World experts back the case for silver

published 28 November 2005

After drifting around $7 for most of the year, silver edged up to an 11-month high of just below $8 an ounce a few weeks ago.

It has now settled back to around $7.50. The uptick was underpinned by a report from precious metals research group GFMS, says Wirtschaftswoche. Over the past 16 years, mined supply has lagged demand, with the gap being plugged by above-ground stockpiles, mostly from China. The study says that Chinese stockpiles are now close to depletion, and that rising internal demand from industry and consumers is likely to outpace local production over the next few years; by the end of the decade, China is set to be a net importer of silver.

Meanwhile, silver bulls have received another fillip from an unlikely quarter. The US Silver Users Association (SUA), a lobby group representing firms that use silver for industrial purposes and thus like to keep prices low has launched a protest against the planned launch of a silver ETF by Barclays Global Investors (BGI). As is the case with BGI's gold ETF, the fund would be backed by the metal held in vaults.But according to the SUA, the sheer volume of silver that would have to be bought to back the fund would cause a shortage of silver in the marketplace and cause a sharp jump in prices.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

In short, says silver analyst Theodore Butler on Investmentrarities.com, the SUA which knows just about all there is to know about silver is saying there is not enough silver in the world to fund "even one measly ETF". A "more compelling endorsement of the true state of the silver market" is hard to imagine. Silver remains a buy.