Silver Bells, Silver Bells,... mmmm silver

Christmas shopping season is upon us once again, let the depression and desperation begin!

If you are an average Canadian, I suspect you have between 12 and 20 people to shower with useless gifts this year. Each one of those gifts. depending on your closeness or means will range from a token $20 dollar gift, to the “I don’t want to be in the dog house again this year” gift that ranges into hundreds of dollars. So what do you buy?

First look at who you are shopping for and remember what you bought them last year. Did you buy them something they actually used or was it something they will hide, return, or re-gift? Were you satisfied with what you gave them or did you buy something out of desperation that neither you nor the recipient liked?

Now consider silver and how it could make a really great gift. Now I’m not suggesting you give everyone a bar or a coin. Some of you might want to get lucky some time soon and bullion will not enamour your wife as much as a tennis bracelet would. (Why is it called a tennis bracelet, one would be nuts to play tennis wearing expensive jewellery you might break or lose?)

What I am suggesting, is that you find people on your list who would appreciate silver and would not immediately try to pawn it. I think valued employees might appreciate a 2006 silver maple leaf marking another of year servitude, oops I meant service ;) A Silver maple would make a nice token gift for a paperboys Christmas tip, A first Christmas gift for an infant and then you could then give one each year as an easy gift, think about your list someone will be appropriate. In every family or group of friends there are those who have a tendency to be pack rats or collectors, I’m just suggesting that you move to encourage such collecting into a useful and value generating direction. This is collecting theme is very prevalent in preteen males who will collect almost anything. Rather than give them a junky toy or something of no real value, start them on a nice collection of silver maples or fractional gold coins or something nice from the Canadian mint.

I’ve said before I’m not a big fan of collectable coins because of the premium you pay for them; however, in a gift situation they are certainly an attractive choice that has more intrinsic value than a pile of crap from Wal-Mart will ever have. Collectable coins with real gold or silver content are a great educational tool to teach the young or uniformed the true nature of money. Explain to them that it’s not a promissory note backed by nothing but a real asset that has intrinsic value that cannot be devalued away.

Royal Canadian mint coins have themes including animals, natural sites, butterflies (these are really beautiful coins that a young women or grandmother would appreciate ), the Victoria cross, the Canadian space arm all in silver. They also have more expensive gold coins ranging from the 1/25oz cowboy (I got one for fathers day) to much larger and pricy coins, they even have Platinum and Palladium coins which will certainly have novelty appeal. Just match the theme to the person and the size and expense to your price limit and they are sure to be a hit.

There are a number of online stores where you could get silver ounces from different countries, the Silver Maples, Silver Eagles, Libertads, Panda’s and Kookaburras, are all very nice looking silver products, that would make a nice silver coins of the world display for a young person. If you can't find a coin with an appropriate theme there are many art bars on the market, also don't forget historical coins that might mark an important time period in a persons life or a keen interest.

For savvier recipients or for larger purchases you could give a 5 or 10 ounce bar and a good silver book like Get the Skinny on Silver by David Morgan, (it’s one of books on the side bar of the site). The idea is to give something of real value that will continue to appreciate rather than a tie or a singing fish. If your gift turns out to be a hook to catch their interest in metals and investing, then you’ve given a gift that will be far more valuable than the gift itself. Even before I started actively buying silver I still would have appreciated gold or silver simply as a novelty and would have kept it. Other than a few silver dollars here and there, most people have never held anything close to pure silver or gold. Sterling earrings and 14 k. rings are a far cry from the wonder of holding a pure ounce of gold or a slab of silver.

I know for a fact that most wives will not be satisfied with this kind of gift so stick to gold or silver jewellery. There is a huge mark up over the bullion price on jewellery but when gold/silver are $2000 and $200 respectively you wife will appreciate the gift that much more. Beauty and real value outshines a gift that will be out of style next season. Women, while men are more likely to like a coin as a gift some may not. Men like shiney things too, consider a nice heavy chain.

