Record industrial demand for silver and resurging investor interest is diminishing a supply surplus, driving the metal used in everything from solar panels to batteries into its best start to a year in almost three decades.

Manufacturers will use 15,415 metric tons, 2.5 percent more than in 2011 and reducing the glut by 41 percent to 3,297 tons, Barclays Capital estimates. Investors may buy 2,000 tons through exchange-traded products, after selling 1,300 tons last year, Morgan Stanley predicts. Prices will average $37.50 an ounce in the fourth quarter, 12 percent more than now, the median estimate in a Bloomberg survey of 13 analysts shows.

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It has been a while since the Marc Faber graced Zero Hedge. It is time to remedy that. Providing his traditional dose of snark, tragedy and realism, the Gloom, Boom and Doom report author spoke to Bloomberg TV, and when asked what his outlook for the euro is, dispensed the following pearl: “I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value.” Needless to say, this is the kind of response that will get him banned from CNBC for life when Bartiromo breathlessly asks him, “ok, you think the world is ending, so what five stocks would you buy.” As for his latest report, “It’s actually quite gloomy but if you’re very gloomy what do you invest in: Treasuries, Italian bonds or commodities or equities?  I happen to think U.S. equities are not terribly expensive, so relatively speaking to other assets, they may for a while actually do quite well.” Considering the ridiculousness of the market over the past two weeks when it has gone up on nothing but lies, Faber just may have a point. 

Some other highlights from Faber:

On the market now:

“Right now, the market is in neutral territory. It was very oversold on October 4th when the S&P dropped to 1,074. Now around 1260, the upside in my opinion will be between 1,280 and 1,350 because there’s a lot of supply around that area. But if there is some good news coming out of Europe, and good news would simply mean postponing the problems for another few years with some kind of money printing operation, either by that ECB or IMF or EFSF, [that] lift stock prices higher.”

“[Postponing problems] is not good news, but it is better news than if the whole eurozone falls apart. It gives some time to maybe find better solutions. I doubt they will be found, but with money printing you can hide a lot of things and you can postpone problems as we have seen in the U.S.”

On whether he’d rather own euros or dollars:

“I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value.”

On emerging markets:

“There is close correlation between all markets in the world. This year, the U.S. has grossly outperformed the emerging markets   In Asia, we’re down between 15% and 25% in markets. In Eastern Europe, even more. The U.S. this year is a wonderful market relative to the rest of the world. “

“I think this outperformance may go on for a while. Some emerging markets could rebound more strongly than the U.S. because they are more oversold. Like India, the currency is down 18% since July and the market is down 22%.  Currency adjusted, the market has been extremely weak and is oversold. It could rebound somewhat here, but forget about new highs. It’s not going to happen anytime soon.”

On China:

“The reason I’m not very keen on China at the present time [is because] we had a credit bubble, we still have artificially low interest rates and a huge fiscal deficit in orders words artificial stimulus. That’s coming to an end. Yes, the government can further stimulate and slash interest-rates again and reduce reserve requirements, but it will just postpone the problem and aggravate the problem in my opinion.”

“When you have an economy like China that becomes so big so quickly, you can have a more meaningful setback. If the U.S. economy grows at 3% or contracts that 3%, it has no impact on the price of copper to speak of….In the case of China, whether the economy grows at 10% or 5% as a huge impact on the demand for iron ore and copper and aluminum, steel and coal. The Chinese economy today has a much larger impact on the rest of the world than is generally perceived economically speaking.”

With gold hanging around the $1,700 level and silver near $32, today King World News is pleased to share with KWN readers a piece of legendary technical analyst Louise Yamada’s “Technical Perspectives” report.  This information is not available to the public and we are grateful to Louise for sharing her incredible work with KWN readers globally.

After a long day of boxing and shipping hats, I’m glad to finally sit down and bang out an update. Lots to talk about but not very much time. Let’s get to it.

First and foremost, don’t ya just love support that holds and holds and holds? $1705 gold is just that. The significance of that level goes all the way back to September.

Gold traders are more bullish after investors accumulated the biggest-ever hoard of the metal, with Europe’s deepening debt crisis driving them to protect their wealth with this year’s second-best performing commodity.

Though pleased by the size of the haircut for Greek bondholders, international investor Jim Rogers says the deal isn’t enough to save Europe, and the problem is likely to come back to haunt investors in the near term.

Rogers has welcomed last night’s eurozone deal, saying the size of the haircut for Greek bondholders was much higher than he had expected.

“Never in a million years did I expect them to impose a haircut of 50 percent, this shows at least somebody is starting to accept reality,” Rogers told Investment Week.

However, Rogers says, “Politicians have delayed addressing the problem yet again.”

Jim Rogers (Getty Images photo)

“It will come back in a few weeks or a few months and the world will still have the same problem, but this time only worse because the European Central Bank and other countries will be in deeper in debt.”

Rogers reiterated that widespread haircuts across Europe are necessary to truly resolve the crisis. “Greece is bankrupt, but others are too, and these haircuts will have to come back and be wider,” he says, adding that this morning’s global stock market rally had the potential to last for a while.

“There has been a major overhang, so we will see the easing of some pressure, but the problem will come back because the Western world still has not dealt with its debt,” sys Rogers.

“Most European countries are increasing their debt rather than decreasing their debt. Until that changes, the problems are going to continue, just as they will in the U.S.,” he added.

Bloomberg reports that the European Union’s agreement with banks for a voluntary 50 percent writedown on their Greek bond holdings means $3.7 billion of debt-insurance contracts won’t be triggered, according to the International Swaps & Derivatives Association.

