“Support for gold as an investment continues to gain momentum, with an increasing number of announcements of purchases by non-Western governments,” says analysts for Canada’s Haywood Securities.

The analysts expect world gold production to decline this year while EFT gold-holdings could top 21 million ounces.

As for silver, the analysts expect that a “positive mix of the main silver price drivers indicates a balance or slight increase in the current silver price, further supporting the view that recent changes in interest may be simply a result of a thin, volatile summer market.”

Read the mineweb.com’s brief review of the analysts’ position.

Before plunging into the silver market, read our Silver Bullion Overview.

Gary North posted an excellent treatise on money and central banking on lewrockwell.com. It’s an important read because it furthers knowledge about money and central banking, subjects that most college graduates know little about because the topics have not been taught in most American universities for decades, perhaps now nearly a century. If you do not understand money, how can you use it wisely?

Although North calls for “greater transparency” at our central bank, the Fed, I don’t doubt that if asked he would call for its abolition, as has presidential candidate Ron Paul. Insomuch as doing away with the Fed would require a much greater knowledge of money and how central banks corrupt monetary systems, North has done us all a favor by sharing his knowledge with us.

As for Ron Paul’s statements calling for doing away with the Fed, they have fallen on deaf ears for most Americans because they have no understanding of money and central banking. Actually, most people hearing Paul’s statements laugh, for they have been indoctrinated into believing that the Federal Reserve System is as much as part of our country as the Constitution. Nothing could be further from the truth. The Constitution’s framers knew well the dangers of central banks and fiat money monopolies.

If you study money and the Fed, and you will have an epiphany: the Fed is not only not needed, it is a cancer. Start with North’s article, and then order a copy of the late Murray Rothbard’s The Case Against the Fed. And while you’re ordering, get a copy of Rothbard’s What Has Government Done to Our Money?, which now includes Rothbard’s The Case for a 100% Gold Dollar.

All are short books, and I promise anyone who buys and reads them will have greater knowledge of money, our monetary system and the Fed than 99% of today’s college graduates.

My latest article on CMIGS’ Articles Page discusses rumors and the possibilities of Asian central banks diversifying their reserve holdings. Shortly, after the article was posted, I discovered the same topic being discussed in a mineweb.com article, which notes that Qatar, a small Persian Gulf emirate, increased its gold reserves 15 fold in the last twelve months, evidence that central bank diversification into gold is not a pipedream for gold investors, but it could be a nightmare for the U.S. Treasury.

Jessica Cross, commodities analyst at VM Group, said had some interesting things about silver in an interview. Resourceinvestor.com published a printed version of the interview.

Much of what Cross said is known to many silver investors. Still, her comments should be interesting to silver investors. One paragraph from the interview:

For example silver is used in wood preservatives in the U.S., it’s used in radio identification tags throughout the world including ID documents, it’s used in medical bandages as a biocide to the extent not only just bandages but in hospitals in the UK, they’re testing silver-impregnated disposable pyjamas. Silver is a very strong biocide, and it’s coming into its own there. The really interesting thing is that if any of these industrial uses take off and start consuming volumes of silver, they’re end uses that don’t generate recycling - so you’re not going to have a problem with the photographic industry where the silver went in and then it came back. This silver will go into the smoke stacks and then all disappear - you’re not going to recycle bandages, pyjamas, radio identification tags, and wood preservatives. That’s physically impossible. So once the metal has gone into these end uses it’s gone, which is a very refreshing change from the usual.

A Reuters poll has silver outperforming gold through 2008. I see no problem with that forecast. Historically, silver has always outperformed gold in precious metals bull market; therefore, in any prediction over eighteen months you can expect silver to turn in a bigger percentage gain than gold.

The Reuters poll forecasted gold to average $681 in 2008; I suspect that number to be low considering the geopolitical state of affairs. Further, sometime in this presidential campaign, the candidates will have to start talking about the financial state of affairs in the U.S., which, of course, are not good. In fact, they are very bad, but public concern has been diverted because of the war in Iraq.

Of interest to me was this prediction:

Silver is seen stronger than other metals, with the average 2007 price surging 14 percent to $13.30 an ounce. But it is forecast to fall to $13.00 in 2008, against its spot price of $12.95 and a 25-year high of $15.17 in May last year.

Frankly, I consider it ridiculous to attempt to predict precious metals prices that exactly, especially silver. In 2005, when silver was trading at $7, where were the Reuters polls showing $15 silver in 2006?

Such predictions are made because a large number of investors want to hear them. By 2008, silver could easily be $18 to $20 because of geopolitical events or recognition of the dire financial state of affairs in the United States, but to say that it will be $18.27 would be ridiculous.