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Hyperinflation Watch – December 13

By James Turk, December 13

For several months I have been warning that hyperinflation of the US dollar is looming.  The ominous signs of this impending currency train-wreck are becoming increasingly clear. 

For example, crude oil is threatening to break above $90 per barrel.  Copper has broken through $4 per pound to a record high price.  The prices of many other commodities are also in uptrends. These commodities are not in short supply.  There is no shortage of oil or copper.  Rather, these high prices are the result of too much money printing, which if not quickly stopped by returning to a sound money policy will ultimately lead to hyperinflation.

Last week another important part of the hyperinflation puzzle fell into place.  Long-term interest rates surged, continuing their sharp upward path that began two months ago.  The 10-year T-note during this two month period has risen from 2.4% to end last week over 3.2%, a remarkable and therefore telling jump.

This rise in long-term rates lays bare the flawed logic of the Federal Reserve’s newly announced $600 billion so-called “Quantitative Easing” program supposedly designed to help the economy.  This new round of money printing is not going to help the economy, which has been hollowed out by years of debt financed consumption along with too little savings and production.  This money printing is serving only one purpose.  This central bank trickery is providing the federal government with all the dollars it wants to spend. 

So despite the fact the Fed will be purchasing $600 billion of US government debt instruments, T-bond and T-note yields are climbing, a clear sign that investors are rushing to sell their US government paper.  Why?  Because they know the purchasing power of the dollar is being debased by QE, and more importantly, will continue being debased.

I have discussed this reckless monetary policy before.  “The Federal Reserve has one mission.  It is to make sure that the federal government obtains all the dollars it wants to spend.  If the federal government cannot attract these dollars from the world’s savings pool, then there is only one other way to obtain them.  The Fed must print them.”

The following chart illustrates that the US government continues to spend and borrow recklessly.  Despite all the pump-priming by the Federal Reserve aimed at stimulating the economy and therefore increasing US government revenue, there has been no meaningful reduction in the deficit.

Federal expenditures remain far above federal revenue.  More worrisome is the resulting growth in US government debt – now nearly $14 trillion – much of which the Fed is turning into currency with its QE actions.  The transformation of government debt into currency by the central bank is the core cause of hyperinflation.

The dollar not only remains on the road to hyperinflation, the rise in commodity prices and bond yields mean that the dollar is picking up speed as it heads toward the fiat currency graveyard.  Remember, numbers don’t lie.  But the same thing can’t be said for politicians who refuse to accept reality or central bankers willing to experiment with the US economy just to test their chalkboard theories.

This article is written by James Turk of Goldmoney.com and with his kind permission, O B Research has been privileged to publish his work on our website. To find out more about Goldmoney, please visit:

GoldMoney. The best way to buy gold & silver

Wall Street Gives Uncle Sam Too Much Credit

By Michael Pento, 13 December

Despite the fact that the S&P is up over 80% in the last 21 months, US financial firms are currently tripping over each other in their zeal to raise their S&P 500 and GDP targets for 2011. JPMorgan’s chief US equities strategist, Thomas Lee, came out on December 3rd with a target of 1425 on the S&P for 2011, which would be a 15 percent gain. Barclays Capital last Thursday released a 1420 estimate. Not to be outdone, Goldman Sachs also recently released its forecast, and it sees a more-than-20 percent increase next year, to 1450. Meanwhile, PIMCO’s idea of a “new normal” has translated into a 2011 GDP forecast raised from 2-2.5% to 3-3.5% due to “massive” government stimulus.

In the midst of this collective ‘hurrah,’ very little attention is being paid to what is going on over in the bond market. With my due condolences to Fed Chairman Bernanke, the yield on the 10-year Treasury note has increased from 2.33% on October 8th to 3.29% today. And, if there is any notice at all given to that recent run-up in yields, it is merely explained away as a sign of robust growth returning to the economy.

In reality, growth doesn’t cause an increase in interest rates; it is either lack of savings or inflation that is responsible. To refute the ‘robust growth’ reasoning, turn your attention to the fact that the spike in yields just happened to coincide with the news that the unemployment rate jumped to 9.8% in November.

A slightly broader explanation for the surge in borrowing costs might be the failure of the Bowles-Simpson deficit commission to implement any cost cutting measures. Or, perhaps it was the intimation from Bernanke himself that QE III may already be under construction in his infamous interview on 60 Minutes. Or, maybe it is the fact that the $150.4 billion November budget deficit was the highest total for that month… ever, and was the 26th straight month of red ink! I often wonder to myself, where in the midst of all this good news do I summon a bearish attitude?

