means you can only buy 3 times more silver than gold for investment purposes.
“But we see so many instances where the ratio is 50 to 1! And GoldMoney’s the same thing. Almost every time I talk to a metals dealer my favorite question- How much silver do you sell vs. gold? And every time, I get the same answer: We sell as many dollars of silver as gold. Well, that’s impossible. It’s just impossible that people can keep buying at that rate, and we not end up with some type of shortage. It’s those data points that make me so optimistic about silver.”
The chart, below, suggests a move in oil to $150 could spark that silver breakout above $50 that silver bugs have anticipated since the beginning of the year. At $150 oil, silver could clear $50 easily, moving traders to the next target of the round number of $100.
Numerous predictions of big moves in silver for 2012 have streamed in since the start of the new year. One standout, financial author Stephen Leeb, told King World News on Jan. 31 that he wouldn’t be surprised if silver cracks $100 in 2012. He believes that, not only is silver an under-priced monetary metal, it’s a critical industrial metal for China’s alternative energy programs.
“I think the outlook for silver, both as an industrial metal and certainly as a monetary metal, is as bright as it can possibly be,” he said. “I’m sticking with my target of at least $100, but I tell you, Eric [King], it will happen this year. We are definitely headed for triple digit silver in the not too distant future.”
Related: ProShares Ultra Silver (NYSEArca:AGQ), ProShares UltraShort Silver (NYSEArca:ZSL), iShares Silver Trust (NYSEArca:SLV), SPDR Gold Trust (NYSEArca:GLD), ETFS Physical Silver Shares Trust (NYSEArca:SIVR).
By Dominique de Kevelioc de Bailleul From Beacon Equity Research
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