TORONTO (miningweekly.com) – Another big precious metals bull run might be just around the corner, seasoned commodity investor and publisher of The Morgan Report, David Morgan, told attendees at the Toronto Resource Investment Conference 2013 on Thursday, adding that precious-metal bears might be headed for hibernation soon.
A technical analysis of gold and silver price charts, which mostly entails drawing straight lines to see whether trends are positive or negative, points to the gold price technically still being in an upward trend.
“Gold could even touch $1 000/oz and it would still be considered in an up trend,” he said. Gold had for decades been trading between about $300/oz and $400/oz before the bull run started at the turn of the century.
“Gold’s bull run would not be considered done until the price pierces the up-trend line, as had, unfortunately, recently happened with silver.”
Morgan, who had been investing in precious metals since his teenage years, said he believed the decline in precious metals prices, especially that of silver, was over.
He pointed to June 28 as being the day the ‘key reversal’ took place for silver, when, in a single trading day, the grey metal recorded a lower low price of $18.17/oz and a higher high price of $20.08/oz than the previous trading day.
“This triggered investors to start buying, some thinking the timing was right for new buys, and others buying to lock in short profits,” he said.
Morgan said he doubted whether there was long-term support for a low silver price in the $20/oz range in the medium term, pointing to recent charts indicating support for silver at $30/oz around January, and at $28/oz around April this year.
On Thursday, the spot silver price declined almost 6.5% in New York to $21.95/oz when compared with the level of about $23/oz it had been trading at earlier in the week.
“I believe we’ll see $26/oz by the end of the year, and it is entirely possible to see levels touching $48/oz again in the medium term. Once that level is breached, I expect an acceleration phase to take place as investors panic buy,” he said.
In April of 2011, the grey metal rallied to a record $49.51/oz before correcting sharply.
Morgan pointed out that historically, about 90% of movement in metals prices took place in about 10% of the overall time in a given cycle.
“There lies big money ahead, but a treacherous road to get there,” Morgan noted.
Meanwhile, Sprott Asset Management market strategist David Franklin said that monetary easing and other monetary interventions were distorting traditional price signals.
He noted that price signals no longer correlated with the realities of their supply.
For instance, Franklin pointed to a growing global supply shortage in the gold market. Despite this, the gold price was not reflecting that.
He said the East was currently seen importing significant amounts of the yellow metal, resulting in significant amounts of bullion moving from west to east. This had resulted in Comex gold inventories dropping steeply.
Hong Kong gold imports had also risen sharply in recent times, and China could very well be the largest gold importer and consumer this year.
Further, the Shangai premium over the London-fixed gold price had also risen in recent times, pointing to increased demand, as a result of lower inventories.
Another significant pull on the demand side was the fact that Germany’s central bank had determined to relocate about 300 t of its gold reserves to own turf from the US and France. Franklin said the US did not have the inventory for this available, most likely having rehypothecated Germany’s reserves.
Despite India, the world’s top gold importer and consumer, having declared war on gold imports, and having effectively cut imports to nil, there still remained a growing inventory deficit, without the gold price moving in correlation, leaving space for price correction.
“In today’s global economy, the price of gold does not resemble the true price of gold,” he said, echoing Morgan’s outlook for a potential bullion bull run in the not-too-distant future.