What they consider strong, I consider weak
In a perfect example of how even the more "bullish" analysts fail to grasp the big picture in looming price-drivers for precious metals, this investment bank considers a silver price forecast of $15.85 in 2010 quite high, and probably expects us all to hail the arrival of sufficiently bullish calls. Not by a long shot... when gold experiences it's big run through the $1,650 level and onto $2,000 over the coming couple of years, silver will briskly reclaim its prior high above $20 and make its way towards $50 per ounce. I have been targeting $50 per ounce for silver since I first started investing in precious metals back in 2003/2004, evidenced later by my early pitches here in CAPS starting in 2006. Nothing has changed, except that macroeconomic developments have transpired more quickly and in a grander scale than I could have imagined, which will more than make up for the reduced global industrial demand implied by the severity of this stagflationary depression.
They did nail one thing in this report, though.... they referenced my slingshot effect, if not by name. :)
Canadian investment bankers Versant Partners forecast the price of silver to average $13.85/oz this year, $15.85/oz in 2010 and $11.75/oz on a long term basis.
"Although correlations have contracted, silver remains more volatile than gold partially as a result of the small size of the silver market, lower inventory levels, and its dual role demand drivers," said Versant mining analyst Anthona Curic.
"Therefore, silver tends to exaggerate gold's movements, trailing on the upside but outperforming and subsequently overcorrecting on the downside," she added.
Versant advises that gold prices will likely remain strong, subject to some volatility in the near term. "Silver, which follows gold, is expected to likewise maintain support at a strong price level."
Curic believes that "the current environment continues to provide an opportunity to invest in silver equities and we expect the price of silver to outperform the price of gold and for silver equities to outperform gold equities."
Having recently initiated coverage on silver, Versant selected companies it believes fit the following investment criteria:
• Quality projects with attractive resource and production growth potential;
• Limited geopolitical risk;
• Highly experienced senior management and technical team; and
• "Lastly, given our outlook that silver prices will revert to normalized long-term prices we have selected equities that remain economically robust in a US$11.75/oz gold price environment."
Among the silver explorers and miners recommended by Versant are Bear Creek Mining (TSX-V: BCM), ECU Silver (TSX: ECU), First Majestic Silver (TSX: FR), Fortuna Silver (TSX-V: FVI), Orko Silver (TSX-V: OK), Silver Wheaton (TSX: SLW), and Silverstone Resources Corp. (TSX-V: SST).