Jason Hommel: silver shorts must be desperate!

Silver's "poor fundamentals" refuted!

(Buy silver while it's on sale, now!)

Silver Stock Report

by Jason Hommel, April 29, 2008

The Guardian just wrote a hatchet job on silver, to try to kill the market. Somebody must be very desperate. I will refute this article point by point. My rebuttal will be in italics. If you cannot see the italics, then read this article at my website:
http://www.silverstockreport.com/2008/refutation.html


http://www.guardian.co.uk/feedarticle?id=7489377

Spotlight falls on silver's poor fundamentals

Reuters, Monday April 28 2008

By Pratima Desai

LONDON, April 28 (Reuters) - Investment money flooding into silver has overwhelmed poor fundamentals and helped it to outperform gold, but the tide could be turning for precious metals and the probability of large losses is rising.

Silver has outstanding fundamentals, and silver's downside is minimal, and, in fact, it probably just bottomed, as I will show.

Silver's price falls in percentage terms are likely to dwarf those seen in gold, which some fund managers say has stronger supply/demand fundamentals.

Again, the opposite is true, silver's supply/demand fundamentals are much better than for gold, as all the smart money knows, and as I will show.

"History shows that when you get a substantial correction in precious metals, silver falls more than gold ... It's a more volatile market and smaller in value terms," said Stephen Briggs, analyst at Societe Generale.

That's true, silver is more volatile, and in a bull market for silver, which we are in, silver will clearly outperform gold, as it has outperformed gold, as the silver to gold ratio is narrowing, from 80:1 to 50:1, and we have a long way to go to get to the historic 15:1 ratio, or we will likely exceed it, with silver moving even higher.

One big reason behind surging prices has been the tumbling dollar, making commodities priced in dollars cheaper for holders of other currencies. The weak dollar also prompts producers to raise prices to protect profit margins.

Silver producers do not have the luxury of raising prices. No commodity producer does. All commodities in the world are either sold at the spot price, or under long term contracts that have already been agreed upon, which, in this bull market, are usually at lower prices than today.

Last week the dollar fell to record lows against the Euro, to beyond $1.60, an event which has caused many to question whether further losses can be sustained and whether it has bottomed.

While the excess creation of paper money is one of the best factors for higher silver prices, the dollar's relation to the yen and Euro has almost nothing to do with it's relation to silver and gold prices. All paper money, the yen, Euro, and the dollar, are all falling against silver and gold, generally, since 2001 and that trend will continue.

"The dollar is not going to keep on depreciating forever," Briggs said. He expects gold prices to average around $900 an ounce next year from $1,025 this year and silver to average $15.50 compared with $19.20.

Well, actually, the dollar could keep on depreciating forever, as all paper currencies in all of human history have eventually done just that. It's silver and gold that cannot depreciate forever. Furthermore, these spokesmen from the large banks and brokers are always revising upwards their estimates of silver's future prices, and it's always behind where silver ends up going; I've seen this pattern for the last eight years now. Since when have the large banks or brokers called silver right? When did they advise you to ever get into this market to make several hundred percent since 2001? They never did. And now they want you to sell? They always want you to sell.

Financial uncertainty, which has underpinned precious metals since last August is to some extent becoming less important to investors seeking the higher returns stocks and bonds offer.

Stocks and bonds offering higher returns? Since when? Only if you go back 30 years, but not the last 8. The Dow/Gold ratio topped out in 2001 at about 56 and has narrowed down to about 14 now that gold has hit about $900.

With a weakened case for holding precious metals, prices have started to slip. Spot gold is now around $893 an ounce compared with a record high of $1,030.80 on March 17 and silver at $17 from a 27-year high of $21.24.

Weakened case for holding precious metals? What weakened case? They made no case. They didn't even get the facts right. The current dip in silver is probably the bottom, and now is probably the best time to buy!

Goldman Sachs recently said it expects to see gold prices at $835 an ounce in 12 months and silver at around $15.50.

Here's another investment bank revising their estimates upwards again, but making bearish calls. Hilarious. Pathetic. Bullish!

RECYCLING

From the end of last year to March 17, silver prices surged by more than 40 percent, while gold was up more than 20 percent. Silver's heftier gains were built on investor flows.

Absolutely. Investment demand for silver surged from 5% of annual mine supply to maybe about 8-10% of annual mine supply, we'll see soon.

Barclays iShares silver trust, the biggest silver exchange traded fund listed in the United States, now holds more than 5,770 tonnes of silver, a rise of about 10 percent since the end of last year.

Gold holdings by New York-listed StreetTracks Gold Shares, the world's biggest gold ETF, stand at 591 tonnes, down about 5 percent since end-December.

I agree with those stats, but look at what they mean. With gold trading at about 50 times the price of silver, and the gold ETF holding more than 1/10th of the tonnes of the silver ETF, it means that about 5 times as many investment dollars went into the gold ETF.

"Silver is probably going to fall more than gold in percentage terms," said Wolfgang Wrzesniok-Rossbach, head of sales at German metals trading group Heraeus.

"From an industrial and jewellery point of view, there has clearly been a decline in demand. There has been a lot of additional material coming to the market in the form of scrap."

This "German metals trading group Heraeus" is not said to be either long or short. They could very well have short positions, and just inventing things. They appear to be a silver user, at first glance here: http://en.wikipedia.org/wiki/Heraeus

More than 20,000 tonnes of silver were produced globally last year compared with around 2,500 tonnes of gold.

I agree with those stats. What is not said is that 160% of gold mine supply is purchased by investors each year or about 4000 tonnes of gold. In stark contrast, about .07% of silver mine supply is purchased by investors each year, about 1555 tonnes, or about 50 million ounces.

The surplus in the physical silver market is expected by some analysts to rise to around 2,500 tonnes from a surplus of around 900 tonnes in 2007. The physical gold market could see a surplus this year of 600 tonnes from 500 tonnes last year.

There is no such thing as a "surplus" of precious metal. This is an accounting term, used to designate demand by investors.

"Fundamentals come into play when prices are coming down," said John Reade, analyst at UBS. "Silver doesn't have gold's fundamentals."

Exactly. Silver does not have gold's fundamentals, silver's are much better. With industry consuming more silver than is mined each year, any slight increase in investor demand for silver will continue to drive silver's prices upwards, and make a mockery of all of wall street and all they do and all they have to offer. This is why they must band together, to write lying foolishness against silver as they do. This can only be an indication of them feeling pain in the silver market, not being able to coax out any supply from investors after having bombed the price in the last few weeks. The silver shortage is continuing with many coin shops still very low on silver supplies, as investor selling by the public, which was a large part of recycling supply, has changed since gold hit $1000/oz., and now must be putting the squeeze on all of wall street, who are probably carrying a collective short position in silver.

ONE SOURCE OF DEMAND

Silver is often a byproduct of other metals such as lead, zinc and copper, where miners are trying to ramp up production with some success.

Funny theory. True, about 70% of silver production is as a by-product of the base metals. I just read that Chile, who produces 40% of the world's copper, is ramping down copper production due to a power crisis. And several more trusted analysts in our industry have finally turned bullish on copper recently.

That means more silver on the market and together with scrap recycling, supplies are set to jump this year, while overall demand, including that from ETFs is expected to fall.

Why would they project demand from silver ETFs to fall? That would be quite a change. It's rather hard to predict such changes; it's usually more likely that things will stay the same, with ever increased demand from the silver ETFs.

"Silver is very dependent on one source of demand -- ETFs.

That's not true. Silver prices will go up even without new investor demand, due to the overwhelming fundamentals that there is so little investment demand at all.

You can't get excited about silver in the same way as gold. Silver doesn't really have the same cachet," Briggs said.

