We recently had a chance to interview David Morgan of the Silver-Investor.com—home of The Morgan Report a financial newsletter focusing on Money, Metals, and Mining.

David Morgan is one of the leaders in forecasting growth and value in silver, gold, rare earth elements and other resource opportunities.  He offered his thoughts on everything from the future of the U.S. dollar to the current silver and gold price cycle.

The Beginning of the Current Cycle

"We have been in the formative stages of a major bull market," said Mr. Morgan.  In fact, gold has gone as low as $252 an ounce in the beginning of the cycle but now we over the $1100 mark in late 2009.

Silver hit a low of around $4.50 in the same time frame and has been as high as $21 dollars an ounce in 2008.  

"We've been through stage one and I believe we've seen the easy money being made,'' says Morgan.

From 2002 to 2006 resource investments proved easy to acquire. Financing was easy to get and many of the mining stocks did well even those of questionable merit. However, those days are gone.

The Intermediate Phase

What’s happening now is that the market is experiencing an intermediate phase. Morgan says, "This is where we'll get more serious investors and more serious money into the sector." Investors will likely be more selective on who they'll invest with. Morgan sees this phase lasting a couple of more years.

The Blow Off

Morgan predicts that later in the cycle the market will experience a "blow off or panic stage as I refer to it." In this stage, the institutional investors will come in stronger. If they come in strong it's likely that the public will be "coming in droves" as Morgan says. This may cause huge swings in silver and gold and mining company share prices.

The Near Term Prospects

From a long term perspective, Morgan sees gold doubling to $2000 per ounce at a minimum.

And while it's impossible to predict the market for any term, short or long, Morgan notes some indicators suggest that gold may be peaking in the very near term. What concerns him about this is that silver and the underlying main equities do not appear to be confirming this move.

Also, having diligently studied the commodities side and seeing the positioning between the professional and amateur investor, Morgan feels there may be a pull back in gold over the next few weeks. 

While cautioning again that no one knows if this pull back will materialize, Morgan says, "I think we're getting a little ahead of ourselves in the gold market right now."

A Strategy for the Modest Investor

For a new or beginning investor who's interested in the gold and silver market, Morgan suggests that it's always the right time to buy physical metals.  While interconnected, they move on a different dynamic than the futures or mining company shares.

"Physical metal was actually very difficult to obtain last summer. You'd buy gold and silver coins at a huge premium," recalls Morgan. That has since improved but Morgan feels it's a possible precursor of what will be seen in the next few years. However, this might work to the benefit of the small investor.

It could be hard to put large money in the physical gold and silver sector so those investors will go to the next step. This means the mining companies and futures markets will be sought by investors.

This is…"Very, very bullish longer term," says Morgan.

Silver/Gold Bullion versus Gold Coins

"The coin market is the best for almost all individual investors," says Morgan. The reason for this is that coins provide the smallest unit of entry. For example, an investor can own 100 ounces of one ounce silver coins or a 100 ounce silver bar. When the time comes to sell, it's much easier to move a one ounce coin in different amounts rather than a hundred ounce bar. The entire bar would have to be sold, and the investor may not want to do that.

The idea of buying the smallest unit remains a sound strategy for most private investors.

Storing Metals

The issue of storing metals is something that has to be determined investor by investor. Some people are comfortable with gold coins in their homes. If purchasers travel a lot or have security concerns, they might consider other options for maintaining their investments. Some of these include:

·        Bullion Management Group in Canada

·        Central Fund of Canada

·        Gold and Silver Trusts

·        ETF's (Exchange Traded Funds)

The premium costs of these firms and the tax implications (especially with ETF's) have to be carefully considered.

"It's better to have an ETF than not have any exposure in metals," says Morgan.

When Will Gold Hit $2000 per Ounce?

"When I first started publishing on the Internet about 10 years ago I said I thought 2010 could be the last year of this bull market in the precious metals. Right now I think I'm wrong about that, it seems the precious metals bull market has several more years to run, "states Morgan.

According to the work of noted investor, Jimmy Rogers, these cycles last about 17 years.   If an average of 15 years is used and this cycle began in 2000, it would end about 2015.  

Taking into account the two year old credit crisis, Morgan thinks the spike in the silver and gold prices will occur between 2012 and 2014.

The Silver Acceleration

Morgan thinks silver, the smaller market, will accelerate even more than gold. "When investors see they missed the move in gold, they'll go to the silver market," he says.

He also predicts the ratio of silver to gold will narrow from 65 ounces of gold buying one ounce of silver to 20, 15 or even 10 to one.

The U.S. Dollar

Morgan sees a time when the U.S. dollar will cease to be the reserve currency of the world. A world currency of some kind will take its place.