I think it’s pretty clear that ‘robust growth’ is going the way of ‘green shoots’ and knickers – right into the dustbin of history.

So, what will the increase in interest rates – ignored by all of Wall Street – actually mean for the economy in 2011?

For starters, the National Home Price Index already fell 2% in the third quarter of 2010. On a national basis, home prices are 1.5% lower year-over-year, and 15 out of the 20 cities measured were down over the last 12 months. On a month-over-month basis, 18 cities posted a price decline in September, compared to 15 MoM drops in August, and just 8 cities experiencing price reductions in the July report. Therefore, home prices, which were already headed lower before this recent spike in mortgage rates, are set to take another tumble downward. According to Freddie Mac’s weekly survey of conforming mortgages, the average rate on the 30-year fixed is at its highest level in six months. 30-year rates averaged 4.61% for the week ending Dec. 9, up from 4.46% last week. It’s the fourth week in a row that the mortgage rate has increased. The ramifications for the real estate market and bank lending are clear. Lower home prices will send more mortgages under water and force many more homes into foreclosure. Higher borrowing costs will lower the demand for borrowing and place more strain on the capital of lending institutions.

On top of that, household debt as a percentage of GDP still stands at a lofty 91%. It should be clear that with near double-digit unemployment, the last thing consumers can now tolerate is a significant increase in debt-service payments.

The rising cost of money is even worse news for the federal government and its chronically ballooning debt problem. According to the Federal Reserve’s Flow of Funds Report, total non-financial debt reached an all-time high of $35.8 trillion in the third quarter of 2010. In fact, household debt, business debt, and government debt increased at a 4.2% annual rate last quarter.

To put that record level of nominal debt into perspective: in 1980, the total non-financial debt-to-GDP ratio was 144%. In the height of the credit boom, at the end of 2007, that figure was 226%. Today, the figure stands at a mind-blowing 243%! So you can forget about all that deleveraging talk. The US is in fact still leveraging up, both in nominal terms and as a percentage of GDP.

I think the rising cost of money will become the story of 2011. Its effect on consumers, the real estate market, and government borrowing costs will be profound. Apparently, most major brokerage firms have no fear of soaring interest rates causing our economy to implode. However, it’s clear to me that the bond market has already started to crack due to inflation and massive oversupply from the Treasury. Prudent investors should think twice before overlooking what could be the initial holes in the biggest bubble in world history – the full faith and credit of the United States.

This article is written by Michael Pento of Europac and with their kind permission, O B Research has been privileged to publish their work on our website. To find out more about Europac, please visit:

The Eurozone is in Bad Need of an Undertaker

By Ambrose Evans-Pritchard, 12 December

The EU’s Franco-German “Directoire” and the European Central Bank have between them ruled out all plausible solutions to the eurozone’s debt crisis.


Even if Angela Merkel, were to agree plans that amounted to a European debt union, the scheme would still be torn to pieces by the German constitutional court

There will be no Eurobond, no increases in the EU’s €440bn (£368bn) rescue fund, and no mass purchases of Spanish and Italian bonds by the ECB. Nothing. The system is politically and constitutionally paralysed. Spain and Portugal will be left nakedly exposed before their funding crunch in January.

It is entirely predictable that Angela Merkel and Nicolas Sarkozy would move so quickly to shoot down last week’s Eurobond proposal, issuing pre-emptive warning before this week’s EU summit that they will not accept “a bundling together of all Europe’s debts”.

How can Germany or France agree lightly to plans that amount to an EU debt union, with a common treasury, tax system, and budget policy, the stuff of civil wars and revolutions over the ages? To do so is to dismantle the ancient nation states of Europe in all but name.

Even if Chancellor Merkel wished to take this course – and even if the Bundestag approved it – the scheme would still be torn to pieces by the German constitutional court unless legitimised by radical EU treaty changes, which would in turn take years, require referenda, and face populist revolt in half Europe.

What the German people are being asked to do is to surrender fiscal sovereignty and pay open-ended transfers to Southern Europe, taking on a burden up to six times reunification with East Germany.

“If we pool the debts of the countries in the south-west periphery of Europe, we are blighting our children’s future: the debt levels are astronomic,” said Hans-Werner Sinn, head of Germany IFO institute.