Now that's true. Silver has absolutely no cachet. As I wrote above: 160% of gold mine supply is purchased by investors each year or about 4000 tonnes of gold. In stark contrast, about .07% of silver mine supply is purchased by investors each year, about 1555 tonnes, or about 50 million ounces. So, how much money is spent on gold vs. silver each year?

Silver: 50 million oz. x $17/oz. = $850 million.

Gold: 4000 tonnes x 32,151oz/tonne = 128.6 million oz. x $900/oz. = $115,743 million, or $115 billion.

Thus, 136 times as much money is spent on gold, than silver, by investors each year. Silver has absolutely no cachet, true, so true. And yet, the fundamentals are so much better, precisely due to that lower investor demand. When investors get educated about silver, they buy hand over fist, and create shortages at major coin shops around the world.

"Demand from the photographic sector has been falling fast ... It's no longer an important source of demand." For gold, the picture is somewhat different. Mine production is expected to hold steady this year, but analysts expect output in South Africa, a major producer, to fall over coming years because the ore that remains is deep and expensive to access.

Wow. What a totally biased statement, telling half truths that are totally irrelevant to silver vs. gold. These guys must either know nothing, or be intentionally trying to hammer silver prices. Silver's declining photography demand is being offset by rising industrial demand and the tiny increase in the tiny investor demand.

Fabrication demand -- jewellery and coins -- is expected to continue unabated as rising incomes in emerging market countries such as China and India allow people to choose gold over silver.

More hatchet jobs against silver are expected, while they continue to say that silver prices will be expected to fall, while silver prices actually rise. The reason that the establishment will not tell you to buy silver is because they don't have any. The investment demand is so tiny, they hardly have any silver at all, and have never been able to enter the market in any size. How can wall street establishments, who receive bail outs by the Fed, to the tune of $20 billion dollars at a time, buy any silver when the silver market is swamped by less than $1 billion of investor demand annually?

Be fruitful and multiply and you can see through the lies. Buy silver. They lie.



Sincerely,

Jason Hommel

Hugo Salinas Price: Dorothy's silver slippers...

Hugo Salinas Price, president of the Mexican Civic Association for Silver and the world's foremost advocate of restoring silver's role as a circulating currency, addressed GATA's recent conference in Washington by video. His address, "Dorothy's Silver Slippers," detailed his proposal for the issuance of a circulating silver ounce coin for Mexico -- a coin that, not being imprinted with any particular peso value, would never be at risk of withdrawal from circulation because its melt value had come to exceed its face value.

Salinas Price's address to the GATA conference is 23 minutes long and you can find it in three parts at YouTube

Edwin Vieira Jr: Silver and gold guarantee freedom

Read the address by Edwin Vieira Jr. at the Gold Anti-Trust Action Committee Inc. conference (GATA Goes to Washington -- Anybody Seen Our Gold?) held at the Hyatt Regency Crystal City Hotel, Arlington, Virginia on Friday, April 18, 2008 here: Edwin Vieira Jr: Silver and gold guarantee freedom

Mineweb: Silver conductive inks market will triple over next 8 years

A new group of applications is emerging for silver inks, which is capturing the attention of businesses, that have ignored silver for years.

Author: Dorothy Kosich
Posted: Tuesday , 15 Apr 2008

RENO, NV -


The market for silver conductive inks will almost triple over the next eight years to reach $2.4 billion by 2015, industry analysts NanoMarkets predicts.

In their report, "Silver Inks and Pastes for Printable Electronics: 2008-2015," NanoMarkets said businesses "are suddenly sitting up and taking notice of opportunities in the silver ink business, when they haven't paid made attention to this kind of material in years."

The report covers the future of both conventional inks and pastes and new nanosilver inks.

Printed electronics are attracting attention as an opportunity for conductive silver inks, according to the study. "Since silver is the best conductor known to man (especially since its oxide is also conductive), silver conductive inks immediately assume a pre-eminence in the pursuit of PE."

During the past year, the report found there may be immediate ways ahead for silver ink makers in the printable materials market. "One of these is to focus on aligning their inks with the move to flexo and gravure, which is beginning to occur as the printed electronics industry ramps up to a full production model. The other is to focus their marketing on selling inks for RFID antennas and (to a lesser extent), solar panels since these are markets that claim both that they have considerable growth potential and that they are already a real business (unlike many applications in the new PE).

The biggest opportunity in the demand for silver inks "will be found in the RFID space where revenues from silver inks for RFID antennas alone will exceed $880 million by 2015. Based on the current excitement surrounding alternative energy, NanoMarkets expect the use of silver inks for solar panel contacts to grow to almost $250 million by 2015."

However, the report also warns that the "biggest challenge to the future of silver's use in electronics is undoubtedly its high cost. This is one reason that the traditional semiconductor industry has never seriously considered using silver for interconnects. Silver ink sales in the printable electronics business are also hurt by high prices. And with the price of silver almost doubling over the past year, this has really become an issue."

Nevertheless, NanoMarkets also noted that silver prices seem to be on their way down, "so perhaps price issues will not matter as much in the next year or so."

The report forecasts that nanosilver inks will comprise almost 21% of total ink sales by 2012, "driven by their high conductivity and ability to be cured at low temperatures. The latter will be especially important given the growing role of thermally sensitive flexible substrates."

Jason Hommel on Silver Shortage

Silver Shortage gets Worse, Price Drops Again!

(If you don't hold it, you don't own it)

Silver Stock Report

by Jason Hommel, March 20, 2008

Three more major silver dealers are reported to be out of silver today: The U.S. Mint, Kitco, and Monex. This, on top of the major dealers yesterday, Amark, Perth Mint, CNI Numismatics, and APMEX, all reported sold out. Further, nearly all of Canada is reported to be out of silver, from Vancouver to Toronto.

This is unprecedented, and is a perfect case of market manipulation in the paper market at COMEX and other futures exchanges to see silver prices continue to drop down to below $17/oz. today. Paper promises can be created endlessly, but real silver cannot.

This is NOT a case of the dealers getting spooked, and selling out to the refiners just in time, at peak prices. This is a case of the public buying up the stock at coin shops across the world ever since gold hit $1000/oz.. That event finally sparked a little of the public's buying of silver and gold. Thus, the typical coin shop flow of silver to the refiners just stopped in the last few weeks, and especially the last two days.

This is NOT a case of the public creating a top with 'everyone' in silver, because nobody's in silver yet. In 2006, only $1 billion was spent on investment silver, which is 0.007% of the $13.5 trillion of money in the banks. As I have long reported, the silver market is so small, there is no room for new investor demand, not even 0.1% of money could be spent on silver, because that would be $13 billion, which would push silver prices to $200/oz., and we are seeing only the tiniest beginnings of that.

$13 billion would be almost enough to buy all the silver produced by the mines in one year, which would leave nothing for industry. It would essentially double demand, but supply would remain the same.

Furthermore, this is not a top because the public continues to get to the coin shops, and is now getting on waiting lists for silver. The public is not yet in, so how can the price drop?

This is a case of price fixing and manipulation, like communism. Sausage is reported to cost 1 link per ruble, but there is no sausage. Silver price is quoted, but there is little to no silver.

Shortages are evidence of price fixing. Price fixing results in shortages. They are price fixing silver at a below market price over on the paper exchanges in New York and around the world.

How long can it go on? Until people stop trusting the paper exchanges, which could be after they default and fail to deliver silver. Or we could see a severe backwardation, as people refuse to trust and buy futures contracts, which would thus sell at a discount to real silver. Then, the spot price will really go up, maybe about double or more very quickly.

Regarding Monex and Kitco:

Monex has a shortage of 100 oz bars and silver eagles. They say that they are 5-7 days behind on orders for 100 oz bars and at least 10 days behind on silver eagle orders.

