Friday, March 03, 2006


Silver Improves Vs. Gold, Platinum Demand Up

The Financial Times has the latest on silver. "Silver prices held above $10 a troy ounce for the second successive day, a feat the metal has not achieved for 22 years, buoyed by expectations that US authorities might soon pave the way for an investment product that could make it easier for investors to buy and sell the metal. Silver reached an intra-day high of $10.31 a troy ounce on Friday after rising more than 4 per cent in the previous session."

"The gains came amid a wave of investor buying on expectations of an announcement by the Securities and Exchange Commission about the proposed silver-backed exchange traded fund. The silver price is up more than 60 per cent since the start of 2005."

"Although silver has not closed above $10 since October 1983, some dealers claimed the metal briefly traded above $11 in April 1987 and the London silver fix was set at $10.92 on April 27, 1987."

"'The speculation regarding the possibility of a silver ETF has been used as a good excuse to buy the metal,' said Alan Williamson, metals strategist at HSBC. 'That silver has continued to outperform gold on the back of the expected ETF can be seen in the continued drift lower in the gold/silver ratio, currently at just 55, the lowest level since April 2004.'"

"The soaring silver price this week stirred other precious metals. Gold touched $570 a troy ounce yesterday, within $5 of its 25-year high set a month ago, before easing to $567.20/$568.10 in late afternoon London trade, $1 lower on the day."

And from Mining Weekly. "Purchases of platinum by the glass-manufacturing industry rose by almost 9% to 315 000 oz last year. Growth in demand for flat-panel displays, such as television sets and notebooks, has risen dra-matically over the last two years, necessitating the construction of new capacity. Apart from LCD glass, pla-tinum is used in a cobalt-alloy coating on computer hard disks to enhance the magnetic qualities of the cobalt alloy, enabling data to be stored at higher densities and improving access times. All hard disks now contain pla-tinum in their magnetic layer."

"Platinum is also used in the manufacture of thermocouples for the glass and steel industries. Demand for platinum in electrical applications rose by an estimated 18% last year, largely on the back of strong demand for hard disks."

"Demand for platinum for indus-trial operations rose 5% last year to 1,615-million ounces, with strong demand from the electric and glass sectors making up for the decline in chemical and other applications."

'Although silver has not closed above $10 since October 1983, some dealers claimed the metal briefly traded above $11 in April 1987 and the London silver fix was set at $10.92 on April 27, 1987.'

I remember that spike in 1987 well. It was the first time I tried to sell a large amount of silver. What I found was that nobody was buying that day. When I did finally get ahold of a buyer three hours away, his typical spread between spot had mysteriously widened in his favor. It was a big lesson for me, as I watched the price quickly fall over the next couple of days.
So, help me out here... will the Silver ETF be a good buy? Or will expectation be so priced in to the price of silver at that point that it will be a "sell on the news" type of event?

I'm guessing lots of longtime silver holders will liquidate on the news, but that could be offset by legions of new silver investors jumping onboard the ETF. Any thoughts on this? Thanks in advance.

The way I am going to use the new ETF is for speculation. The 'insurance' portion of gold and silver I own should be physically held, IMO. If I chose to make a bet on the price of silver, the ETF should provide a cheaper and more liquid way to do so.

It sure looks like it will happen.
As I mentioned before, last week I got into CEF (Central Fund of Canada) in anticipation of the SLV ETF. It's the least speculative way I can figure to invest in it without having to rent a storage unit for silver.

An interest charecteristic of CEF is that there appears to be a (sometimes considerable) lag between it and AG spot price movement, much more so than GLD.

I would think that lag could be played if one was quick on the trigger :)
I'm jumping into the ETF the moment it's available. I figure it to play like an IPO, the reasons for which I've supplied previously.
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