Any attempt to prop up the status quo will cement the current account imbalances of EMU’s North and South, to the detriment of both sides.

“I doubt that the current leaders of Europe fully understand the economic implications of their decisions. They are repeating the mistakes that Germany made over reunification,” he told the Handelsblatt.

Transfers to the East are still running at €60bn a year two decades after the fall of the Berlin Wall. There has been no meaningful East-West convergence for the last 15 years.

To those who blithely argue that EMU is a good racket for German exporters because it locks in Germany’s competitive advantage, he retorts that a trade surplus is the flip side of a capital deficit. Germany has seen €1 trillion – or two thirds of its entire savings since 2002 – leak out to fund the EMU party, gutting investment at home. This is toxic for Germany too.

It is no surprise to eurosceptics that Europe should have reached this fateful point where leaders must choose between the twin traumas of EMU break-up or giving up their countries. Nor is it a surprise to an inner-core of schemers within the EU system, who have always calculated that they could exploit such a crisis to catalyse political union.

However, it is a big surprise to Europe’s leaders, and they do not know what to do about it.

Chancellor Merkel and President Sarkozy seem unwilling even to boost the firepower of the European Financial Stability Facility, though in this they may be right.

The drama has moved beyond the point where headline “shock and awe” pledges can achieve anything. Markets are already looking beyond the debt-stricken periphery to the creditor core, fearing that bail-out costs will themselves create a chain of contamination. Credit default swaps on France have risen above 100 basis points, where they linger stubbornly.

A Fitch report on the European Stability Mechanism (ESM) said the new rescue fund “could result in lower ratings” on the risky sovereigns because the EU would have instant debt seniority, leaving private bondholders exposed to the risk of bigger haircuts. To make matters worse, debt restructuring would depend on the whim of politicians. The incoherence of the rescue machinery itself is feeding the debt crisis.

So as EU leaders flounder, the task of saving monetary union falls to the ECB. Yet it too has declined the burden, refusing to go nuclear with bond purchases. “Each country needs to be held responsible for its own debt,” said Germany’s monetary avenger at the ECB, Jurgen Stark.

He was joined last week by Mario Draghi, Italy’s governor and candidate for ECB chief, who said it was not the job of a central bank to carry out fiscal rescues. “We could easily cross the line and lose everything we have, lose independence, and basically violate the Treaty,” he said.

Indeed. Maastricht forbids the ECB from buying the debt of eurozone states except for specific purposes of liquidity management. But this saga no longer has anything to do with liquidity. Southern Europe faces a solvency crisis.

The ECB has postponed its threat to pull away the lending props beneath the banking systems of the PIGS. Beyond that it has limited itself to tactical strikes in the small illiquid debt markets of Ireland and Portugal, buying enough bonds to ram down yields and burn a few hedge funds.

The effect has faded within days. It had little impact on Spanish and Italian bonds in any case. Spanish 10-year yields reached 5.45pc last week, far above 5pc level where compound arithmetic comes into play.

At the end of the day, debtor governments still have to persuade Japanese life insurers, Mideast wealth funds, or French and German banks, to put up real money to buy their bonds at a bearable interest rate.

Credit Agricole said last week that it would hold back at next week’s auction of Spanish debt because it is not yet clear whether the ECB will back-stop the country. “The risk is simply too large for our appetite,” it said.

So we drift on with rising yields into 2011, when Portugal must raise €38bn, Belgium €85bn, Spain €210bn, and Italy €374bn – according to Goldman Sachs.

Europe’s leaders still seem to hope that brisk global growth will lift everybody off the reefs. That too is wishful thinking. Recovery brings its own set of problems, and will make intra-EMU tensions even worse.

Germany will hit the inflation buffers and force the ECB to raise interest rates before the trickle down benefits of trade have begun to make any difference in the closed economies of the South. Floating Euribor rates that determine 98pc of mortgages in Spain have been shooting up already, even as wages fall. The vice is still tightening on Spain.

The reflex of the EU elites is to blame this structural mess on lack of statesmanship.

“There is something surreal about the unfolding financial crisis,” said Stefano Micossi from the College of Europe, the sanctum sanctorum of the European Project.

“Leaders grudgingly do what is needed to prevent disaster at the last minute before it is too late, and the next minute they go back to the behaviour that brought them against the wall in the first place. The eurozone is in bad need of a psychiatrist,” he wrote at VoxEU

“If the eurozone follows this path, either all of the sovereign debts become German public debt, or the euro will collapse,” he said.This is admirably candid in one sense, but is today’s crisis really just a failure of leadership? Was EMU not dysfunctional from the first day? Did it not inflict negative real interest rates on Club Med and Ireland in the boom years, driving them into distastrously pro-cyclical policies?