"This message has been placed on KITCO's buying board in large red letters. TT

IMPORTANT: Due to the volatility of the market, we are experiencing a significant increase in the volume of products that are being sold to Kitco. Although Kitco and HSBC Bank are working hard to stay on top of this, you may experience a delay in your package being processed. We apologize for any inconvenience this may cause, and appreciate your patience and understanding."

bulliondirect says:

High Activity Market Alert
The precious metals industry is experiencing a substantial surge in activity which may increase the possibility of logistical delays; including customer service response time and product processing (incoming and outgoing). Our goal is to keep our prices competitive while still delivering an exceptional transaction experience.

I now have 4 pages of reports that I posted to my member's forum, from people saying that dealers around the world are out. Here is a summary of their comments:

Apmex out.
CNI out.
One in the UK.
One in New Port Richy, Florida.
Ebay is selling silver over spot.
Toronto out except overpriced Eagles and Maples.
Kitco in Montreal is out of Silver Maples.
Local shop in Victoria BC is out of all bullion.
Mexico City's "Consultoria casa de cambio" is out of bullion.
There is no silver for sale in eastern Canada.
Perth Mint is out.
A world class gold and silver bullion dealer in Dubai, Lakhoo Jewelry, is almost out.
Most Utah coin shops say there is a critical shortage of silver available for purchase in Utah.
(Johnson Matthey, the largest refiner, is in Utah!)
www.argentarius.de , there where 637 Mexican Libertad still left. Now, two hours later: nothing.
We could not find silver in canada from two days now.
Conejo Coin and Stamp run out of 100 oz silver bars too.
I just cleaned out the last 25 oz. of silver at my local coin shop.
scotia bank told me that they have no silver for about 2 days now.
Camino Coin of Burlingame, CA says, There seems to be a silver shortage.
In the Detroit, Michigan area, very few coin shops have any, I got the last 2 bars at one shop.
Bulliondirect having trouble mostly with Silver Eagles and Canadian Silver Maple Leafs.
The US Mint has said they are out of silver eagles - at least for a few weeks.
Portland, OR, Alder Gold Exchange., just a few bars, bought them out.

The dealers in Vancouver are offering 100 oz bars at $1875 preorder, but we wont get them for months.

==============

Paul Mladjenovic, author of Precious Metals for Dummies, said to me today, the following about the current price manipulation and shortage of real silver:

Outside of Oil, there is no other commodity with more diversified uses. Silver will probably hit $50/oz. within 3 years, and exceed its all time high on an inflation adjusted basis ($150-$350/oz.) and hit tripple digits by the early part of the next decade.

Everything has a natural and artifical price, and an artificial low price stimulates demand, and creates shortages, but the false appearance of plenty, which will blindside those in the paper markets.

Artifical intervention only works in the short term, whereas natural supply and demand forces always triumph in the long term.

==============

I want you to be able to buy on this dip, and not be discouraged by sold out coin shops. This is why I asked people to report to me who had silver in quantity, ready to sell.

"If you don't hold it, you don't own it" (And can't sell it!)

Yesterday, Robert Mish was slammed by my mention of his shop in my report. Next time, he says he can only handle orders for $10,000 or more at one time.

Here are a few more sources:

bulliondirect.com has silver available, up to 400 x 100 oz. bars.
Bulliondirect is like the ebay for large silver orders.
They do have 100 x 100 oz. bars available, in several categories.

But they now post a warning:
High Activity Market Alert
The precious metals industry is experiencing a substantial surge in activity which may increase the possibility of logistical delays; including customer service response time and product processing (incoming and outgoing). Our goal is to keep our prices competitive while still delivering an exceptional transaction experience.

===============

FideliTrade Incorporated in Wilmington, Delaware is reported to have silver inventory available for immediate delivery.
http://www.fidelitrade.com/

===============

http://www.delawaredepository.com/
is an NYMEX/COMEX and CBOT licensed and CFTC approved depository for silver.

===============

Mike of Gulfcoast Coin and Jewelry (239) 939-5636, In Florida
1 800 465 3909
www.gulfcoastcoin.com
Keeps a large inventory of bullion and rare coins. 90% bags, .999 silver, is a market maker.
Sells gold at 1% over costs, silver at 3%.
Self-reported that he has 50 bags of 90% now. -- but others report he "drop ships" from other sources.

===============

Jason, I was forwarded your blog regarding silver. I'm a major precious metal dealer and have sold 25,000 yesterday. I still have plenty left. We have been selling plenty of pure silver dealer to dealer at spot + .50 cents.
Thanks,
Don Herres
Dollartowne
Bellbrook, OH
937-848-6231

I was unable to confirm.

===============

It was reported to me that:
In Austria, Europe, there are plenty of sources where you can get massive amounts of silver:

www.oegussa.at - this is the largest smelter in Austria, with an office for individual, private party walk-in customers in Vienna and they have lots of silver bullion available all the time. Silver bullion is not too interesting for Austrian citizens, because they have to pay V.A.T. on silver bullion purchases - VAT is the European equivalent of sales tax.

But if any American or other non-EU-citizen purchases silver bullion and keeps the receipt, they get the VAT back at the airport when leaving the country.

You can also purchase lots of silver at Austrian banks and coin shops - no shortage here! And if you go for coins, denominated in any current currency and not bullion, there is no VAT to pay for anyone. The Austrian Mint is currently offering the Silver Philharmonic coin, weight is not metric, but in troy ounces, the coin is denominated in Euros, so no VAT to pay - and you can purchase tons of it! They distribute them through all Austrian banks.

Yes, metric tons of these coins are available now. .

Here is the specific page at their website: www.austrian-mint.at/silberphil?l=en

Sources sent by the owner of:
www.alchemianova.com

===============

Ross Hansen of NorthWest Territorial Mint emailed me:

Dear Jason:

We are not out of silver!

Northwest Territorial Mint produces approximately 20,000 ounces of silver per day, and ships 200 orders daily. A quick audit of our vault today showed more than 300,000 ounces of silver in the production pipeline, in finished and raw form. (You are welcome to come up here to conduct your own audit any time.) Contrary to reports, there remains an ample supply of silver coming from mines and refineries. There is no shortage of silver in the world.

What you fail to understand is that, like the U.S. Mint and the Royal Canadian Mint, Northwest Territorial Mint manufactures its own silver products. During times of extreme price fluctuation in the precious metals markets such as we are experiencing now, demand increases substantially. Since November, our sales have increased more than 300%. Because all mints have a finite manufacturing capability, this increase strains every aspect of our business infrastructure, from sales to manufacturing to shipping.

Unlike our smaller competitors who just resell used silver products, Northwest Territorial Mint sells factory-fresh products. While, in your eyes, our products should be shipped quicker (and we agree, and are expanding to meet this increasing demand), no one has ever complained about the quality of our products or any failure to deliver them.

With over 140 employees, Northwest Territorial Mint completed more than 69,000 individual transactions last year. The Governor of Washington named us Medium Private Employer of the Year. With an office in the Pentagon, we are the mint of choice for the U.S. military and numerous other governmental and corporate entities.

Because of the backorders created by current high demand, U.S. Mint and the Royal Canadian Mint have temporarily suspended shipments of their silver coins. Northwest Territorial Mint, while stretching its delivery times, is still shipping every day. Your inaccurate representation has generated numerous calls, taking us away from the important business of serving the people who buy silver from us.

And, yes, we expect that free advertising you are offering.

