Monthly Archives: April 2013

“Whether one supports it or opposes it, the gold standard no longer is seen by most serious thinkers as fringe. It no longer is dismissible merely by invoking shibboleths like “barbarous relic” or “cross of gold.” Facts are stubborn things, as John Adams once observed. Facts are much more stubborn than mere mockery.

There are reasons for the turnaround in the gold standard’s reputation. Rigorous thinkers such as analysts from the Bank of England, in its December 2011 Financial Security Paper No. 13, “Reform of the International Monetary and Financial System, have assessed the performance of the fiduciary dollar standard and found it deeply inferior to the actual performance of both the gold and of the (before it inevitably, due to an inherent latent defect, collapsed) gold-exchange standard. Now, after 12 years of “Dark Ages” economic growth rates, the incumbent monetary policy elites are beginning to appear slightly desperate to justify their prestige and attendant privileges.”

“Short term factors including market momentum and the concentrated sell-off following analysts’ downward gold price forecast revisions along with Cyprus’ gold sales contagion could put pressure on gold prices in the near future. However, we consider that many of the fundamental drivers that have supported gold’s 12-year trajectory are still well in place. Data suggests that some investors in developed markets are betting on a swift economic recovery, and while economic data may seem encouraging in the US, many of the underlying issues that financial markets face are still relevant: countries face high level of debt while monetary policies have yet to unwind. At the same time, gold’s fate does not rely only on uncertainty and malaise in developed markets. Gold’s performance is also linked to their long-term economic expansion. There is consensus that emerging market economies will continue growing. Most economists agree that emerging markets will continue to grow and surpass developed market economies by 2020 in term of GDP. Finally, the US dollar will likely remain a crucial component of the monetary system, but may have to make room for others. As central banks diversify their foreign reserves, gold will continue to be one of the most relevant assets.”

“Robust global silver investor demand was the dominant driver of silver prices last year, accounting for almost a quarter of total silver demand. Averaging $31.15 per ounce, 2012’s price level was the second highest on record, behind the average reached in 2011. While last year was a volatile year for most precious metals, globally, silver investment rose to a total of 252.7 million troy ounces (Moz). That figure represents approximately $8 billion on a net basis, substantially above the annual average of $1.2 billion over the 2001-10 timeframe, according to “World Silver Survey 2013,” released here today by the Silver Institute.

Investors remained significant net buyers of silver in 2012, as evidenced by the 21 percent increase in implied net silver investment (which includes physical bar investment, exchange traded funds and fund activity on Comex) to set an all-time high of 160.0 Moz. By comparison, in 2004, the level of implied net silver investment was 5.4 Moz.”