Did it not lock in chronic imbalances between North and South? Has it not left victim states trapped in debt deflation or slumps which have gone too far to respond an austerity cure, and from which there seems to be no escape on terms acceptable to Germany?

Should we blame the current hapless leaders, or the guilty men of Maastricht who created this doomsday machine? If the project itself is rotten, surely what the eurozone needs most is an undertaker.

Source

NEWS: Orvana Reports Annual Results for Fiscal 2010

Orvana Minerals Corp. (TSX:ORV) announced operating results today for the year ended September 30, 2010. Dollar amounts are in U.S. dollars unless stated otherwise, and fine troy ounces of gold are referred to as “ounces”. Highlights for the year are:

  • Revenues of $32.3 million on sales of 28,341 ounces for the year ended September 30, 2010 compared to $56.0 million on sales of 63,230 ounces for the same period a year ago, with lower ounces of gold sold contributing to most of the decline, which was somewhat offset by higher average gold prices realized;

  • Net loss of $2.4 million ($0.02 per share) for the 2010 fiscal year compared to net income of $13.4 million ($0.12 per share) for the year ended September 30, 2009;

  • Cash from operations before changes in working capital was $2.5 million for fiscal 2010 compared to $22.8 million for fiscal 2009;

  • Capital expenditures were $37.5 million for fiscal 2010 compared to $7.7 million for the same period last year. Expenditures included $11.1 million on the development of the Upper Mineralized Zone (“UMZ”) of the Don Mario Mine, $23.0 million on the development of the El Valle-Boinás/Carles (“EVBC”) project, $3.1 million on the Copperwood project and $.3 million for systems improvements; and

  • Cash and cash equivalents amounted to $12.7 million at September 30, 2010 compared to $58.0 million at September 30, 2009.

“Results for the fourth quarter and the year ended September 30, 2010, are in line with our expectations and we will continue to produce gold at our Las Tojas operation in Bolivia until early in 2011. Our focus though is on bringing the Spanish EVBC gold/copper mine and the Bolivian UMZ copper/gold/silver mine into production early in 2011. In addition we are working towards a pre-feasibility study on our Copperwood copper project in Michigan.” said Roland Horst, Orvana’s Chief Executive Officer.

Orvana has $12.7 million in cash and cash equivalents at year end. Subsequent to the end of the year, Orvana entered into a US$50 million five-year term corporate debt facility with Credit Suisse AG. After fully funding its capital requirements at the EVBC project and the UMZ, Orvana expects to have accumulated cash reserves from its operating free cash flows. Orvana will continue to seek gold and/or copper advanced stage properties in politically stable regions, utilizing its mining expertise to increase long-term value for shareholders.

Don Mario Mine Operations

All dollar amounts (except per unit amounts) in the remainder of this news release are in thousands of United States dollars unless otherwise stated.

The ore from the Lower Mineralized Zone (“LMZ”) of the Don Mario Mine was exhausted during the last quarter of fiscal 2009 and the processing of the Las Tojas ores continued to the end of fiscal 2010. A total of 608,492 tonnes of ore were treated in fiscal 2010 compared to 331,506 tonnes a year ago as indicated in the table below:

        Quarters ended      
    Year ended                   Year ended  
    Sept. 30,   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,  
    2010   2010   2010   2010   2009   2009  
Underground Tonnes                     153,212  
mine g/t                     11.49  
Las Tojas Tonnes 608,492   153,459   154,270   144,587   156,176   178,294  
g/t 1.73   1.41   1.66   1.70   2.13   1.87  
Total Tonnes 608,492   153,459   154,270   144,587   156,176   331,506  
g/t 1.73   1.41   1.66   1.70   2.13   6.32  
Gold recovery rate 82.2 % 73.5 % 79.5 % 83.3 % 89.0 % 93.1 %
Gold production – ounces 27,751   5,114   6,545   6,565   9,527   62,644  

Gold production for fiscal 2010 was 56% lower, at 27,751 ounces, compared to 62,644 ounces for fiscal 2009. This decline was due to processing of the tonnages from the lower grade ore of the Las Tojas deposit. The prior year results included the production from the now depleted higher grade ore of the Don Mario underground mine.