Very truly yours,

Ross B. Hansen

Northwest Territorial Mint
P.O. Box 2148
Auburn, WA 98071-2148
Direct: (253) 833-7780 | Toll-Free: (800) 344-6468
Fax: (253) 735-2210 | www.nwtmint.com

===============

Ross Hansen, I'm sick of hearing your excuses, and so are many of your firm's clients. I do very well understand that you are running a mint, one of the largest private mints around, you flew me out to see it, remember? I've never reported, and neither has anyone else, that silver is not being mined in sufficient quantity. And I don't care how long you ship, that's not the point.

The point is that you ought to tell people the truth about how long it takes you to ship! If it is going to take you 8-9 weeks, or 12-16 weeks to deliver, then report that at your web site so you are not so bothered by people who freak out about how long it takes. You will be able to keep your customers, have better customer relations, and it will greatly help your business to tell the truth. If you are telling people it will be 30-40 days, and it takes 2-5 months, you have a serious problem. And no surprise, people don't like it.

Furthermore, I will reiterate that the Washington State Attorney General logged 82 complaints against your company.
http://www.thenewstribune.com/news/local/story/276620.html

Furthermore, 26 people complained online here:
http://goldismoney.info/forums/forumdisplay.php?f=150

Furthermore, I received 18 complaints about Northwest Territorial Mint in the last 24 hours, which I posted to my member's forum, summarized below:

1. 1,000 oz of Canadian Maples, it took almost 12 weeks to get here!
I used APMEX.com to order another 1,000 ounces of Canadian Maples about 9 weeks after I ordered my NWT Mint silver, and the APMEX.com silver came before my NWT Mint suff!

2. I wire transfered the money to them on the SAME day I placed my orders. I ordered a 100.00 face bag of dimes on 2-05-08, from NWTM, and received them today. 3-19-08. That's about 6 weeks for delivery.

3. Last year I had LONG delays with my orders. One was delayed at least 2 months. It was ridiculous.

4. They were 3 months getting my order of 50 oz to me. This was about 1 year ago as well.

5. I ordered 500 Pan American silver rounds from NW Territorial Mint on Nov. 30th 2007. I sent them a check for $7,240 the next day. My coins arrived last Friday March 14th!!!!!!!!!!!!!!!!! (3.5 months, or 14 weeks.

6. I have given up hope with NWT Mint. I bought bars and coins from them 5 times, and sometimes I had to wait for many months to get my silver. Once, they simply asked if they could buy it back from me, and send me a check for the difference. I got so upset that I sent them emails for months, and apparently, they've done nothing to sort out their shortage issues. (I have a lot of emails between NWTM and myself, so I can support my claims in writing).

7. Ordered 100 oz. from them early Jan. due to deliver this Friday. Way too long.

8. Dear Mr. Hommel, I can also verify the poor customer service and LATE delivery over 6 months ago. It took them just about 2 months to deliver my silver from the time they received my check.

9. hello jason;
about 3 years ago bot some gold and palladium coins from n w mint....sent them 2 checks--one, 7k check was either lost or stolen.,,,after a number of phone calls to the firm, i got no answers, so i cancelled the check....i did receive my 2nd check coins, but weeks later, and only after repeated phone calls....did some internet investigation, and found one of the owners had a criminal record, so i'm not surprised you're having difficulty in dealing with n w mint

10. They delayed me way past the time alloted. I find them to be full of shit. When I started to complain 5 weeks after I was to be shipped their staff was rude to me. I eventually got the owner invoved. He even screwed up the order. I find them to be incompetent and would not do business with them again. I find most coin dealers that are large shady.

11. I had problems receiving an order about a year ago from NW the order did finally arrive BUT I will never do business with NW again.

12. My friend and I have been waiting on NWT Mint since Jan17th and it suppposedly just shipped out this week. So that's 48 work days or 64 days total and counting so far. So, guess it does average close to plus or minus 60 days. But We couldn't get anyone to answer our emails to them and no one would explain WHY it was taking so long.

13. My last (and I do mean last) order from Northwest Mint took 2 months to receive. I had to make numerous calls to finally get it. Never again.

14. I also had a bad experience, it took several weeks to get my silver (only 200 ozs). I never thought that I would get it at all after waiting a very long time. I was given all kind of excuses, I had paid right away with a certified money order, they still held the transaction to clear my money order. A certified money order should not have to go through a waiting period. I promised myself that I would never deal with them again.

15. Jason, I've been waiting over 60days now for my order. I was told on Monday that they had sent it out. I live in in Ontario Canada and getting more and more worried.

16. I ordered 1200 Oz. Ag from NWT mint on 11/7/07. Paid by wire so it cleared the next day.
Received said silver on 2/20/08. .......... 104 days after the payment cleared.

17. I purchased about 800 ounces from NWT mint about a year ago. It took 4-5 months to get my package. Talked with the owner, who claimed bullion was "only 20% of their business" and most of their production resources were tied up in time-sensitive government contracts (medals) for operation Iraqi Freedom. Well, they should either take down that 30 day delivery claim on their website and replace it with something accurate or stop selling bullion.

18. Jason, I ordered two 100-oz bars last August when it dipped below $12 & didn't get them until late November.

Ross, if you want the names of these people, email me, and I'll provide you with a username and access to my member's forum, so you can check your records, and deliver silver promptly. I hope you can buy all the silver you need on this dip, and I hope the sources I quoted above can help you locate the silver that you need to fill your orders. I'm just trying to help.

Sincerely,

Jason Hommel
www.silverstockreport.com
www.miningpedia.com

Howard Ruff: The Silver Lining

The Silver Lining: Part II

This continues Chapter 10 of my new book How to Prosper During the Coming Bad Year in the 21st Century. It completes the my last posting on the Kitco website.

Modern Usage

Silver is a ubiquitous and essential industrial metal with literally thousands of uses, many of which are irreplaceable. Jim Cook,President of Investment Rarities (800-328-1860), has recently listed just a few of silver’s thousands of modern uses, many of which are infinitesimal in amounts per unit, but multiplied by many millions of units, it’s thousands of tons of silver. (I can’t vouch for each one of these statements, but at least most of them are true).

Both rechargeable and disposable batteries are manufactured with silver alloys. Billions of silver oxide-zinc batteries are supplied to the world’s market yearly, including batteries for watches,cameras and small electronic devices,tools and TV cameras.

Steel bearings are often electroplated with high-purity silver. Silver solder facilitates the joining of materials. Silver-brazing alloys are used in air conditioning, refrigeration, power distribution, automobiles and airplanes.

Silver is of first importance to plumbers, appliance manufacturers, and electronics.

Chemical reactions use silver as a catalyst; approximately 700 tons of silver are in continuous use in the production of plastics.

Silver is essential for producing a class of plastics which includes adhesives, laminated resins for construction, plywood, particle board finishes, paper and electronic equipment, textiles, surface coating, dinner ware, buttons, casings for appliances, handles and knobs, packaging materials, automotive parts, and electrical insulation materials.

Silver is necessary for producing soft plastics used in polyester textiles. It is used for molded items, for insulating-handles for stoves, and for computers, electrical control knobs and Mylar tape(which makes up 100% of audio, VCR and other types of recording tapes). It is also used to produce antifreeze.

Silver is used in commemorative and proof coins around the world. There is wide silver use in silverware, jewelry and the decorative arts.

Silver is the best electrical conductor of all metals and is used in contacts and fuses and ordinary household wall switches. The use of silver for motor controls is universal in the home, and is even a better conductor of electricity than copper. All of the electrical appliances, timers, thermostats, and some pumps, use silver contacts. A typical washing machine requires 16 silver contacts. A fully-equipped automobile may have more than 40 silver-tipped switches.

Silver relays are used in washing machines, dryers, automobile accessories, vacuum cleaners, electric drills, elevators, escalators, machine tools, locomotives, marine diesel engines and oil-drilling motors. It is also used for circuit breakers. It is widely used in electronics, membrane switches, electrically heated automobile windows and conductive adhesives.

