If you have studied the silver market, you will discover the Uranium market is almost a carbon copy of the silver market. i.e. chronic mine supply and demand deficit, depletion of above-ground stock pile, increasing industrial (inelastic) demand (meaning demand unaffected by rising silver/uranium price). Believing in everything being connected, I laid the charts of Uranium and silver side by side, and boy what do I find? (The chart in order from top down are Uranium, Silver, and the dollar index).
- Uranium/Silver seem to be trading inversely to the dollar, with black circles as turning points.
- The peaks of Uranium are followed in 12-18 months by peaks in silver, see red squares.
Is it a pure coincidence that Silver chart looks just like the Uranium one, lagged by 12-18 months? How come? My take is the dollar index has something to do with this. I have come to believe that macro economic trends affect individual commodities prices more so than the underlying supply and demand equation of those commodities.
Think of a commodity market with bullish fundamentals like a ship with super jet-engine, but if the tides and waves (i.e. the dollar) are strong and going the other way, the ship is going to have a hard time advancing at sea. Sorry Ted Butler (who discredits the weakness of the dollar has anything to do with silver's break out in 2003), but silver would have remained dormant had dollar not resumed its bear, just ask Warren Buffet what happened in 1997.
This time however I believe the outcome for silver will be different from 1997, not because the supply and demand picture for silver has gotten more bullish (it has), but because the tide (the dollar) is going the right way with respect to where the ship wants to go. Looking at the chart, you can't help but get really excited about silver's prospect. If silver follows Uranium as it did in 1987 and 1997, we could be looking at $20/oz silver price in 24 months. We should also carefully follow the peak in Uranium, as it is a signal for a silver peak months down the road.
As for silver equities, there are two that I like - IMA exploration and SKN resources (I own significant shares of both). Although I view it (suit) as frivolous, IMA does have a lawsuit hanging over its head. SKN recently secured the license for the 130 million oz+ silver project in China. The 130 million oz silver resource numbers were calculated based on 6 veins and there were 40 veins discovered so far. Although somewhat narrow, the silver veins boast grades that are consistently measured at 5,000 g/tonne. The In-Situ value per tonne reaches an exceptional US$800, compared to the average In-Situ value of $20-$70 from the likes of Western Silver and Apex Silver. Readers are advised to do their own due diligence.
The newsletter subscription rate is USD $199 a year. We publish once every 3 weeks in pdf format with frequent email alerts on an as-needed basis.
