John Rubino: In this week’s Q & A, National Numismatics’ Tom Cloud updates his near-term precious metals price targets and explains why silver will rise faster than gold once the bottom is in.
DollarCollapse: Hi Tom. Last time we talked you said that your charts put the worst case scenario for a gold correction at $1,380. Within two weeks it got there. Nice, if painful, call.
Tom Cloud: It actually got down to $1,328 mid-day, and silver fell to $22.68, which was right at the low point of our chart. It was pretty stunning. Both metals have recovered part of their losses lately.
DC: Now that your short-term predictive skills are established, what happens next?
TC: I’d say we right now we have a 50-50 chance of silver going back below $23 one last time, in the next week or two. But at that point the shorts will be taken out and we’ll see silver head back up above $25 fairly quickly. I’d be really excited if we weren’t heading into the weakest demand season. Normally the precious metals market kind of flattens out at the end of May when the kids get out of school and then picks back up at the end of August. So barring some big financial crisis or a Middle East war the next few months may not be too eventful.
DC: We can wait. Looking at longer-term fundamentals, the “austerity versus growth” argument seems to have been resolved in favor of growth. From now on the world will follow Japan’s lead and just create whatever new currency is needed to generate jobs and inflation. If they succeed and we finally get the Austrians’ crack-up boom, would that favor silver or gold.?
TC: In that scenario industrial demand for silver would rise. On the investment side, more people can afford silver. They can dollar cost average with $500 or $1000 a month. And with the gold/silver ratio now at 62, there’s a lot of room for silver to outperform gold – though both should go up given all the money printing that’s coming. Once Treasuries break [i.e. once the US government bond bubble bursts] you’ll see money moving out of paper, and gold and silver and other hard assets will explode.
DC: What’s happening on the supply side with availability and wait times?
TC: Right now, even with the seasonality, the long waits aren’t coming down. Two months ago we could deliver metal as soon as a client’s check cleared. Now there are multi-week delays on some of the popular coins like silver maples, silver eagles and silver philharmonics. I’ve actually been getting calls from smaller dealers who have been completely cut off. They can’t even order from their suppliers and they’re trying to get me to order for them, which I’m not doing.
DC: Last month you noted that your orders were coming mostly from big buyers and that smaller customers were notably absent. Has that changed?
TC: The small buyers came back after the correction. In addition to lower prices they’re starting to understand that after the Cyprus “bail-in”, money in the bank anywhere in the world is at risk. Most governments have made it clear that they will not bail out banks, so banks will go after depositors’ money.
DC: If I call you and say I want $10,000 of precious metals asap, what would you tell me?
TC: I’d tell you to get silver rounds and get them paid for. We’ll put you in line once your check clears and though your wait might be three or four weeks, the price is fixed and the product will come. It’ll be a much bigger thing down the road when supplies are even tighter and premiums are even higher.
This article is brought to you courtesy of John Rubino from Dollar Collapse.
Related: iShares Silver Trust ETF (NYSEARCA:SLV), ProShares Ultra Silver ETF (NYSEARCA:AGQ).