Every time you turn on a microwave oven, a dishwasher, clothes washer or TV set, you have activated a switch with silver contacts. The majority of computers use silver-membrane switches. They are used for cable television, telephones, microwave ovens, learning toys and keyboards of typewriters and computers and in prepaid-toll gizmos. These silver-containing , radio-frequency-identification devices will soon make an appearance, imbedded in credit cards and passports.

Silver is used in circuit boards and is essential to electronics to control the operation of aircraft, car engines, electrical appliances,security systems, telecommunication networks, mobile telephones and TV receivers.

Silver is used in windshields in General Motors all-purpose vehicles because it reflects some 70% of the solar energy. Every automobile produced in America has a silver ceramic line in the rear window to clear the frost and ice.

Silver plating is used in Christmas tree ornaments, cutlery and hollow ware. Because it is virtually 100%-reflective after polishing, it is used in mirrors and coating for glass, cellophane and metals.

A transparent coating of silver is used on double-paned thermal windows.

Silver has a variety of uses in pharmaceuticals. Silver sulfadiazine is the most powerful compound for burn treatment worldwide. Catheters impregnated with silver diazine eliminate bacteria. It’s increasingly being tapped for its bactericidal properties from severe burns to Legionnaire’s Disease to dressings for wounds.

One out of every seven pairs of prescription sunglasses incorporates silver. Silver-based photography has superior definition and low cost; it is still the biggest user of silver.

Digital photography is considered by many to be a threat to old-fashioned film photography, which at one time was the biggest user of silver, as digital cameras are becoming the camera of choice for millions of people. Ergo, physical silver use will decline in the film business, and that is considered by many to be a bearish factor. Kodak was at one time the world’s largest user of silver in manufacturing film. Because they used silver in every roll of film in the ‘70s, silver photographic use was touted as one reason for the silver bull market of the ‘70s.

There is a counter argument, and a counter, counter argument.

It is not generally known, but much of the silver used in film is recycled to be used again by the film companies. That is also true of silver in medical x-rays.

But more than offsetting this is the fact that silver is also used in glossy photographic print paper at Wal-Mart, Kmart and Costco and other supermarkets, for people to print out their digital photos, and that paper is never recycled. One of my daughters informed me that now that she has a digital camera, she takes 12-times as many pictures of the boys as she did with her old-fashioned film camera, and she usually prints them out.

But also, the film companies will still sell one-billion rolls of film this year.

Silver is widely employed as a bactericide and algaecide. A doctor friend of mine told me that when there is an open wound or big burns, a silver compound is used on the dressing. Silver ions have been used to purify drinking water and swimming pools for generations.

Silver ions in house frames help resist mold and mildew. Silver compounds are providing doctors with powerful clinical treatments against antibiotic-resistant bacteria.

I could go on and on, and I guess I already did, but that’s one reason why our silver inventory is under assault, and if Butler is even partly right, that could be one reason why silver is turning into the supply/demand investment of the century.

Will the growing assault on silver inventories trigger a switch to some as-yet-unknown substitutes?In some cases, probably yes. Copper can do some of the things silver can do, but copper is rocketing up in price in a solid bull market, and is becoming a more and more expensive substitute. Usually the thousands of silver uses are so small in each individual unit manufactured, that they are only a small part of the cost of manufacturing the units that incorporate it, so there is not enough incentive to change at these prices, but collectively, they add up to thousands of tons of silver.

Silver as Money

Silver has an important monetary role, according to economic history. One disagreement I have with Butler is that he has discounted the monetary role of silver.

Silver has been consistently used as money throughout history, even more than gold, but as I have said several times before, whenever paper money fails (every 50 to 75 years), the world is subsequently littered with useless paper currencies. That’s when silver is resurrected and comes back into its own.

For example, when the Chinese government fell at the end of World War II, paper currency became distrusted, but almost like magic, U.S. silver and gold coins became the currency of choice all across that huge, primitive country. Everyone knew what an American silver dime was worth. This held true until the Communists imposed a new “fiat currency” (one that is money just because the government says it is) and enforced it with the heavy hand of government.

Could that happen here in America? No one knows for sure, but that remote possibility is becoming less remote every day. That’s why you need some silver for insurance purposes, because the dollar’s fate seems to be sealed and delivered by our present rate of internal monetary inflation. Whether it will take one year, ten years or 30 years, I don’t know, but eventually the world will be littered with worthless paper dollars, and governments will be forced to go back to a gold standard to back a new currency. At some future time, silver coins will be minted again in massive quantities, and silver and gold will both reign triumphant over the world’s monetary system until we have a monetary system we can trust. I don’t know exactly how it will work, and probably nobody else does either, but for that reason, I repeat, you should buy at least ½ bag of junk silver (pre-1965 American dimes, quarters and halves) for your family, just for the silver content. This is not for investment (even though it will go up), but as an insurance policy against a possible inflationary calamity.

Silver always rises during gold bull markets, usually twice as far and fast as gold, but the supply/demand situation (ETFs and jewelry and industrial usage) dwarfs all other reasons why silver will soar in price, perhaps much more than twice as much as gold.

One other supply/demand factor that really matters is that COMEX, (The New York Commodity Exchange), which is by far the biggest commodity exchange in the world, has a monster silver futures exposure. Many of the “longs” have bought a silver contract from the shorts contracting for the silver, in the hopes that silver will be rising, and so will their contract. It can be settled either with a cash payment or by delivery of the physical metal. But a lot of the longs are silver users and need the metal and have only bought the contracts for delivery. They won’t settle for cash, but only for delivery, because they need the metal.

The “shorts” have sold silver they don’t have, assuming they will be able to buy it back at a lower cost in the future and thereby profit handsomely. They are pure speculators, betting that the price will go down so they can buy it cheap. Steadily rising prices are their worst nightmare.

The longs are even more dangerous than the shorts. Remember, for every long contract, there is a corresponding short. As silver has soared, shorting paper losses have mounted to billions of dollars.

I guess the short speculators never learn. That’s exactly what they did back in the 70’s, and when the Hunt brothers tried to corner the silver market and drove the price to $50, most of the governors of the COMEX were short, in effect betting against the Hunts. Their losses mounted day by day, and as they became more and more insolvent, their need to cover their shorts, either with cash or by buying silver to deliver, was way beyond their financial ability to handle. Technically the COMEX should have been shut down, as many of the shorts were governors of the COMEX, but this was unthinkable, as we couldn’t allow the world’s most important commodity exchange to close down.

Eventually they won the battle with the Hunts by, among other things, changing the rules to “liquidation only.” That’s when I decided to tell my subscribers to sell their gold and silver at $35 an ounce, before the $50 top, as when the elephants are fighting, we mice should scurry into the underbrush. Yes, it went to $50, but $2 to $35 is good enough.

This is similar to where COMEX finds itself today. But this time they are short so much silver, that if they had to buy enough silver to cover all their shorts, especially if the longs are silver users who need the physical silver for their industries (many are) and won’t accept just a cash settlement, that this could soak up as much as 100% of all silver production. Also, the short’s cash position is so dire, as their paper losses have mounted as silver has risen, that they won’t have enough money for a cash settlement. Sooner or later they will have to buy silver, and the stability price of silver could soon be above $100 an ounce (my best guess) in order to induce holders (you) to give up yours.

Silver is the investment of the century. It will move with gold, but further, as has already been demonstrated. Gold is up about 200%, and silver is up more than 300% over the last couple of years. We will eventually find that silver at today’s $15 to $20 is the bargain of the century. Silver and silver-mining stocks will be a license to print money.

Israel Friedman on Silver

THOUGHTS FROM IZZY

By Israel Friedman

Israel Friedman is a friend and mentor to Theodore Butler. He has followed silver for many decades.