The following table shows the cash operating costs and total production costs for years ended September 30, 2010 and 2009. The Company prepares its financial statements in accordance with Canadian generally accepted accounting principles (“GAAP”). The calculations below represent non-GAAP information, which should not be construed as an alternative to GAAP reporting of operating expenses, and may not be comparable to similar measures presented by other issuers (see “non-GAAP measures” below).

  Year ended September 30, 2010 Year ended September 30, 2009
  Costs Cost/oz. Costs Cost/oz.
Direct mine operating costs $ 18,237 $ 657.15 $ 15,331 $ 244.73
Third-party smelting, refining and transportation costs   153   5.52   273   4.36
  Cash operating costs   18,390   662.67   15,604   249.09
Royalties and mining rights   1,108   39.93   1,754   27.99
Mining royalty tax   2,263   81.56   3,916   62.52
  Total cash costs   21,761   784.16   21,274   339.60
Depreciation, amortization and accretion   3,716   133.90   9,948   158.80
  Total production costs $ 25,477 $ 918.06 $ 31,222 $ 498.40
  Gold production   27,751 ozs.   62,644 ozs.

Cash operating costs at $662.67 per ounce were dramatically affected by the decline in gold production resulting from the transition from the LMZ to the lower grade Las Tojas deposit. These costs are not representative of the expected costs of the operation of the UMZ.

Financial Highlights

Orvana’s financial highlights for the year ended September 30, 2010 compared to year ended September 30, 2009 are summarized below:

  Year ended September 30
  2010   2009
Revenue $ 32,344   $ 56,005
Net (loss) income   (2,431 )   13,400
Net (loss) income per share – basic and diluted   ($0.02 ) $ 0.12
Cash (used) provided by operating activities   (8,644 )   19,631
Cash and cash equivalents   12,700     58,036
Total assets   156,472     140,607
Long-term debt and obligations under capital leases   5,104     4,144
Shareholders’ equity $ 109,402   $ 110,367

The audited consolidated financial statements and Management’s Discussion & Analysis for the period ended September 30, 2010 are available on SEDAR and at www.orvana.com.

Outlook

The forward looking statements made in this section are intended to provide an overview of management’s expectations with respect to certain future operating activities of the Company and may not be appropriate for other purposes.

Orvana’s focus is to use its cash resources and mining capability to build long-term value for its shareholders through organic growth and future strategic acquisitions of advanced-stage gold and/or copper properties.

In the short term, Orvana is focused on commencing production at both the EVBC gold/copper project in northern Spain and its Don Mario UMZ copper/gold operation in eastern Bolivia, as well as, advancing its Copperwood copper project in Michigan.

With the start up of operations at EVBC and the UMZ expected to occur in early 2011, Orvana expects annualized gold production to increase from about 28,000 ounces to approximately 120,000 ounces, early in 2012. Additionally, annualized copper and silver production are expected to increase substantially to over 12,000 tonnes and to 750,000 ounces respectively.

Over the longer term, Orvana will continue to seek gold and/or copper advanced stage properties in politically stable regions, utilizing our mining expertise to increase long-term value for shareholders.

The Company will hold a conference call on Tuesday December 14, 2010 at 10:00 a.m. (Eastern Time) to discuss the annual results. Following the presentation there will be a question and answer period for analysts and investors.

The conference call can be accessed at 1-416-695-7806 or the North American toll-free number at 1-888-789-9572, using the passcode 8416682 followed by the number sign.

Full release

All that Glitters is Silver

By Eric Sprott & David Franklin

In the four months since we filed the prospectus for the Sprott Physical Silver Trust on July 9, 2010, the silver price has rocketed up 54%, bringing its year-to-date return up to a stunning 68% (!!). Silver has now outperformed all of the other eighteen commodity components that comprise the CRB Commodity Price Index on a year-to-date basis. Silver has been the indisputable star of 2010, and we have been very long the physical metal in many of our mutual funds and hedge funds.

Silver’s performance since June has been influenced by a number of factors. The first and arguably most significant development took place on October 26, 2010 when comments were released by Bart Chilton of the Commodity Futures and Trading Commission (CFTC). The CFTC is the US government agency that supposedly regulates the US futures and options markets. While the CFTC has technically been “investigating” the silver market since 2008, it had revealed nothing about its findings for over two years. Everything suddenly changed when Mr. Chilton, a CFTC Commissioner no less, publicly stated that, “I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted (emphasis ours).”1 These comments quickly triggered a flurry of lawsuits against the purported manipulators and set the silver market on fire. There are now no less than four lawsuits seeking class action status. They all allege that JP Morgan Chase & Co. and HSBC Securities Inc. colluded to manipulate the silver futures market beginning in the first half of 2008. The suits claim that the two banks amassed massive short positions in silver futures contracts that they had no intent to fill in order to force silver prices down for their furtive benefit.

