Rick Rule"s comments today from KWN blog;

“In terms of gold it is no longer a contrarian buy, it’s no longer a lonely trade. But in the first instance we need to remember that all of world demand is denominated in US dollars and if the denominator is declining, the numerator only needs to hold even to rise in price.

So the baseline move in the gold price is accounted for by the deterioration in the US dollar. On top of that we have continued currency crises in Europe, widespread and serious political instability in the Middle-East and North Africa and surprisingly strong physical demand from India and China.

This environment is creating what we spoke about last time which is fear demand. This could be the prelude to an upside blowout.”

When asked about silver specifically Rule stated, “The situation in silver seems to be a shortage in the March delivery. There is more silver called for delivery than there is silver to deliver. This has created backwardation in silver and this is an extremely unusual situation in this market. This occurs when there is scarcity of silver. Anecdotally, my sources tell me that demand for physical silver is outstripping demand for gold on dollar for dollar basis in European and North American markets.

Certainly what is of interest to me is the limited availability of new mine supply including byproduct supply in view of increasing demand. Meaning in addition to the near-term you could see explosive action in silver in the future. You could also see a sustained two or three year bull market in silver simply because supply isn’t sufficient to meet intermediate-term demand.

I don’t know how you solve a structural failure to deliver. I don’t know if regulators or exchange officials would allow a force majeure until markets could stabilize. What I do know is that set of circumstances would further destabilize the silver market and markedly increase speculative interest.”