The U.S. mint sold 2,170,000 silver eagles and only 26,000 gold eagles in the month of January. By my calculation 83 times more silver eagles were sold then gold eagles. This is an enormous difference that shows you how much more interest there is in silver. Investors are starting to understand that silver is a better investment then gold. I congratulate Mr. Butler that by his writing about silver, more and more people are buying physical silver.

In my opinion, the beauty of silver is that any amount of silver you buy will reward you tremendously. Maybe only 0.5% of the world population has heard about silver and they are mostly American investors who bought in the last 15 years around 400 million ounces of silver.

Today, many silver investors are asking why silver doesn't achieve all time highs like gold. Mr. Butler answers this question every week by emphasizing the control of prices on the COMEX by 4 or less traders that hold more than 50% of the net short position. When you hold a position of more than 50%, you control the market. This may be changing now. The short position is the main reason why the price of silver is behind the gold price, but this creates the opportunity to buy silver.

Different people have different opinions or expectations for future prices. I personally believe that only silver can be characterized as real precious metal and gold is a second violin. I made this decision by understanding the rarity of the metal and its world stocks. Let's look at gold first: its world stocks increase almost 100 million ounces annually. Contrast this to silver, which is in a yearly deficit and is decreasing yearly. World gold stocks are around 5 billion ounces and silver around 1 to 2 billion ounces. I say with conviction that silver is more rare than gold and, in my eyes, is the only precious metal. I think investors are beginning to understand that a shortage can develop easily in silver, but not so in gold, because it is not used that much industrially. It is a lot easier for people to pay $15 or $20 for an ounce than $900 or $1,000, especially when the cheap one has the most value.

If 90% of the world population knew this, the prices of silver and gold would be different. In the short term, with gold prices over $900, silver would be in the hundreds. Mr. Butler doesn’t like my numbers. He says that they are too extreme and people are going to lose confidence in my writing, but I hope he will not censor me, because this is my opinion. Silver in the hundreds of dollars will come only with a shortage of silver. The 4 or less shorts will give up. With a shortage, world investors will recognize the rarity of silver.

Gold and silver seem to trade together, tick by tick. It is easy for many people to think they are the same commodity. Not true. Gold and silver are very different, even if they behave now as one. I am certain that will change, and perhaps very soon. You don’t have to look very far to see just how different silver is from gold.

Some of you want to hear how I see the future in silver prices and what I think about the world in my crystal ball.

(1) Life expectancy will rise tremendously and most of you will live over 100 in years to come.

(2) It will be very important to save and prepare for a long life.

(3) Investment in education----silver----farmland, in my opinion, will do the best.

(4) At some point, in 15 to 20 years, silver prices will be 5 times higher than gold prices. If my calculation is correct, a dollar invested in silver will do many times better than gold. In real estate value, I think 1,000 ounces of silver will buy a 3-bedroom apartment in Manhattan in Trump Towers.

I am a different thinker, and some gold investors don't like my opinion, but that is their problem.

Those who believe in silver value should buy eagles and force the mint to work overtime.

Ted Butler: Back to basics

Silver market analyst Ted Butler says that if you ever get tired of trying to figure out the daily movements of the silver price, you can find refuge in silver's fundamentals, which he lays out in his new essay, "Back to Basics":

Back to Basics

By: Theodore Butler
Posted 12 February, 2008

It’s hard not to get caught up in the daily ebb and flow of short-term news and price movements on an asset as interesting as silver. But, it is important to always remember that a short-term focus can detract from long-term investment success. It’s easy to fall into the trap of analyzing on a shorter and shorter time frame, as world events unfold at warp speed, thanks to modern communications.

I confess to blurring the lines between the short term and long term in silver. Most often I write about the short term; the COT market structure on the COMEX, the manipulation, the CFTC, ScotiaMocatta, etc. That’s a consequence of me trying to convey what I feel is important in silver. There is no intent to get people to focus on the short term over the long term. The best investment horizon in silver is the long term.

The danger in focusing on the short term is that it can cause you to lose your long-term perspective and thus, your position. The problem with the short term is that it forces you to concentrate on the current price. By doing so, one makes the implied conclusion that the current price is correct and reflects true value. While we must all transact purchases and sales at the current price, it is not necessarily reflective of true value or future price.

Put aside the current price and instead study the factors that go into determining the price, namely, its supply, demand fundamentals and world conditions. In other words, don’t look at the current price as being too high or too low, look under the hood. Look at verifiable facts and measure that against the current price. This is what analysis is all about.

A few years ago silver was under $5 and many said that was a fair price and reflected true value. There was no thought that the price could double or triple in a few years, even though there were structural deficits, dwindling inventories and growing world industrial consumption. They made the mistake of assuming the price had to be correct and fully reflected silver’s true future value. They failed to consider the real long-term fundamentals. I think many are making that same mistake today.

Back then, it was easy to make the case that silver was undervalued and a great long-term investment. The real facts spoke for themselves. Those that took advantage of the now-apparent bargain prices are glad they did. But that was then, and this is now. With prices double and triple the lows of recent years past, is silver still a long-term bargain?

MORE COMPELLING THAN EVER

Frankly, I think the case for silver is more compelling today than it was five years ago. When we compare today’s circumstances with the current price, silver looks better today. Of course, a 50-cent sell-off then is the equivalent of a $1.50 sell-off now. But a tripling in price then brought us to $13 to $15, now triple brings us to $40 or $45.

I view silver as primarily an industrial commodity, strategic and vital to the modern world. Despite inevitable hiccups along the way, the juggernaut of world economic growth will continue. The primal desire to improve one’s standard of living can’t be suppressed. Throw hundreds of million of new-world citizens into the mix, and the case for world economic growth became even stronger. This requires increased consumption of all natural resources, including silver.

Looking back over the past five years, the idea that world economic growth would lead to increased consumption of natural resources seems an elementary conclusion. But it was not a universal expectation. It is easy to forget that, all along the way, many were expecting a world economic slowdown or recession. That is still the case today, particularly in light of well-publicized troubles in the housing and mortgage markets. In spite of such troubles, we are experiencing record high prices and consumption rates in a number of commodities, including the most important of them all, crude oil.

The high prices for natural resources in the past five years has been brought about, not by supply disruptions, but by unrelenting demand. This is particularly true in the developing BRIC countries (Brazil, Russia, India and China). This was something new. Previous commodity price spikes revolved around supply disruptions, wars, embargoes, weather shocks, etc. These days, industry-wide demand has propelled commodity prices, especially in metals and minerals.

I am hard-pressed to think of an industrial metal or mineral that has not established an all-time price high in the past five years. Strong and persistent demand, accompanied by declining or low inventories and restrained (but growing) production are responsible. However, I can think of one glaring exception to the new record highs – silver. While nearly all industrial metals and minerals have established new record-high price levels in the past 5 years (petroleum and natural gas, uranium, copper, nickel, lead, zinc, etc.), silver is still less than a third of its price peak from thirty years ago. Even gold, not considered an industrial metal, has approached its all-time price high. What’s with silver?

STILL UNDERPRICED

The doubling and tripling in the price of silver over the past few years hasn’t caused it to become over-valued, based on current fundamentals and circumstances. Although silver has appreciated as much as any precious metal, it has greatly lagged the price performance of the base metals. The GFMS base metals index is up almost 5-fold over the past five years, almost doubling silver’s price performance. This suggests silver is still undervalued.

Industrial demand for base metals is determined by the level of world economic activity. It’s impossible for there to be strong world demand for just one base metal and not for all the others. Nor could there be demand for base metals and not an industrial metal like silver. If the world is demanding more zinc and copper and lead, it is also demanding, and consuming, more silver.

