Why Does the CIBC Slam Silver? 12 comments
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I’m going to comment on Jon Nadler’s remarks in his February 9 article titled "The Silver Medalist." Jon pointed out some interesting quotes about the silver market, and some of these I have issue with and some I don’t. Mostly what he did is quote CIBC Global Markets and their assessment of the silver market. And one thing that he quotes from CIBC is that in 2008 silver had risen to about $20 an ounce and lately it’s been languishing at around the $10 level; those are facts, no dispute there. And then they (CIBC) go on to state at the first sign of a decline in gold that investors are likely to sell their silver holding but retain more of their gold holdings since gold has a superior reputation as an insurance policy, compared to silver. I really don’t have an issue with that, yet.
For one thing, in this part of the cycle, gold has certainly gotten most of the publicity and will continue to do so. Secondly, gold is almost mainstream and even Wall Street’s starting to talk about gold. Silver is not frequently discussed; it certainly is not thought of as a safe-haven asset by most investors in North America. However, that fails to recognize that there are 6.2 billion people on the planet and many of those will never hear of Jon Nadler or David Morgan or Ted Butler or any commentator for that matter, but they have eons of history where silver was a store of value. And those people, as things unwind globally, will move to the silver market, simply because gold is outside their price range.
So for now, I think the CIBC statement referred to in the first paragraph is a fairly accurate one. Certainly it’s an opinion. As far as the future is concerned, however, my opinion is a bit different because of what I see coming down the road, and that is my reason for using the word “yet,” above.
What bothers me about this CIBC article that Jon has quoted is that they believe the increase in base metals will lead to a low in silver prices because there’s going to be more and more silver as a result of base metal mining. That’s something I take some issue with for 2009 and probably well into 2010. I’ve already written an article about that; in fact I said 70 percent of silver is not coming to the market—and that was just a catch phrase so people would understand that 70 percent of the silver that does come to market is a result of base metal mining. From everything I have read and all indications I get, the amount of silver mined in 2009 as a result of base metal mining will probably be less than what it was in 2008.
Thus the CIBC article is certainly worth reading and commenting on, and I think Jon handled it very well, because basically what he’s doing is quoting what CIBC said. His look at it is somewhat similar: there has been a big ratio drop. Silver has outperformed gold from the time silver started its bull market in 2003, but depending where you draw the starting line, you can make just about any argument you want. You can also say that from 2003, which is where I think the silver bull market started, after the gold bull market began, silver has outperformed gold until recently. And since then, gold has outperformed silver based on total performance and the gold/silver ratio.
The ratio went from basically 80 to 1, down to around 50 to 1, until the credit crisis started unwinding and once that took place, the silver/gold ratio got back up—actually above 80, temporarily. Now it’s worked itself down to around 70... will it continue down or up, nobody knows. I actually suspect that the ratio is not going to get real favorable toward silver, probably for the rest of the year. Not that I’m agreeing with the CIBC article, but I have to maintain my integrity in what I’ve written to my membership site, Silver-Investor.com, and have told readers of The Morgan Report—that I saw a good rally going into the early months and after that, it might be a time to build cash and look for some good values.
The amount of silver that is available for investment is so small, probably 50 million to 100 million ounces at best. That is a pitifully small market, relative to all the paper that’s flying around. And there will be a day like no other day, when someone is not going to be able to deliver silver to someone who can make some noise, and when that event takes place it will probably be pushed aside, looked at askew, and not recognized as the fact that it is. But eventually the truth will leak out, and once that happens I think more and more people will start to get much more interested in the silver market.
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This article has 12 comments:
"Those people?" What people? When? Where? How much?
Much of this article is pure speculation and is without documentation. It lacks rigor, in other words. Some people look at silver as gold's ugly cousin. Personally, I don't know. More facts, please. More analysis. More . . . documentation.
Good article. I think we will see silver rocket much higher in the coming months - up at least another three to five US dollars.
The supply of readily deliverable silver is severely squeezed at this point, and with the massive bailouts and all the distrust of banks, I believe we are about to see the world's greatest shift to precious metals and other physical stores of value in history.
Around the world, there is a profound sense of panic and anger at the chicanery of the financial market players, and I believe if you took a poll, you would find over 90% feel that they can't trust anything they hear from govt officials or bankers - and they would agree that they have been lied to repeatedly over the years regarding their investments, the soundness of banks, and the actions and pay levels of corporate execs. The level of anger seems to grow by the week.
The buying panic could begin any day, and when people find out that the futures markets cannot come close to honoring the deliveries of gold and silver as scheduled, there is a real risk that many of the shorts will go bust in a big hurry.
I'm not sure how that will be resolved - California (remember the 'world's 7th largest economy'?) is already giving out paper IOUs instead of cash for tax refunds! Will angry investors in PM ETFs settle for a piece of paper from some clerk on Wall Street, or will they do whatever is required to claim what is owed to them by the banker or speculator on the other side of the trade?
Silver is consuming fast as we speak , gold is in vault !!
We are consuming more silver than ever and there are no more Govt. silver sales or from remelting sources !!
Chinese imports dropped 43% last month. World GDP growth was revised to + 0.5% before the Japanese released their numbers, Europe? Russia?
Who is consuming all of the silver?
if there's a near to intermediate term low coming (again) in silver, it'll be, i believe, more to do with the natural up and down of sentiment
silver's being driven mania like right now; when that needs correcting, silver, as it's historically done, will crash hard, then, sooner or later, rise again
as to timing and amts of rise and/or fall, i waiting to see ;-)
No one knows what silver will do but it sure is kind of a nice metal, has been moving up quickly, and is somewhat in short supply if you consider some of the statistics. I have a bunch in the house and at...Kitco. Hmmm, I hope no one is taking my silver to pay Jon Nadler. :) Silver is now back up to where I paid for my Kitco metal, but I never doubted that.