As creator of the Silver-Investor.com website and publisher of The Morgan Report, David Morgan is considered an authority on the silver market in particular and other precious metals in general. So, we took the opportunity to seek his views on the current state of play and future trends.

“Right now, we’ve had the white metals sell off pretty well recently,” he began. “Platinum, palladium and silver — all three look like they’ve topped out momentarily. Perhaps, they’re starting a downtrend. How long it will last, no-one knows.

“Gold is a little more difficult to figure out. Gold is basically holding fairly strongly and I’ve just finished the June edition of The Morgan Report; and I stated gold could, and at some point would, go contra to everything else. Gold is the most negatively correlated asset group to everything — bonds, stocks, real estate, anything else.

“Gold is performing right now rather well. I wouldn’t be surprised to see gold start to either level off, as it’s doing, and then continue up while almost everything else is going negatively, including even the white precious metals. If that is the case, I wouldn’t think that silver, platinum and palladium will stay down long, I would expect them to follow gold’s lead.”

Debt Crisis

The other scenario that’s influencing prices is the Euro-based debt crisis that David has been forecasting for some time. He believes no-one knows how it’s going to be resolved and says: “Gold is still performing better than anything else because of this crisis. We may see this thing resolved somewhat for a temporary amount of time. I don’t think it’s going to last long. If that is the case, we could see gold soften up for a brief time.”

Many of the changes are, he believes, down to confidence or a lack of it. Confidence in all global currencies varies over time, with any currency going through a cycle of strong to weak and back again. Six months ago, the Dollar was weak and the word was to get out of the Dollar and into the Euro.

“Now, no-one wants the Euro,” remarks David. “These things ebb and flow because all currencies are a confidence game. You only put confidence in when something’s been around 4000 or 5000 years, like gold and silver. I think you’re going to see more and more uncertainty in the markets and that’s going to push more people into the precious metals.”

The outcome of the uncertainty is that he expects gold, after staying at its present level for a while, to start moving up strongly again. He says: “Technically, it looks like it’s basing here on high-level consolidation. I think it’s more likely to break through the upside rather than the downside.”

Silver is expected to go the same way as gold but maybe at a faster pace. “A lot of people are kind of discouraged about the silver market,” David comments, “but yet silver didn’t really start up until 2003. At that time, the ratio was about eighty to one — it took eighty ounces of silver to buy one ounce of gold. Currently, it’s about seventy to one, so it’s actually outperformed gold from that starting point.” He acknowledges that choosing another starting point would give a different figure but insists the overall trend would be the same.

Precious Metals Bubble

Metals, he insists, don’t perform any differently from any of the other financial markets. And that includes being susceptible to bubbles in the same way as the tech bubble, the real-estate bubble and the Chinese equity market. All markets go through psychological phases that range from pessimism to optimism and sometimes go into euphoria mode. “We haven’t hit the euphoria yet,” David says. “The euphoria is where you get people buying these things hand over fist, gold going up day after day. That’s what happened in the tech bubble. Those nonsense companies that had no merit whatsoever, all they had was a dot com address. We were getting IPOs (initial public offerings) that were astronomically priced but all worth basically zero. That’s euphoria, that’s a mania. We’re going to see that in the precious metals, probably beyond any bubble we’ve ever seen, but we’re not there yet.

“I don’t think we’re going to see that kind of mania until after 2012. I think we’re going to see a good strong market, beginning probably half way through this year, maybe in the third quarter of this year.”

The expectation is that there will be strong silver prices from September 2010 but gold is less certain in the short term. However, he believes that gold will reach the $2000 region from 2011 until 2012 while silver will get to $30. David goes on: The ultimate high prices are going to happen on a spike high in my view. Those things are like the tech bubble and the real estate bubble where everybody tries to cash into the market at the same time. It’s not going to be long-lived in my view.”

Panic Buying

His forecast of panic buying is not unprecedented and he gives an example of when many of the US population were concerned about the Dollar. The result was that gold went from $300 on 1 November 1979 to $850 on 21 January 1980. If a similar situation occurs, it could also have an effect on the share prices of gold and silver mining and exploration companies.

David says: “There’s not going to be enough metal around for the people that come late to the party. That means that any gold or silver mining company that has any merit whatsoever, and some that don’t, people are going to flock into these mining companies because it’s the only exposure they’re going to get to gold and silver. I think that the biggest bubble you’re going to see in financial history in modern times is going to be the precious metals bubble.”

The timing of any surge is difficult to predict but the peak for silver and gold prices is likely to be around 2012-14. And this, David believes, fits the pattern: “Most of these commodity cycles go about seventeen years. If gold started in 2000, and it did, you add 16-17 years and you’re around that timeframe. So that’s what I’m looking for.”

To learn more about David Morgan visit—www.TheMorganReport.com