The price peaks for base metals were made under shortage conditions. This included delayed deliveries and the existence of backwardization, where near term spot supplies commanded notable premiums to more deferred delivery. We’ve even experienced contract delivery defaults (in LME nickel). All this presages the coming shortage in silver. I predict that, at some point, silver will enter a true shortage condition because of strong industrial demand.

A SPECIAL TRAIT

One special trait that distinguishes silver from all the other industrial metals is investment demand. It sets silver apart from any other industrial metal. Silver will always be considered as a true investment asset by people around the world. Investors large and small, hold silver in their own possession or in storage. They hold it in a wide variety of forms, including coins and bars. The only other metal that can be compared to silver in terms of investment holdings is gold. But gold is not considered an industrial material. The only true investment metals are gold and silver.

Any number of reasons can cause investment buying of silver. The single most compelling reason that motivates investment buying is rising prices. The masses will rush to buy investments as prices are rising. It doesn’t matter what the asset may be, stocks, real estate, collectibles, rising prices beget more buying and higher prices. This, most assuredly, includes institutional investors. Sometimes it ends badly, but only after dramatic gains.

We have yet to see the inevitable investment rush in silver. Modern communications guarantee the silver story will be spread far and wide. The investment world is eager to learn of such opportunities. The creation of institutional investment vehicles, which convert pension funds and other large institutional pools of capital into silver, are conditions that never existed before.

PANIC

Industrial commodities can enter temporary periods where physical availability is a problem. This is reflected in time delays for physical delivery and premium prices being offered for prompt delivery. This almost always occurs when industrial users attempt to build up inventory to avoid disruptions to production. No industrial concern will willingly shut down and send employees home for lack of a key ingredient or component. It is precisely the need to avoid shutdowns that cause industrial users to build inventory when availability gets tight, causing more overall tightness and shortage. It leads to panic buying.

So much silver has been consumed industrially over the past 65 years that known world inventories have declined by more than 95%. This cannot be said of any other industrial commodity. (Just for the sake of comparison, known world gold above ground has more than doubled in that time period). Because it is an industrially consumed commodity, silver is prone to panic buying in the event of industrial tightness and delays in physical availability.

Of all the industrial commodities, silver is the only investment asset. Of all investment assets, silver is the only one consumed industrially. This is a rare and potent combination. There are powerful reasons to buy silver as an industrial commodity in a world demanding more of it, or as an investment asset in a world with exploding buying power. When you put the reasons together, you create a force that is greater than its parts.

It doesn’t matter if panic buying trips off investment buying, or vice-versa, the net result will be the same – one will inflame the other. It looks inevitable, given current world conditions and human nature. There is something you can do about it if you see it as I do. Buy silver for the long run. Nothing available anywhere has the potential to change your economic circumstances like silver.

Oikonomika Blog: The Double Whammy of Geopolitical Gold Games

Antal Fekete: The Double Whammy of Geopolitical Gold Games

Professor Fekete explains how Silver has always been THE monetary metal of China and how its comeback is being staged by the Chinese economists to coincide with the US $ demise from its global monetary status....

Ted Butler: The Coming Investment Boom in Silver

The Coming Investment Boom in Silver

By: Theodore Butler
From the very beginning of my interest in silver, my focus has been on basic supply and demand, with particular emphasis on remaining inventories. And why not? I am a commodity supply and demand analyst and the world did experience a structural deficit in silver for more than 60 years, beginning with World War II and lasting up until very recently. What could be more bullish for a commodity than drawing down and depleting an inventory that took thousands of years to accumulate?

Despite this fact, I have never dismissed the potential impact of increased investment demand on silver. I always felt that investment demand would be a bonus, or icing on the cake. Especially with the certainty of higher prices brought about by consuming more of something than what was being produced. By and large, that certainty has come to be recognized, as silver prices have risen amid growing awareness that world inventories have been depleted. Gone are the days when there was universal talk of inexhaustible inventories of silver.

A while back, I may have caused some consternation among silver enthusiasts when I wrote that the structural silver deficit appeared ended. I thought the days of unrestricted drawdowns from inventory, due to industrial consumption outpacing current production, were over. I based my thinking on the fact that the silver structural deficit couldn’t continue forever, as inventories available for depletion were finite and would eventually be exhausted. Sooner or later, all commodity deficits must end. The wonder in silver was that its deficit endured for more than 60 consecutive years, due to a variety of highly unique factors, not the least of which was an unusually large inventory to start with. I was careful to conclude, however, that the eventual end of the deficit didn’t necessarily imply that silver must then decline in price.

In reality, it does now appear that the industrial consumption silver deficit that the world witnessed for decade after decade is now over. Recent statistics indicate a balance, more or less, between total current supply (mine production plus recycling) and total current fabrication demand. I know many consider the talk of current fabrication demand being in balance with current total production to be blasphemy, but an analyst must deal with the facts as they develop. Besides, as I wrote at the time, industrial consumption deficits could return, from time to time, if world demand, especially from the BRIC countries (Brazil, Russia, India, and China) continued to accelerate, as appeared likely. More importantly, we were at a point when the industrial fabrication deficit, as the primary price influence, was about to be replaced by something else.

That something else, in my opinion, is the coming wave of investment demand about to engulf silver. If my thinking is correct, the time could be very short before silver will no longer be available for accumulation near current prices. There are a number of factors that lead me to believe that an investment surge is about to hit silver and influence its price for years to come. Some of these factors are developments that I would have never imagined could occur when I first started analyzing silver, more than 20 years ago. So bullish are these developments, as I have written previously, that I could not have dreamed them up even if I wanted to.

Going, Going, Gone

At the top of the list is the fact that the silver structural deficit lasted as long as it did. Commodity deficits, in which inventories must be drawn from in order to balance supply and demand, are always temporary situations, usually weeks and months, rarely stretching to more than a year. In silver, we had the shocking circumstance of a consumption deficit lasting more than half a century. How could this be?

The short answer revolves around a starkly unique confluence of verifiable events; a build up of massive quantities of inventories as a result of thousands of years of accumulated production, and the transformation of what was a monetary and cherished precious metal into a vital and modern industrial commodity that resulted in the depletion of the accumulated production. Long-time readers know that the depletion of thousands of years of accumulated silver inventory has always been a central theme of mine, as has been the resultant rarity and scarcity of above-ground silver. The less supply there is of something to invest in, the greater the price impact will be when demand appears.

Because the industrial and fabrication demand is, in my opinion, in balance with total production (mining plus recycling), none of the silver currently being produced is, effectively, available for investment demand. The only real source of silver for new investment demand is silver already held as investment, namely existing world inventories. In other words, since all newly produced silver is already spoken for by industrial and other fabrication demand, the only real silver available for new silver investors is the sale and resale of silver by existing silver investors.

In this sense, silver is now similar to gold, because gold’s total current production has always largely been taken by jewelry and other fabrication, with existing gold inventory the primary source of supply available for new investment. The key difference, of course, is that the available above ground gold inventory towers over the equivalent available silver inventory, both in ounces, by as much as 5 to 1, but particularly in dollar value, by more than 250 to 1.

One other difference between silver and gold is that for the life of the 60+ years of the silver structural deficit, there was very little, if any, net investment in silver. That has changed in recent years, and it is precisely this change, the rebirth of silver as an investment asset that is a shockingly bullish development. Think of it – the world draws down and depletes silver inventory for more than 60 consecutive years, exhausting the very source of what is available for investment, and only then collectively decides that silver is a good investment. Silver appears on the investment horizon at precisely the time there is less available as an investment than ever before.

