Silver price at $158 in 12-18 months?

The Facebook IPO and the $80 billion Glencore/Xstrata merger are the talk of the markets this morning, with both lending encouragement to equities. North American stock markets had another up day yesterday, with Asian exchanges recording further gains this morning. European markets are however more mixed, with continuing Greek debt talks casting a shadow over the generally bullish mood.

April Comex gold futures – the most actively traded month – settled just 50 cents shy of $1,750 per troy ounce. $1,750 is becoming an increasingly significant short-term resistance level for gold. Encouraging news about German and Chinese manufacturing output led to more selling of the US dollar as investors headed back to risk assets, with the US Dollar Index (USDX) falling by 0.46% to settle at 78.92.

The silver price continues to be capped at $34. Until we’re back over $35, it’s hard to get too confident with regards short-term movements in the silver price, though as reported at King World News, market technician Alf Field is confident that we will see a silver price of $158 per troy ounce in the next 12 to 18 months. Given the amount of new money created over the last few years and central banks’ continuing determination to inflate, it’s not hard to understand the bullish case for silver.

This bullish case becomes all the more compelling when one considers the fiscal crisis brewing in major US states. Monday saw warnings that California could run out of cash to pay for government expenditures as early as March unless more borrowing and delays in existing payment commitments are arranged. California should meet the deadline, but its long-term fiscal prospects remain troubling. In the words of one S&P analyst: “The A-minus rating we have on California is pretty low for a US state and reflective of its tendency to get into these cash-deficiency situations."

Massachusetts has the dubious distinction of being the most indebted state in America on a Gross State Product (GSP) basis, followed closely by New York. However, other states – notably New Jersey and Nevada – face far larger deficit problems (that is, there borrowing needs are much more onerous relative to GSP).

We may still be a while away from this crisis, but the fiscal health of the states bears close attention.