Silver to hit $50 in 2011, gold to follow - James Turk

GoldMoney CEO, James Turk says surging physical demand for the metals is pushing them into backwardation and should see gold hitting $2,000 per ounce this year

Author: Geoff Candy
Posted: Friday , 11 Feb 2011

CAPE TOWN -

After a record breaking run during the course of 2010 and, indeed, the last 10 years, gold took a breather in January.

Part of the reason for the decline was a movement out of gold by investors in Europe and the US that had bought the metal as protection against further declines in the health of the global economic system. Sentiment improved and investors began once more to look at other asset classes that perhaps would offer better returns, prompting some commentators to question whether or not it is time to get out of gold.

James Turk, CEO and co-founder of GoldMoney is not one of those commentators.

Speaking at the Mining Indaba in Cape Town, Turk reiterated his view that gold will get to around $8,000 an ounce by around 2015 adding, "I would say though, having seen QE2, that my predictions will turn out to be on the conservative side."

Speaking to Mineweb on the sidelines of the conference, Turk brushed aside concerns about a decline in investment demand for the metal, saying that one must be clear to differentiate between the paper market [like ETF] and that for physical gold.

"What drives the gold price at the end of the day is the demand for physical gold. We're seeing that clearly now in silver which is in backwardation going out to 2015. Money never goes into backwardation unless you reach a position where you have extreme conditions - and that's what we see in silver now - the demand for physical metal is so much higher that people don't want paper any more, they want the real thing."

Turk believes this backwardation, the situation where the price of a commodity for future delivery is lower than the price for immediate delivery, could happen to the gold market.

"We could see gold in backwardation too as people become more and more worried about the inflationary consequences of the money printing that's going on around the world. Silver always leads - in bull markets it leads on the upside and in bear markets it leads on the downside. Maybe as precious metals move into backwardation, silver is again giving us an important message that it is leading and gold will eventually follow."

Asked his view of what is likely to happen over the course of 2011, he says, "We're probably going to see $1,800 - $2,000 this year on the gold price and silver looks like it's going to go to at least $50, given the way the backwardation is forming right now... The demand for physical metal is just absolutely huge and the paper market is being more and more discredited as a price discovery mechanism. As a consequence you're going to see even greater demand for physical silver as we go forward.