Money and Metals

The Resource Investor has the latest on the silver ETF. "The 21-day public comment period has ended at the Securities and Exchange Commission, regarding Barclays’ proposed silver ETF, iShares Silver Trust, but investors continue to wait for any indication of further progress. On January 25, Christine Hudacko, advisor at Barclays Global Investors, told Resource Investor that the SEC had approved the AMEX listing and initiated the 21-day public comment period, 'indicative of movement at the SEC.'"

"Today, Hudacko told RI that no further movement of the silver ETF has been reported, but the deadline for submitting comments to the SEC expired on Monday. And if comments posted under Resource Investor’s most recent write up indicate anything, it would appear investors are screaming, 'Let the market decide the silver price!'"

"As most of us know by now, the Silver Users Association (SUA) has other ideas, representing the most vocal opponent to Barclays’ iShares Silver Trust. RI intercepted a 4-page letter by SUA Executive Director Paul Miller to SEC Secretary Nancy Morris urging the SEC to block the product. 'If the silver ETF is approved, it will mean higher product costs and lost jobs in our industry,' wrote Miller."

"However, Jason Hommel, Editor of Silver Stock Report, rebuts this assertion vehemently. 'There’s no way they’re going to lose jobs no matter how high the price goes up,' said Hommel. 'It’s all bottom line.'"

"The SUA’s members employ more than 200,000 workers and process 80% of all silver used in the United States. The Association’s biggest argument is that any squeeze in the silver market would cause a loss of jobs by its members. The letter even insinuates that it could have a negative effect on the economy."

"According to the 2005 CPM Group’s Silver Survey, the above ground levels of silver in 2004 were roughly 750 million ounces. The letter states that the creation of iShares Silver Trust would result in the removal of substantial amounts of silver in an already strained market, thus increasing prices for products containing silver. 'Such price pressure threatens to erode our products’ competitiveness, overall price points, and the manufacturing jobs that rely on the stability of silver products,' Miller wrote."

"Hommel said they have it exactly backwards. If the silver price goes up, it will likely open and reopen many mines deemed unfeasible at current prices. This would increase silver production as more deposits became profitable for miners, he said. 'There’s no way the SUA will have enough silver without the silver ETF,' he said."

"According to letter, the ETF would exaggerate silver’s illiquidity given the sheer volume of physical silver needed. And, the SUA is 'concerned that the proposed silver ETF could be a legal way for investors to squeeze the silver market.' Hommel said the SUA is just being shortsighted. 'They’d rather delay this and have the silver price rise to $100 in the long term than have it go to $25 in the short term,' he said."

"Miller also argues that a silver ETF could set the stage for additional ETFs for platinum or palladium. These commodities are in thinner supply and vitally necessary in the refining of oil into gasoline, the automotive industry and many other industrial applications, said Miller. 'I think you can make the same case here,' said Hommel. 'It would increase the liquidity' with the creation of stockpiles. This is a great thing, because 'when you run out, the factories shut down,' Hommel added."

"Even still, Miller concluded the letter in saying 'the Silver Users Associations supports the buying and selling of silver as an investment. There are already several ways to do so.'"

"'They must clearly be in a panic, cause here they are making a bullish case for us,' said Hommel. The fundamentals of a capitalist market require the market to supply whatever is demanded, he added."