If there’s one thing we know about precious metals, it’s that everyone has an opinion about how gold and silver will behave as we delve deeper into global economic crisis. So, who better to give us a bit of perspective than the Chief Executive Officer of one of the world’s largest primary silver producers?
Keither Neuemyer, who has been an outspoken critic of rampant price manipulation on commodity exchanges is the CEO of First Majestic Silver and the Chairman of precious metals mineral bank First Mining Finance. His latest revelation suggests that despite billions of dollars being traded daily on paper exchanges, physical silver supplies around the world have tightened to such an extent that manufacturers have been left with no choice but to come directly to mining companies to acquire the precious metal for their high-tech products. With this in mind, and the fact that silver demand today is greater than when it was trading at nearly $50 in April of 2011, one can’t help but think that based strictly on the fundamentals we should see a much higher price in coming months and years.
We got approached by an electronics manufacturing company that manufacturers cell phones and computers about four weeks ago… There were three of them in the meeting and they wanted to bid on our silver… It’s the first time in the fourteen years that I’ve been with First Majestic that we’ve ever been contacted by an electronics manufacturer… That tells me there is something changing in the market.
Full interview via Future Money Trends:
Despite the supply demand fundamentals clearly indicating prices should be significantly higher, Neumeyer understands that this isn’t always the driving force behind market moves.
I don’t think it’s supply demand fundamentals… You can’t tell me for a second that when silver was trading at $50 in April of 2011 that the demand for silver was greater than it is today. Actually, silver demand at current levels at $16-$17 is greater today than it was when silver was at $50.
So, if the price was impacted by supply/demand fundamentals silver would be trading at much, much higher prices than it is today.
And fundamentally, Neumeyer doesn’t even consider silver a precious metal, but rather, a strategic metal that is absolutely necessary for the modern age and one that is a lot more rare than most people understand.
This is what I don’t really get and this goes to the pure rarity of the metal… I look at silver as a strategic metal not a precious metal because it is so required for the human race for everything we do on a daily basis… and people don’t really understand that… nothing of yours would work… your computer… your cell phone… everything requires silver.
Right now, for every ounce of gold we’re mining only nine ounces of silver. So that would suggest we should be trading at 9-to-1… So at $1200 gold that would be $140 silver or so… If you just look at what we’re mining today that’s where silver should be trading… and we’re trading at 75-to-1.
I just don’t think that ratio can last.
Fundamentals aside, looking strictly at gold’s monetary position in the world as the only physical currency available to central banks, Neumeyer explains that while average investor sentiment remains muted, the big players, including financial institutions and some of the world’s most well known investors, are already anticipating the fall out:
I’m a big bull on gold [and silver]. I think that we’re going to see a major reset in the world… It’s coming, maybe not to mainstream thinking, but definitely in some of the upper circles… it’s pretty well understood that the debt in the world is never going to be paid off.
We have to have some kind of major reset that is likely going to include gold…The Americans have the largest hoard of gold and to pay off their debts they’re going to need probably north of $10,000 gold, which I think will happen.
I’ve been quoted many times saying I expect to see triple digit silver… that’s assuming gold doesn’t move. If gold goes to $10,000… silver will be some ridiculous number… it could even be $1000 silver.
And like China, Russia and investment fund managers positioning themselves for when this reset does come to pass, Neumeyer’s First Mining Finance has been rapidly acquiring gold and silver mining assets around the world, to the tune of some 15,000,000 ounces.
As crisis accelerates and physical demand becomes so overwhelming that paper markets can no longer contain it, the broader sentiment of market participants will drive the next bull market, a trend that according to Neumeyer has already started:
It was almost like it was this last capitulation of selling that took place at the beginning of the year.
Then all of a sudden there were no sellers left. Gold started to get a bit of a bid… then due to all the talk about negative interest rates… and some very influential and large well known players started to come into the sector and the press started covering some of these investors who were coming into gold…
There were a lot of things that suggested the sector had bottomed… all of a sudden there was this huge rush of money… it was like there was all this money sitting on the sidelines waiting for a reason to buy gold and silver mining stocks… and it just all happened…
I’ve never seen such a broad-based move in such a short period of time… It was pretty dramatic.
I’m hearing from a lot of big institutions that they completely missed this move… this correction is well welcomed by many of these big investors because this is their opportunity to start coming into this market in advance of the next big move.
While we may not be able to time markets, we can certainly identify trends.
If you’ve been paying attention then you have no doubt noticed that investors big and small are realizing that when the economic, monetary and financial systems detonate on a global scale there will be only one safe haven asset class left to preserve and grow wealth.
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