I have long used the number of one billion ounces of silver bullion equivalent as a world inventory amount. This is higher than most accepted published accounts. In dollar terms, that comes to $15 billion. That is a very small amount, especially when compared to the $4 trillion dollar value of world gold inventories. But it is not just the extremely limited dollar value of silver inventories; it is also my sense of the nature of who holds the silver.

Closely Held

An extremely small percentage of the world’s investors, certainly way less than 1%, have any knowledge about the real facts in silver. That’s why there is limited investment. Those that do hold silver as an investment are about as rare as silver inventory itself. I run across a larger than normal number of silver investors, large and small. Maybe this is somewhat unscientific, but I’d like to share a few observations.

The vast majority are looking for substantially higher prices before selling. (Perhaps they have been influenced by my writings.) My strong sense is that many more are looking to add to their silver holdings, especially on price dips, rather than those looking to sell on near-term price rallies. For those holding real silver, either exclusively or in addition to mining stocks and leveraged positions, the real silver is considered core to be held for the longest holding period possible. In fact, holders of real silver rarely think of selling and converting to other assets, including cash. They think more in terms of specific long-term personal financial goals, or of passing on to heirs or charity, rather than selling.

My point here is that an incredibly small quantity of silver is held for investment and it is held in extremely strong hands. To pry this silver from these investors is going to take an unusually high and attractive price. Whenever you have a small and tightly held supply, you have the makings of a price boom on even modest demand.

There was a short period of time in the late 1970’s when speculators, led by the Hunt Bros., caused prices to climb ten-fold. And there was a quick doubling of the price of silver in 1998, when Warren Buffett bought a chunk. But, by and large, there has been no sustained broad net investment buying of silver over the past half century. That has now changed, for a variety of reasons.

For one reason, thanks to the Internet and instant, uncensored communications, more people are becoming aware of the investment merits of silver. Though the number is currently small, never in the history of the world has there existed so much money and so many investors looking to deploy that money. That the real silver story is still largely unknown is a powerfully bullish factor, as more investors are bound to uncover the story as time goes by.

Nothing brings more attention to an investment item than a rising price. It is dogma that in the investment world higher prices beget more investor demand. And while silver prices have lagged a bit this year, for the past five years silver has recorded bigger price advances than gold, platinum and palladium. Combine rising prices with a great investment story and you have the potential for an investment rush.

Most recently, nervousness and stress are in the investment air. The mortgage and housing and credit crises get more serious by the day. The impacts on the economy and the markets are great. The losses and write-downs from credit securities have been massive. The reaction from investors has been clear; a move to safety.

There has been a pronounced flight to the quality of the highest-grade securities. To paraphrase Will Rogers, the return of principal takes precedence over the return on principal. Nothing could be of higher credit quality than assets that are no one else’s liability. While most investors instinctively turn to gold, it is undeniable that silver is an asset as liability-free as gold.

Flight to quality buying isn’t something I normally dwell on as a reason to buy silver because there are so many who already advance this as a reason. What I would like to emphasize is that because there is so little inventory available that could be purchased, a fevered rush to safety in silver takes on added significance as a price factor. That a rush to the safety of silver has yet to occur is potentially a lot more bullish than one that has already occurred.

Big Money

Perhaps the most profound potential impact on the coming investment boom in silver is the newly created ability for institutional and other stock-only investors to buy silver. Of course, I’m referring to the recent creation of silver exchange traded funds (ETFs), as well as existing closed-end fund, the Central Fund of Canada. For the first time in history, institutional investors have the ability to invest in silver. In less than 2 years, the US-listed silver ETF, plus the versions in London and Switzerland hold 170 million ounces, with the Central Fund holding more than 40 million ounces. For all intents and purposes, this is more than 210 million ounces of silver that has been indefinitely taken off the market.

That this quantity of silver has been acquired is remarkable, in that it has occurred without any real signs of investment frenzy. While the price of silver has basically doubled since the announcement of the first silver ETF, there is no denying that the price rise feels subdued. Certainly, I never imagined that 170 million ounces of silver could have been purchased with such a muted price impact.

But I think there is a specific explanation for how that much silver could have been bought with so little relative impact on price. Further, I think that it would be a mistake to assume, as some do, that additional large quantities of silver are available to the ETFs at similarly muted prices.

I believe that a very large part of the 170 million ounces bought by the three ETFs so far is the same silver that I have previously written that Warren Buffett got snookered out of at the time the first silver ETF was introduced. If my analysis is correct, then a lot less "non-Buffett" silver resides in the ETFs than would appear. My point is that if a big chunk, or perhaps even the majority, of the ETFs’ holdings came from Buffett (who was said to hold 130 million ounces) in a single transaction, that would go a long way to explaining the muted price reaction (only a double) for the balance of the silver bought.

Most importantly, again assuming I am correct, the Buffett silver was a "one-off" transaction, that can’t be repeated, because there is no known silver hoard of that size in the world. In other words, the next 100 million ounces to be bought by the ETFs will cause a price impact greater than the last 100 million ounces purchased. To assume otherwise would be a mistake.

Another reason for optimism for silver investment demand to get kicked into high gear on higher prices is simply how investors collectively behave. The remarkable thing is that the silver ETFs now hold, by a wide margin, the largest known silver stockpile in the world. What the heck will those holdings amount to when a true silver buying fever hits?

While I have been pointing out that the ETFs allow, for the very first time, institutional investors to participate in silver, that’s not to suggest, in the slightest, that the silver ETFs will be, or should be the preferred choice for silver investors. Nothing is safer than what you hold yourself or is stored for you (with the clear ability to take possession of your specifically ear-marked holdings on your demand). The ETFs don’t allow this, except under certain thresholds (such as large minimum quantities, like 500,000 ounces in the US-traded version). And ETFs do involve additional levels of middlemen that complicate pure ownership. For institutions or other accounts that couldn’t own silver otherwise, the ETFs are fine, and will have a big ongoing impact on price. That’s my point.

Let me try to state something that I strongly believe in, yet don’t recall ever writing about before. I believe the very best form of silver you can own is physical silver in your personal possession. The next best form, and only if it is logistically impossible, due to the quantities involved, is silver stored for you by an independent storage facility (not the dealer you bought from) in which you know the serial numbers and weights (in the case of 1000 ounce bars).

I know it can be a pain in the neck for most people to buy and hold your own silver (in a safe deposit box or other personal safe storage), especially those who never bought and held silver before. But I am convinced that it is precisely this inconvenience that will enable the average person to hold his or her silver for the long term, through thick and thin.

When something is real easy to buy, it is usually real easy to sell as well. Futures and options and ETFs and mining stocks are much easier to buy and sell than real silver. That automatically makes them much harder to hold. When a quick phone call or the click of a computer mouse is all it takes to initiate or liquidate a large investment holding in an emotional reaction to a short-term price rise or fall, especially when margin may be involved, that is not always a good thing. Easy to buy and sell, and hard to hold can be very bad when it interferes with a long-term position. I have seen too many, including myself, disturb a long-term position in moments of weakness, with later regret. All because it was too darn easy. I have rarely seen anyone liquidate a long-term physical position on a whim. Since the big gains come with long-term positions, the fact that physical silver forces you, more than any other form of silver, to hold is a very good thing.

In summary, I believe we are in the very early stages of a long-term price boom in silver that will be caused by investment demand. The combination of an extremely small and tightly-held existing investment inventory, combined with a large potential investor base, funded with the largest buying power in history, hungry for the next hot investment, and still unaware of the true silver story is the stuff that makes investment dreams.

I have not forgotten, for one second, the industrial supply/demand situation, the coming industrial user inventory buying panic and the resolution of the largest concentrated short position ever witnessed, but an analyst should look at everything that promises to greatly impact prices. The purpose of this article is to get you to add the coming investment demand into the mix when you think about silver. But not before adding more silver to your holdings.