Resourceinvestor.com has posted an interview with Jessica Cross, CEO of Virtual Metals, who says “we’re going to be very surprised if we don’t see $900 an ounce in 2008.” Obviously, $900 gold within twelve months would be another major move. If we do see $900 in 2008, then we have to be ready to accept, sometime, maybe in 2009, a period of consolidation. Still, geopolitical circumstances and concerns about the dollar are such that no one can say when buyers will take a breather.

A couple of more interesting points about the interview are in order. First, many U.S. investors may not be familiar with Virtual Metals, but resouceinvestor.com says that Virtual Metals, based in the UK, is “. . . probably the world’s most respected precious metals . . . agency.” So, Cross’ observations should be of interest to gold and silver investors.

Second, Cross says that surge of recyclable metals that usually comes with a sharp price increase is not happening this time. Recyclable metals are a major source of gold for refineries, but gold is not coming in as expected, which means less gold coming out of the refineries.

Third, Cross says this about silver: “. . . silver will sort of be somnolent for a while, and then suddenly it kind of erupts into life, and the percentage price moves then make everybody’s jaw drop. It can happen, there’s no doubt.” At CMIGS, we are not concerned about silver’s failure to keep step with gold.

When silver makes its move, it will do so in a dramatic manner, such as the late 2005 through May 2006 when silver tacked on a 75% gain in about seven months. We continue to think that silver will outpace gold before this precious metals bull market is over.

Finally, Cross points out that the Fed is usually accommodating during election years, which means lower interest rates and increased “liquidity,” via the Fed’s printing presses, which is inflationary.

It’s the right climate to own gold and silver.

A client who trades commodities puts a lot of faith in triangle patterns. In a recent email to me and other friends, he posted the above 13-year graph of silver. His comments:

If a person does not know something is possible, it is hard or impossible to take advantage of important possibilities. A prepared mind is a great advantage.

I have been following the commodity markets since 1956 and SILVER since 1975. I invite your attention to a possible big up-move in the SILVER price in the period ahead.

I am doing this because I have some type of association with everyone receiving this message, and if I can help you make money I will be happy.

The attached chart of SILVER goes from 1994 to 2007.

After a long bear market the price of SILVER started up in 2001 and doubled in price.

A consolidation of that price increase (see triangle on chart) took place between 2004 and 2005.

There was then another doubling in price ending in another consolidation between 2006 and 2007.

I believe that this latest consolidation will lead to another doubling in price between now and the end of 2008.

There is a P&F objective at $15.75 and another at $20.75.

This latest two-year consolidation can easily send prices to the $25 or $30 level.

Please do your own due diligence and don’t get greedy and over trade!

Remember every market moves in fits and starts, so expect large volatility.

Interestingly, my client’s observations fit nicely with those of James Turk, founder of goldmoney.com, who also likes what he sees in the gold and silver markets.

In his analysis, Turk presents a silver graph that also depicts the two triangle patterns, one from which silver burst strongly to the upside, resulting in a doubling of the price of silver in about six months. That move culminated with silver topping $15 in May 2006. Now, Turk sees a second triangle developing, as does my client.

If silver makes a similar move out of the second triangle, it could go to the $20-$25 level. Considering that silver has “lagged” gold since June 2006, this could be “catch up time.”

Please remember that these are only speculations about potential future price action. Investors who have been around the silver market a long time know that things can sometimes go against the best analysis.

Still, we may see some spectacular fireworks in the silver and gold markets over the next few months, fireworks that could easily send silver and gold higher. Those fireworks could be set off by a continued fall in the dollar or by a widening war in the Middle East.

Investors new to precious metals often ask which is better, gold or silver. Although not a difficult topic, discussing the matter can be long and convoluted. This blog post is not intended to cover all aspects of the topic but will lay out some considerations for investors when deciding which metal to go with.

