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Gold and Silver Will Soon Line Investors’ Pockets

SOURCE:[The Gold Report]-Even though the mining equity markets have been choppy and mostly sideways this year, Jordan Roy-Byrne, CMT and editor of The Daily Gold Premium newsletter, has managed to produce some enviable returns in his model portfolio. In this exclusive interview with The Gold Report, he tells us why he's now turning his attention to silver, which he expects will provide some exciting returns for producers and investors. He talks about some of his favorite names and how companies with cash and cash flow will be able to scoop up some great property deals from less-fortunate juniors.

The Gold Report: A lot has happened on the global economic and geopolitical fronts since we spoke last Spring. What's your appraisal of the affects of these developments on the precious metals markets?

Jordan Roy-Byrne: I believe the geopolitics is overplayed. Certain geopolitical events can have a short-term impact but by and large aren't a long-term driving force for precious metals. As far as the economy itself, up until this spring, the markets were essentially pricing in a mild recession globally. Europe was in recession and the emerging world was slowing down considerably. The U.S. situation is similar to Japan after its bust. We're in a flat-lining mode, which I believe will continue for another five to seven years.

I don't see any substantial economic growth, and at the same time I don't see any severe recessions on the horizon. To have a severe recession you need to have an expansion lasting for many years. The Great Recession of 2007/2008 cleansed the system. Granted, we're still not at the point where we can get back to consistent strong economic growth. It's going to take several more years to get to that point.

"I believe we're in a new cyclical bull market for precious metals that started in May."

At the beginning of the crisis, governments financed deficits with huge amounts of short-term debt rather than with long-term instruments. A significant amount of that debt is coming due in the next several years. That's why we're having open-ended quantitative easing (QE) and why we will have permanent QE, given that the debt burden over the next couple of years is going to be substantially greater than it was in the last couple of years. The other point is that even though we have had a recovery, it has not been strong enough to bring down the debt burden, which has gotten worse and worse.

That's why I believe we're in a new cyclical bull market for precious metals that started in May. I'm looking for a little correction/pullback in October. After that, the market could be in position to retest its highs sometime this winter.

TGR: Historically, October can be a scary month in the markets and it is just ahead of the U.S. election. Care to make any short-term predictions for what will happen between now and the end of the year?

JR-B: I think the markets will do what they're going to do. They don't really respond to political events. Markets are forward-looking and lead everything. I don't see something coming out of nowhere and most markets are performing fairly well. October is probably just going to be a pullback, and it's possible the S&P 500 can have a significant pullback. I'm more focused on precious metals, which have been following the seasonality to a T in the last couple of months. Typically, this seasonality calls for weakness in October. The market is ready for a correction anyway, and the typical October seasonality adds more credence to that argument.

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