Papering Over The Cracks

JIM ROGERS, the commodities investor and self-made billionaire, hopes the Silver Price does not continue its current steep uptrend, and that he does not wish to see the Silver Price hit $100 per ounce in 2011.

Rogers, who co-founded the Quantum Fund with George Soros in 1970, warned that a "parabolic" upward move would be followed by a swift fall, and says that if it hits triple digits this year he would "probably think about selling".

"I certainly hope it doesn't happen [this year] because I own silver and want to buy more," he told Financial Survival Radio. "If silver continues to go up like it has been over the past 2 or 3 weeks, yes, then it would get to triple digits this year.  And then we'll have to worry.  It's not parabolic yet".

Rogers explained that too rapid an upward swing – what he calls a "parabolic" move – would almost certainly be a precursor to sharp falls.

"There's never one in history that hasn't popped," he said.

Some analysts worry that Silver Prices rely too heavily on investment – as opposed fabrication demand, which includes industrial and jewelry uses.

"Given silver's heavy reliance on investor interest, price action is likely to remain volatile," said Barclays Capital analyst Suki Cooper earlier this month.

Bullion bank Scotia Mocatta said in its monthly Metal Matters report that Silver Prices "seem to have run ahead of the fundamentals".

"Silver supply has outpaced fabrication demand, leaving the onus on investors to absorb the supply surplus and drive the bull market," it wrote.

Figures from the World Silver Survey, compiled by precious metals consultant GFMS and published by The Silver Institute earlier this month, show that while silver supply in 2010 was up 14.5% on 2009, total fabrication demand rose slightly more slowly, by 12.8%.

Soctia Mocatta believes that while an improvement in the wider economy would be good for fabrication demand, it would likely hit Silver Investment demand. 

"[We] do not think the pick-up in industrial demand will be sufficient to replace the drop off in demand from safehaven buying... with surpluses continuing to build, we feel stronger economic growth could be a double-edged sword for silver," it wrote.

Jim Rogers also believes that economic considerations are a key part of the silver story.

"Now, maybe the US dollar is going to become confetti in 2011, and if that's the case and silver goes to $150, then obviously I wouldn't sell my silver," he said. "It would be the US dollar which is collapsing. But if silver goes up the way you're talking about without currency collapse, I would be very worried."

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Porter Stansberry is founder and publisher of Stansberry & Associates Investment Research, a private financial publishing company based in Baltimore, Maryland, and editor of the monthly Porter Stansberry's Investment Advisory.

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