What makes the decisions more confusing for new investors are assertions such as “Silver is an industrial metal, while gold is a monetary metal.” and “Because silver is an industrial metal, demand may fall in a recession and its price may not keep up with gold’s, on a percentage basis.”

First, both metals have been money throughout recorded history. The Old Testament tells of Abraham weighing four hundred talents of silver, “the current money,” for Ephron the merchant. And, everyone knows of the infamous thirty pieces received by Judas for betraying Jesus. More recently, silver coins circulated as money in our great republic until 1965, when, because of inflation, the silver content became worth more than the face value of the coins and they disappeared from circulation. (Actually, what happened was Gresham’s Law at work. Gresham’s Law shows that even the most unsophisticated know the difference between silver coins and base metal coins.)

Gold, too, is mentioned extensively in the Old Testament and was used thought history as money. Actually, it is accurate to say that gold and silver have been valued in all civilizations. In the United States, gold was used as money until 1933. Today, 109 countries, and the IMF, claim gold as reserves. Although a few governments (or their central banks) own silver, none claim its silver to be reserves. Consequently, because governments hold gold as reserves, but not silver, many analysts say that gold is a monetary metal and silver is not. In doing so, they ignore silver’s historic use as money.

As I view silver, its industrial use is a plus, a big plus. Daily, silver is used in applications that never result in reclamation. As for new gold being mined, little is used industrially and most is turned into jewelry, which is one form of owning gold, especially in India and the Middle East where bullion jewelry is the norm. Just because silver has many industrial uses does not mean it is no longer a monetary metal.

A final point: the so-called “smart money,” which usually is “big money,” tends to go with gold because it is much easier to handle and because the gold market is less volatile than the silver market. (With the development of ETFs, a lot of “smart money” is making some big silver investments because handling the silver is no longer an issue.) And, because the smart money usually recognizes a developing problem early, gold often gets the jump on silver in the early stages of some precious metals bull markets. A recent Doug Casey analysis noted that “gold is now up 15% since August 1, while silver has rallied only 6%.” That is too short a period to conclude that gold is a better investment than silver.

However, silver’s lagging gold since August 1 suggests to me that silver at this time is definitely the way to go because over the long-run silver turns in better percentage gains than does gold. With all the industrial demands for silver, there is reason to believe that it should do much better than gold this time. Additionally, there is the impact of the masses.

More people have used silver as money than have used gold. When the masses come to the gold/silver market, they will choose silver simply because they will get more physical metal for their dollars. In the aggregate, the masses have more money than the wealthy, because there are so many of them. That’s why they’re called the masses. The result will be a lot of money being poured into silver during any monetary crisis or period of sustained inflation.

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.

The second quarter Silver News, a Silver Institute quarterly report covering recent and on-going developments in silver, is interesting reading and yields some tasty morsels for silver investors.

Here are a few:

2006 was the fifth consecutive year that industrial applications posted a gain in total silver demand. Total industrial demand exceeded in 2006, for the first time, 50% of total global fabrication demand.

New anti-microbial flooring for the food industry has been introduced. The flooring emits silver ions that suppress microbial growth, including some or the really nasty bacteria, resulting in cleaner food preparation areas.

Want pollution-free electricity? If only 1% of the world’s sunbelt deserts were dedicated to silver-coated solar reflector systems, they would generate enough power to meet all of the world’s energy needs

Silver demand for the jewelry industry was 171.8 million ounces, versus 164.8 million ounces for photography. While 60% of the silver used for photography is reclaimed, relatively little silver jewelry is recycled. (Between the two uses, about 270 million ounces are lost annually.)

In nine states, fifteen correctional facilities are using a new hard-service disinfectant containing silver dihydrogen citrate to control Staph infections.

With all the new industrial applications being developed for silver, it is likely that from now on industrial demand will exceed 50% of total global fabrication demand. This is a significant development that should cause those investors who like to look at supply/demand statistics to become even more bullish on silver.