Below is Fitzwilson’s exclusive piece for KWN:

“Value rarely equals price in investing.  If it were not so, fundamental and technical analyses would be pointless.  The only form of investing that would make any sense would be a judgment-and-research-free process that relied solely upon the underlying growth of the economy.  Clearly, that is not reality, particularly where many of the key economic statistics have become so unreliable.

Readers of KWN are well versed in the fact that the prices of the precious metals have been “managed” for decades.  In recent years, the prices have gone from being nudged to being outright smashed.  The prices of the metals have become completely divorced from the underlying values.

We have argued that silver is the most grotesquely undervalued asset on the planet....

Continue reading the Robert Fitzwilson piece below...  


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“The US has devoured its reserves of the metal since the end of WWII, while at the same time the uses have mushroomed in electronics and medicine.  Silver tends to be used in small quantities which are not to be recycled.  We rely on annual production and reclamation for what we consume.  You can reach this conclusion simply by looking at burgeoning demand and struggling supply, although the debasement of paper currencies and continuing accumulated debts add to the extreme undervaluation.

As Stephen Leeb has highlighted on KWN, the Chinese have been making solar a focus of their energy policy.  It was just announced that China hopes to add 10 gigawatts of solar generating capacity in 2013 as well as adding another 4 GW by 2015, bringing the total up to 21 GW.  This total is compared to an estimated .14 GW in 2008.  This will require a huge amount of silver.

If we turn out attention to gold, it is also extremely undervalued.  Below is a chart which shows the dollar monetary base since 1968 in billions less the price of gold.  While the methodology of the chart was a pleasant surprise to us, the chart clearly indicates how dramatically undervalued gold is relative to the skyrocketing size of the monetary base.  The chart also does a beautiful job of reflecting the economic and policy experiences we saw during this time frame as well as reflect the magnitude of the shift from over-valuation in the late 1970s to the extreme under-valuation at present.

As an indication of how just how undervalued gold is, notice that the line has gone from roughly -500 to plus 1,000 since the over-valuation in the late 1970s.  That is 15 units on the left-hand scale.  While this is simply one way to approach what underlying disparity between price and value for gold might be, it suggests a 15 multiple over the current price.  That would indicate a long-term value of over $25,000 per ounce of gold.

Will we see $25,000 gold?  Time will tell.  Rarely do price and value land in the same place.  Price and value tend to be ships passing in the night as markets swing between extreme undervaluation to extreme overvaluation.  A target of $25,000 might be conservative if the panic to buy ensues as should be expected.  The wild card will be central bank policies, but we will have to see how that unfolds.

While the disparity between value and price can continue for as long as the central bank activities remain effective, both silver and gold offer a unique opportunity for long-term investors to buy an asset where the gap between value and price is so extreme.

It is penny wise and pound foolish to try to time the market when it comes to such an unusual disparity between price and value.  The smart move is to acquire as much as one considers appropriate given individual circumstances.  As we saw with the announcement about the U.S. Mint suspending silver eagle sales, dallying too long to buy could prove to be very expensive if these period suspensions turn into something more permanent across the precious metals spectrum.”

© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The interviews with Gerald Celente, James Turk, Bill Fleckenstein, John Hathaway, Egon von Greyerz, Ben Davies, Kevin Bambrough and Nigel Farage are available now.  Also, be sure to listen to the other recent KWN interviews which include Eric Sprott, Art Cashin, John Mauldin, John Embry and Andrew Maguire by CLICKING HERE.

Eric King

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© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast,

rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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