Giving silver will give those you care for a real asset, give you a hook to educate them on real money, and will tighten the supply increasing the value of all the silver you have already bought. Of course, don’t forget to tell those who are buying for you that silver is a perfectly acceptable gift. As for me, you can send me a bucket of Pan American or Northwest Territorial rounds, I'll hug them and squeeze them and name them George.

Where is silver going: Expert Quotes

Below is a series of quotes from some of the biggest voices in the pro silver camp on the peak silver price. I don’t expect you to accept anyone of these predictions as fact, they are just predictions. They are however useful in realizing just how much exuberance there is in the market. Silver once ignored is becoming a contrarians dream, an essential commodity that can be owned physically, is in supply deficit, has growing demand, and has a history of real money and retention of wealth, ideal in a time of inflation, and possible fiscal crisis. Silver is being ignored by most main steam investors and is still a very good buy if you can hold for up to 3 years.

Doug Casey, Chairman Casey Research

“Will silver hit its previous 1980 high? It was $48.70 then, but that's $120 in today's dollars-almost 10 times the current price. Given that just below the surface, the threats to the U.S. economy are even greater today than in the late 1970s, we can easily envision silver closing in on its previous high and even going way beyond it.

When will this come to pass? No telling. But, periodic and inevitable corrections aside, it's going to happen, of that we are confident. And, more to the point of our service, when it does, the silver stocks we follow on behalf of our readers won't just go to the moon, they'll leave the solar system. “

Howard Ruff of the Ruff Times Newsletter and author of one of the books you’ll find on my sidebar from Amazon.

“The worst financial decision you could make in 2006 is to ignore gold and silver. This one mistake will cost you more than all the dumb financial decisions you can make put together.
Gold and silver are now early in a historic bull market that will dwarf the 500-1700% profits we made in the 70's.
Gold will hit at least $2,172, and $100 silver is inevitable. Is it unreasonable to expect such returns? Those are not unprecedented numbers. In 1980, gold hit $850 and silver hit $50. If you adjust those numbers for inflation since then, the metals will not make new highs until $2,172 (gold) and $125 (silver).”


Jack Weber, Pres
Golden Eagle Enterprises

“In projecting the future prices of gold and silver, we believe that the foregoing factors have given us the basis for anticipating that between 2005 and 2010, the price of silver could very possibly exceed the price of gold. This is not an idle wish, but a carefully calculated "staking-our-reputation" conclusion, based upon the foregoing factors. We hope this essay has helped you to make a beneficial financial decision - to GET SOME SILVER!”



Israel Friedman,
Long time silver bug and occasion contributor to Butler’s Commentary.

“In stage one, pre-shortage, I think investors will be willing to sell 50 million ounces at a price between $20 to $30. Stage two, shortage, investors will sell 200 million ounces between $30 and $100. And the remaining 150 million ounces will be sold in stage three, super shortage and the prices will be truly shocking.”

Jason Hommel of the Silver Stock Report

“There is no need to fear a price spike in silver, or a drastic drop. The bigger fear ought to be that even though you know all of this, silver prices will rise swiftly past $100/oz., before you decide to buy all that you want, and will continue to grind ever higher, for decades to come”

“I like silver better than gold for a number of reasons. Mainly they can all be summed up in the ratio, which is about 52 to 1. You can buy 52 ounces of silver for the same price as 1 ounce of gold. I think this ratio will easily return to the historic ratio of 15 to 1 very easily, and as silver does that, it will outperform gold by about a factor of just over 3. You will make three times as much money owning silver, than gold by the time the ratio hits 15:1.

I think silver will do better than 15:1. It may hit 5:1, or even 1:1. If that happens, you will make far, far more money in silver than gold”
I think silver will head beyond $8000/oz., in less than 15 years.

I can’t help but comment on this site and the message. Under no circumstances do I believe that investing in silver because GOD said so, is a rational basis for investment. While the site agrees with the basics of silver supply deficit GOD is not an investment banker, to buy silver for that reason is as irrational as believing fiat currency is money. The silver story is one of manipulation, demand, supply and necessity; not burning bushes.

David Zurcuchen of Silver in Scripture

“Without serious dollar dilution, which seems unlikely, I expect silver to peak at around $200/ounce and gold at around $5,000/ounce.”

Similar to the above in some cases but most of the articles keep religion and investing separate. I can live with that.


Ted Butler , writer of Butler's Commentary


Butler is one of the most prolific and well written of all the silver bugs out there. Butler’s articles are well rounded and informative with the intent of showing investors that silver is manipulated and undervalued. There are mentions of silver price explosions but he never sets an actual price. So while I cannot give you a price quote, I could not mention silver bulls without mentioning the work of Ted Butler.

I respect actually Butler's unwillingness to set a price more than others who claim $8000/oz silver. Butler shows you the facts and let’s you set your own investment goals. Those claiming the highest prices would seem to be more intent on keeping demand high enough long enough to make sure they can sell their stakes without selling the price down. Butler gives his research and an opinion freely, never asks for subscriptions and never flogs stocks. While I did not find a target silver price from Butler’s articles, I have to say that his opinion carries a great deal of weight with me and was instrumental in my decision to buy silver. It’s too bad however that he never warned me about the stigma a metals bugs can generate. Are there people in his family who thinks he's nuts, like mine do?

Anyone who believes in the silver story usually believes that a return to the highs of 1980 adjusted to inflation is a reasonable goal. Many think it that a panic or fiscal crisis could force silver to go much higher but I don’t bank on that. I firmly think that a goal of $100-120/oz. is nothing to snicker at and it does not take $500/oz. silver to make this a good buy now. Prices beyond $120 would be gravy but why would you need more than 1000% increase to convince you silver would be a good investment. Personally, I’m usually quite happy to get into a stock, make 30% and get the hell out before greed makes me lose some of my gains. Supply and demand says silver will go up; 300% profits have already been made without any appreciable substitution effect, no great increase in production, recycling, or scrap. In the silver story we’ve only seen the trailer, the full feature is yet to be released.

The books I have listed for sale all tell the tale of the end of days for the U.S. dollar, weakness in the total economy, and the potential for metals as a safe haven investment. Silver is a twofer, you get an industrial metal that is a deficit situation and you get a form of real money that can not be inflated and devalued. I'm not making this stuff up, this real, it may be hidden by bankers, government and brokers, but then again they have a stake in the status quo. Don't get caught without at least a little piece of financial security, buy some silver.

Silver shortage in the forseeable future.

Previously, I mentioned that there is no more than 800 million ounces of investment grade, above ground silver. For perspective 800 million ounces is only 8% of the 10 billion ounces once held in world stockpiles and less than a years worth of demand. Further I have shown that current supply deficit is made up with government sales supplementing mine production and recycling to meet world silver demand. The question is how much long will the remaining 800 million ounces last?

Before we can estimate how long 800 million ounces will last we need to find the location and availability of this silver.

Locating all the worlds silver is impossible, there are numerous private hoards hidden in attics and safety deposit boxes, various investment bankers and bullion traders have supply, a few governments such as China likely have some silver left but China does not publish this kind of information. A quick scan of the web allowed me to identify approximately 42% of estimated 800 million ounces.

104 million ounces Barclay’s silver ETF
105 million ounces NYMEX (New York Mercantile exchange)
33 million ounces Central fund of Canada
96 million ounces - estimated remaining government stockpiles
338 million ounces total or 42.25%

The silver in the Barclay’s and Central fund of Canada is effectively off the market backing these investment vehicles for a reduction from 800 million, to 663 million ounces of silver available to industry and physical investment. That’s not to say that the principals of the ETF would not pull silver out of the fund if it suited their interests but for the time being and at this price and supply level there is no need.

NYMEX silver is available to the market but under conditions limiting the physical delivery per trader to 1.5 million ounces per month. This is in an effort to stop one big buyer from sweeping up all the silver in one fell swoop. Considering the small size of the silver market at this time and the low 1 billion dollar value of all remaining silver this is a real risk. There is also the fact that you can’t go up to NYMEX and buy 100 oz for your personal hoarding. NYMEX stocks are in nominal 1000 oz bars traded on future contracts of 5000 ounces. There is no way for a small investor to cash and carry from NYMEX; this is the playground of the industrials and big money.

So if 663 million ounces remain for purchase how long will this supply last?

First we have to assume the trend of deficits continue for the immediate future. A continued deficit is an easy assumption to make considering that projected demand is growing faster than projected supply at least for the next couple of years. The level of deficit is difficult to pin down as several methods seem to be used to calculate it. A leading silver miner Pan American states the 2005 silver deficit as being 35.5 million ounces by leaving out investment buying, while others estimate a 80-100 million ounce shortfall. Ted Butler of Investment rarities, who is the most prolific of the silver commentators, believes there is a 50 million ounce deficit which seems a reasonable number to accept that also fall in the average of other estimates.

On a simple calculation 663 million ounces divided by 50 million per year should give us a 13 year supply but this is very misleading. The Barclay’s silver ETF has applied to enlarge the fund by another 152 million ounces. If this amount was ever filled it would represent 35% of today’s silver. While I’m pretty certain they will not be able to source this much silver in a short period of time without driving the price to the brink, some silver will certainly be bought and this new demand will remove million of ounces from the market place. This new demand will keep prices rising slowly and attracting attention to the silver market and silver fundamentals.

Also it’s quite likely that depleted government holdings will end the practice of government selling into the market. The average government sales for the last 10 years have been 55 million ounces per year. The removal of this supply will double the rate of depletion and shorten the timeline by half.

Technologies are being announced everyday that will strengthen silver demand, silver/zinc matrix batteries, anti bacterial/fungal fabrics using silver, silver embedded plastic storage containers for fresher food. Asian growth in demand for cell phones, washing machines, computers all add demand for silver. In India a trend towards substitution of silver jewellery for gold allows women to have more pieces and more variety for the same investment dollar. Indians are also turning towards bullion rather than jewellery as an investment. Bullion’s much lower price premium over jewellery allows the purchase of more gold or silver for the same expenditure, increasing demand.

The devaluation of fiat currencies vs. the value of bullion gold or silver is very evident over the last 5 years. Despite being considered an industrial metal, silver still retains some of the spill over from its monetary history and is still considered the poor man’s gold. This monetary connection is obvious upon seeing the increasing investment demand in both bullion and coinage. Add to this the movement to remonetize silver though the use of the Mexican Libertad and it’s obvious that demand for a safe haven from paper money is growing.

The biggest factor that will bring shortages and huge profits for the enlightened is fear and panic. Industries that require silver to operate their day to day operations cannot and will not let themselves be cut off from their supply. When the fear of shortages makes its way to industries, panic will set in and purchasing and hording will take place. In the modern just in time delivery system companies may only buy a week or a month’s supply of silver at one time, however with the chance of shortages companies will step up their purchases and could try to purchase their whole years supply while they can. The first ones in will get the best price and bid up the value of the remaining silver and shrink the supply. Other industries will see the price hike and supply drop and a new wave of panic will take place, this panic could quickly gobble up all physical supplies. Even a shift from an average of 1 month supply to a 2 month supply would take 70 million ounces off the market and be well on the way to cleaning NYMEX out.

Rather than the possible 13 years a simple division of the supply vs. the deficit would give us, I believe a 4 year or less timeline is more appropriate. With or without the second filing by Barclay’s, the silver ETF will reach 130 million ounces by early 2007 pulling 26 million more ounces off the market. I believe that the amount of silver diverted to investments will increase significantly this year as will the coinage allotment; this trend will continue increasing the yearly deficit speeding the future shortage.