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With gold, silver and stocks all having big up-moves this week, today King World News interviewed Peter Schiff, CEO of Europacific Capital.  Schiff made some great calls recently including the move higher in the euro.  When asked about the huge move in gold and silver, Schiff stated, “I think there’s more to come.  Look at the technical action in everything, in stocks around the world, in commodities.  Look at the price of crude oil and look at the dollar, the dollar is breaking down.  I mean we had a huge decline against the Australian dollar, but look at that surge back into the 1.40s on the euro.”

Peter Schiff continues: 

“Today the dollar is at an all-time record low against the Japanese Yen.  So you have a weak dollar, you have bond prices now headed lower, commodities up, stocks up, kind of across the board.  The message is get out of paper, get into stuff and the worst paper is dollars.  Even the euro as a currency is moving up against the dollar.

I think we will come pretty close to hitting $2,000 on gold this year.  It would be hard for gold not to be above $2,000 in 2012.  I really think it would be unlikely that we wouldn’t see prices north of $2,000 next year.

The dollar is headed right back to the lows and I think it will take out the lows.  If it does break to new lows, that’s when we might see another crisis because then we might start to see the world questioning the viability of the US economy….

“They may also be questioning the credibility, whatever credibility remains of the Fed.  So that could be the next real problem looming on the horizon.”

When asked about silver specifically, Schiff stated, “I like the chart on silver.  Silver has a lot of upside here.  They really couldn’t get it much below $30, that’s pretty solid support.  The only real resistance is up around $50.  

We are going to eventually go through $50 so buy it now.  I have that special report, before you buy gold or silver from any dealer, go to my website (goldscams.com) and download that special report and make sure you don’t get ripped off.”

Peter Schiff also gave us an update on what he is up to, “I’m down here in New Orleans.  If you haven’t seen the youtube videos there’s a lot of youtube’s around now of my trip down to Occupy Wall Street.  There’s a lot of good stuff there.  There is a lot more footage coming because I was there for hours and hours, so this is just the beginning of it. 

There are interesting conversations with the protesters, how they think, what they are saying and how they react to me.  So it’s good fun to watch.”

Eric King

KingWorldNews.com

Silver is absolutely in love with the idea of QE3.

It was last Thursday that Fed Governor Tarullo took the podium in New York and began pontificating about QE3. Over the next few days, Fed Governor Yellen and Fed Vice Chairman Dudley did the same. And the reaction from silver investors has been ebullient ever since.

A primary fundamental thesis for owning silver is the following: hard asset protection against aggressive monetary stimulus, pricing instability and currency debasement. In other words, when the Fed and other global central banks are effectively engaged in printing money, silver thrives as a hard currency alternative that is affordable for many investors from a price perspective.

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The biggest rout in commodities since the global recession may be a sign that the fastest U.S. inflation in three years is peaking.

The Standard & Poor’s GSCI Index of 24 commodities entered a bear market last month after sliding more than 20 percent from a two-year high in April, on concern that slower growth will cut demand. A slump in the gauge from a 2008 record preceded a drop in inflation, while a 2009 rebound caused the consumer price index to climb. Raw materials fell 12 percent in September as the CPI rose 3.9 percent from the same month a year earlier, the most since 2008.

“There is a sense that headline inflation is receding,” said Stephen Stanley, the chief economist at Pierpont Securities LLC, a government-bond broker in Stamford, Connecticut. “Things have been a little more tame the last few months than they were earlier in the year, when you had this relentless push higher, in energy prices especially.”

That’s good news for shoppers, manufacturers and Federal Reserve Chairman Ben S. Bernanke, whose efforts to revive the economy have been criticized for risking faster inflation. Lower commodity costs, accounting for 40 percent of the CPI, would give Bernanke even more flexibility to shore up growth. The benchmark measure for prices will slow to 2.1 percent in 2012 from 3.1 percent this year, according to the median estimate of 75 economists surveyed by Bloomberg News.

Slowing Inflation

Price growth will slow to 3.35 percent this quarter from 3.77 percent in the previous three months, according to the median of 68 economists’ estimates compiled by Bloomberg. CPI will cool to 2 percent by the third quarter of next year, the estimates show.

The government’s measure includes 60 percent services such as rent and medical care and 40 percent commodities, which the Bureau of Labor Statistics defines as food, beverages, apparel and other non-durable goods, as well as durable goods including cars and appliances. The cost of those items is determined by raw materials and other expenditures, including labor.

“We’ve already seen some declines in gasoline prices and at least for some foodstuffs,” said Randy Kroszner, a former Fed governor and an economics professor at the Booth School of Business at the University of Chicago. “That suggests that the outlook for inflation is relatively subdued.”

Investors’ Outlook

Investors are expecting a slower pace than they did in April, when the S&P GSCI gauge was at a 32-month high. The difference in yields on 10-year Treasury Inflation Protected Securities and 10-year bonds is 2.0309 percentage points, the average rate investors anticipate in CPI over the life of the securities, down from an almost five-year high of 2.6556 points on April 11.

Consumers also are changing their outlook. In a survey released by the University of Michigan on Oct. 14, they expected an inflation rate of 3.2 percent over the next 12 months. In the same survey in March, respondents forecast rates would reach 4.6 percent, the highest since August 2008.

While commodities are declining, they remain costly relative to past years, meaning inflation will stay near the highest levels since 2008. The median forecast of a 3.1 percent gain in the CPI this year compares with expectations for 1.5 percent in January, a Bloomberg survey of 75 economists shows.

“Commodities come off most when the winds of recession are blowing pretty strong,” said Chris Rupkey, the chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Inflation has “run up to the top because gasoline prices were so high this spring,” he said. “Now that gas peaked at around $4, there’s nowhere for headline CPI to go but down.”

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net