GATA is cited in Dubai again, this time in silver market analysis

Is Buying Silver As Good As Gold?

From AMEInfo, Dubai
Sunday, July 9, 2006

http://www.ameinfo.com/90934.html

Last week there were rumors that Dubai was trying to
corner the silver market like the legendary Hunt
Brothers in the 1970s. This latter episode culminated
in a $50-an-ounce blowoff in 1980 followed by a price
collapse that left these one-time multi-billionaires
bankrupt.

Whatever the truth in speculation about Dubai's
interest in silver, many investors are beginning to
ask whether the time is right to buy silver, and if it
is as good as gold.

From an investment perspective gold and silver have
trodden a very similar upward path over the past five
years, and the sudden recent correction and subsequent
bounce have been well matched with a slightly sharper
downturn for silver.

Indeed, the arguments for holding silver or
silver-backed assets are very much the same as for the
yellow metal. The immutable quality of precious metals
is clear when you look at the image of a silver coin
from the reign of the Roman Emperor Trajan -- this was
legal currency in A.D. 112 and still has a
quantifiable value today.

And unlike paper money the central bankers of the
world can not print more silver. The supply of this
commodity expands in line with mining operations and
not printing presses. It is therefore less prone to
devaluation than paper money.

In fact on the supply side there is a good argument
for suggesting that silver is under more pressure than
gold, as more silver is used in more industrial
processes than gold and the stock is actually
diminishing rather than rising steadily as in the case
of gold.

On the other hand, silver has never played the same
quasi-monetary role in central banking that gold
fulfils, and in any financial crisis it would probably
be gold that gains the most in value.

Silver also suffers from the "Hunt factor" mentioned
in the first paragraph. The market manipulation so
blatantly executed by the Hunts in the late 1970s has
left investors wary of a repeat performance by some
other major investor.

Indeed, silver traders point to huge short positions
in the silver market and evidence of massive market
manipulation. The Gold Anti-Trust Action Committee has
highlighted a similar manipulation of the gold market
by central banks. But such short positions have to be
unwound eventually and could be the very mechanism of
a price spike after years of artificial suppression.

One reason to hold silver as well as gold is
diversification. There certainly have been times when
silver prices have held up better than gold and
vice-versa. Hold both precious metals and you iron out
some of the fluctuations, and volatility is the major
problem with this asset class for the average
investor.

Arguably this is a better investment strategy than
trying to "market-time" purchases. Volatility is
supposed to be great for traders, and it is if they
have pinpoint timing. But for the average investor
this is also the quickest way to lose a fortune rather
than to make one.