This shortage will happen it’s just a matter of when. The two factors that could start a run on silver and shortages early are risk tolerance by silver users and fiscal instability. The tolerance of companies to the risk of material shortage cannot be known, each company will decide at some point that it fears for its own production and will step up its buying schedule. Companies might come in dribs and drabs to the market buying extra stocks of silver, or they might see others moving and stampede the market in a very short time. Financial instability could also start a run on silver, and gold too for that matter. The U.S. dollar is in a very precarious situation having lost a great deal of it’s value in the last few years, should Asian creditors pull the plug on new credit or begin selling off U.S. debt the dollar will fall and a great deal of money will run to hide in bullion in an attempt to maintain its value. Eventually all fiat money has failed but bullion throughout history has never been worthless.

With electronic trading and the big money available in the market, very little silver will be available for the small investor if this kind of shortage develops quickly. If you don’t have it before panic sets in you won’t ever have it. Don’t mortgage your house or sell your car or do anything else rash, rather consider diverting $1500 from your RRSP this year, forgo buying a bond or taking that cruise and buy 100 ounces for a start. I truly believe that a 500-700 percent profit is not only possible but probable. Even if it takes 5 years, where else are you going to get 100% per year growth?

Silver Fundamentals

How much silver is there?

This is a question often asked by silver investors; the answer is no one really knows. I’ve seen widely differing estimates but the majority seem to be in the range of 600-800 million ounces. Most stockpiles in government or commodity brokers vaults are quantified but there are issues such as hidden hoards, variables of jewellery recycle rates at any particular price, and the true amount of remaining junk silver coin all cloud the real number. With this in mind, I’m going to go with the high end of the average range and state there are appox. 800 million ounces of silver above ground.

How much is 800 million ounces?

800 million ounces is a drop in the bucket considering that at its peak in 1950 the world’s stockpile of silver was estimated at 10 billion ounces. 800 million ounces represents less than 1 year’s supply at current usage levels. In 2005 864.4 million ounces of silver were used in fabrication and a further 47.5 million were purchased as investments.
This sets 2005 silver demand at 911.9 million ounces.

How much is supplied to the market each year?

The silver institute states that the total supply for 2005 was 911.9 million ounces broken down as follows:
Mine production 641.6 million ounces
Net Government sales 68 million ounces
Recycled scrap silver 187.3 million ounces
Producer hedging 15.1 million ounces

The most important thing to note in these figures is the net government sales of 68 million ounces. For decades governments have been supporting the artificially low price of silver by making sure that there is sufficient supply to meet industrial demand from their own stockpiles. Production and recycling have not been able to meet demand for most of the last 40 years so governments have allowed their private stashes to be used up for the benefit of industry. This will soon come to an end as government stockpiles of silver have been largely used up. Smart holders of silver now see the shortages coming and refuse to sell at today’s unrealistic low price, meanwhile silver investors who were nearly invisible for decades have absorbed 47 millions of ounces in 2005 alone The greatest sign of imminent shortage is the U.S. government who once had the largest bullion reserves in the world had to buy silver to produce the Silver Eagle coin in 2005.

So if it took 68 million ounces of government sales to meet 2005 demand than this amount of silver represents a reduction in stockpiles. In the last 10 years 557.2 million ounces of silver has been sold by governments around the world. These constant government silver sales are not sustainable, the slush fund has nearly run dry and soon there will be no stockpiles to make up the difference betweens supply and demand.

A great deal of silver is consumed by industry. In 2005 570 million ounces were used in industry and photography, in the same year only 187 million ounces was recycled for a net loss of 383 million ounces of silver consumed or lost forever. This destruction is the reason silver is becoming scarce.