The suits also describe two ‘crash’ events that were set in motion by JP Morgan and HSBC, one in March 2008, and the other in February 2010, after the defendants had amassed large short positions. The suits allege that COMEX silver futures prices subsequently collapsed to the benefit of both banks in the wake of these events.2 The fallout from these accusations has undoubtedly increased the investment demand for silver, and it serves to remember, as we highlighted in the previous article, that investment demand was already understated by at least half by the major silver reporting agencies. It will be hard for them to downplay the recent demand increase, as the volume of silver contracts traded on the COMEX market on November 10th set a new record, surpassing the previous record set in December 1976 by 57%!3 This increase actually forced the CME Group to increase the margin requirements for COMEX silver futures twice in one week in order to maintain some semblance of market order.4

Silver coin sales as reported by the world’s major mints have also been exploding since Chilton’s comments were made. The US Mint, The Royal Canadian Mint, The Austrian Mint and The Perth Mint are all reporting record or near record sales of silver coins.5 The silver Eagle produced by the US Mint set three new records at various points in November: best annual sales, best silver Eagle mintage, and best ever month.6 Money is pouring into silver in all forms, and due to silver’s relatively small market size, this capital inflow is having a huge impact on the silver spot price.

As we outlined in our Sprott Physical Silver Trust prospectus and our June MAAG article, the physical silver market is surprisingly small in US dollar terms. The CPM Group estimates that above ground stocks of physical silver total 1.184 billion ounces in bar and coin form, implying a total silver market size of a mere US$33.15 billion dollars.7 At the end of 2009, approximately 500 million ounces of that 1.184 billion were already accounted for by the silver ETF’s and other large holders. This left approximately 684 million ounces of silver available for sale in 2010. That is hardly enough, in our opinion, to satiate demand.

The money flows into silver in November 2010 have been staggering. Consider the investment demand generated from only two sources: the iShares Silver Trust ETF (SLV) and US Mint coin sales. The SLV added approximately 18 million ounces of silver in November alone; the US Mint sold 4.2 million ounces of silver coins. If you multiply these amounts against today’s silver price of $28, money is flowing into the silver market at an annualized rate of $7.5 billion dollars! At that rate of demand, it won’t take long before all the remaining above ground silver is spoken for.

Silver’s demand profile may also benefit from the outrageous short position that exists in the silver COMEX market. The current ‘open interest’ in silver COMEX contracts totals an approximate 871 million ounces (!!!).8 This means there are paper contracts for over 871 million ounces of silver that have someone betting ‘long’ and someone else betting ‘short’. In the event that the ‘longs’ choose to take physical delivery, there will not be enough silver to supply each buyer. It’s simple math – with only 684 million ounces of silver available above ground, there won’t be enough silver to go around. And considering the rate with which people have been purchasing coins and silver bars this past month, there may not even be enough physical to satiate regular spot buyers, let alone futures market participants.

Considering all the recent developments in the silver market, it seems unlikely that the silver price will stay under $30/oz for long. The large quantity of money flowing into silver from investors, combined with the potential demand from those who are ‘short’ silver that they do not own, will likely end up swamping the physical silver market entirely.

As our dear friend, Marc Faber, espouses in his book “Tomorrow’s Gold”, an investor can do very well by only making a few good investment decisions over his or her career. The trick is to make one good investment decision every decade or so, based on trends that will last a number of years.9 In our view, owning physical silver and the associated stocks represents that type of investment opportunity today. If that seems too simplistic, consider that in October 2001 we wrote an article that identified the investment of the last decade. It too was just a simple metal. The article was entitled “All that Glitters is Gold”, and it was written when gold was still considered a relic in financial circles. We believe silver will be this decade’s gold, and judging by the recent price action, it’s already off to a great start.

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Disclaimer: The opinions, estimates and projections (“information”) contained within this report are solely those of Sprott Asset Management LP (“SAM LP”) and are subject to change without notice. SAM LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, SAM LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. SAM LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances.

Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.

The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction.