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December
31
2012

2013: How Silver may go up putting a space shuttle to shame
Rakesh Neelakandan

Fiscal cliff issue is just the tip of the iceberg. The patchwork deal would not address the debt ceiling issue at all and would be a source of consternation for the times to come.

If you are an intraday trader, the markets may not offer much prospects for the day as the trend is expected to be flat. But, if you are having a position for the long term, you may hold on to silver, come what may.

The logic is here:

The US politicians are busy clinching a deal on fiscal cliff and obviously, given the time and political constraints, a comprehensive deal is not expected out of them. They may at best reach a face-saving solution that would at least not spook the markets.

Still, the markets have always been expecting a solution to the crisis and last week, when the markets sensed that a comprehensive deal may not be arrived at, they priced in a patchwork solution. Gold dived a bit, silver maintained a studied calmness compared to gold.

Since silver is also an industrial commodity, it has a an advantage in that signals of growth would help it gain and a recessionary signal would boost its prices (it being an investment commodity).

Now, the nature and possibilities of a compromise deal is well depicted here.

The immediate effect of the compromise deal would be reflected as a downward trend in markets; gold, silver and treasuries may climb. But, if the compromise deal falls short of minimal expectations, then the uptrend in gold, silver may not even occur and treasuries could probably sky-rocket.

Fiscal cliff issue is just the tip of the iceberg. The patchwork deal would not address the debt ceiling issue at all and would be a source of consternation for the times to come.

Over the longer-term, possibly by March-end one may see that the debt ceiling debates would be out of the bottle, yet again. And this can snowball into a pertinent issue wherein the solvency of the US govt would be questioned. If debt-ceiling is not further raised (chances of celing hike happening is very very miniscule if not accompanied by solid and disgusting spending cuts), then US will have to default on its debt.

And if this occurs, the crisis that started off as a liquidity crisis in 2007-08 would change into a solvency crisis.

In other words, the USD, the world's reserve currency would dive like a whale into the fathoms triggering a fiscal nightmare and a monetary vacuum. And mind you, USD is the reserve currency of the world!

Add to this the global easing measures and you would know, how value-less paper currency can turn out to be.

Silver, along with gold can then be seen going up putting a space shuttle to shame. (rakesh@commodityonline.com)

Rakesh Neelakandan is relatively new to the profession of journalism. Previously he was a content-writer and prior to that a copy-writer. He writes regularly on commodities and also prepares market intelligence reports for various agricultural commodities.

Interests- Commodities, political science, foreign affairs, policy matters..

Contact Info- Commodity Online India Ltd, 27/540, 2nd Floor, EAK Towers, Main Avenue, Panampilly Nagar Kochi-682 036

 

www.commodityonline.com

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