Jewellery and silver ware have added costs attributed to the labour and marketing of these products. This means that at current prices these items, unless broken are not likely to enter the supply chain as recycled silver. I’ve seen estimates that it would take $50 silver or higher to move any significant amount of scrap from these sources. Additionaly these items often hold sentimental value making them not for sale or would be even more desirable to keep should they appreciate in price. I do not think an increase in scrap rates will fix the supply/demand shortage.

To be fair demand in some sectors like photography demand has been dropping but overall industrial use, total fabrication and total demand are still trending higher as more industrial uses for silver are discovered. As prices have risen over the last few years supply from mining has increased but it has not been able to offset the need for government sales or the strong new investment demand. Additionally 168 million ounces of silver have been taken off the market to back the Barclay’s silver ETF

What does all this mean?

Silver is a bargain at today’s prices. Silver stocks are dwindling and we may be staring at the beginning of the strongest bull market of your lifetime. At today’s supply there is only 24 ounces of silver available for each Canadian or 1/10 of an ounce for each person on the world. Silver is in such short supply that at this moment 5x more gold exists in vaults than silver. That's right! A $13 Can. metal is rarer than a $670 Can. metal. Do you honestly think the price will stay this way once the market notices the real rarity of silver? I Don't.

Silver will never be in this price range again once the truth about silver supply becomes commonly known. I am comfortable estimating $100 silver and I will not sell any of mine until it hits this price. I will buy until it hits $20 and I would take a loan to buy at $10 dollars. The current $13 dollar Canadian range is certainly a buy. $1300 dollars will buy you a nice 100 oz bar which I firmly believe will be worth $10,000 in less than 5 years and unlike paper money or stocks, silver has never had zero value. Start smaller if that fit's your finances but don't ignore this rare opportunity, an opportunity rarer than gold!

Silver Talk October

A year ago silver was in the $8.00 range and by May it was near $15 until we got nuked soundly, falling back to a $10 range in June. Since then silver has climbed to $13 in early Sept only to fall back to about $10.70 mid month with a quick bounce back to $11.60ish today. It appears that each time we get a correction on silver the drop is less dramatic in both time and depth and then the prices start back up again. I believe this is a sign that the market is becoming adjusted to a new normal in silver value. Big investors are still buying and selling for the trade giving us the some volatility but as the trend continues the trading range is narrowing and new support prices are being built. I think these new support levels are a sign we are getting ready for a new upward leg that will likely bring us back into the May range of $14-$15 silver for the end of year.

On the demand side anecdotal evidence shows that the small physical buyer is not cashing in his hoard, the coin stores I frequent seem to have little in stock. At the Scotia Bank metals and currency counter I’ve been told that sales are not as strong as in May but still constant with buyers greatly outnumbering sellers and people on Ebay are over bidding in a bullish sentiment.

Industrially there have been a number of new products being announced in the last few months using silver. These products should add new and growing demand for our shiny friend. Silver is being woven into hospital curtain fabric and will act as anti microbial agent aiding hospitals in controlling the spread of infections. This is in addition to a number of other consumer products like band aids to fight infection and socks that eliminate odour by using silver. Also new, are plastic food storage containers that are impregnated with small silver particles that will keep food fresher longer. These products all use very small amounts of silver but have great potential in increase demand for silver by their pure volume.

Finally and the most bullish for silver is the announcement by Zinc Matrix Power that they have developed a safer, longer lasting, more environmentally friendly rechargeable battery. These new batteries are made of a zinc silver matrix, have no memory, and are claimed to last twice as long as Lithium Ion batteries. Considering the bad press exploding laptops and recalls have given the Lithium Ion technology, I think companies will be beating down the doors to access these batteries. Once scaled up in size Zinc Matrix should also make a big impact on the feasibility of plug in cars or at least plug in hybrid cars. I’ve yet to find out how much silver is used in these batteries but it is certainly more than none and once again the volume of lithium Ion batteries to replace bodes well for silver demand.

Advice for the day, If you can afford some silver today, don’t wait. Buy when you can, especially after a correction, you never know when big move will happen