11:47p ET Thursday, October 27, 2005
Dear Friend of GATA and Gold:
The story appended here from Thursday's London Telegraph
about the opposition of the Silver Users Association to a
silver bullion investment fund seems important for three
reasons:
First, it publicizes the likelihood of a silver shortage and
thus may spark investment interest regardless of whether
the silver bullion investment fund is started.
Second, it acknowledges the interest of central banks in
suppressing the silver price as well as the gold price.
Third, it acknowledges that central bank gold sales have
been meant to suppress the gold price.
Someone in London gets it -- in this case, the Telegraph's
Ambrose Evans-Pritchard.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Move to Trade Silver 'Would Spark Shortage'
By Ambrose Evans-Pritchard
The Telegraph, London
Thursday, October 27, 2005
http://www.telegraph.co.uk/money/main.jhtml? [1]
xml=/money/2005/10/27/cnsilv27.xml&menuId=242&sSheet=/money/2005/10/2
7/ixcitytop.html
America's Silver Users Association is battling to stop the launch of
a silver trading instrument by Barclays on the New York Stock
Exchange, warning that it will cause a supply bottleneck and trigger
a sharp spike in prices.
Their campaign has led to a flurry of excitement among silver buffs
and commodity traders, fuelling speculation that the metal is poised
for takeoff.
The silver users fear that ordinary industry could face an acute
shortage if the metal is diverted into investment.
The best conductor of electricity, silver is widely used for plasma
screens, solar panels, window defoggers, car headlamps, mobile
telephones, anti-freeze catalysts, fuel cells, mirrors, paints,
dental alloys, and photography, as well as jewellery.
Silver is even used as a salt to kill bacteria in wounds by breaking
down the cell membranes.
In a letter to the US Securities and Exchange Commission, the silver
users warned that there was too little metal being mined to meet the
expected surge in investment demand.
It warned that Barclays' Exchange Traded Fund (ETF) for
silver "would disrupt the market in the short term and may harm the
market in the long term."
As investors bought the new ETF, the fund would have to match the
amount by purchasing bars of actual silver for storage in warehouses.
ETFs offer ordinary investors and non-specialist funds an easy way
to buy into commodities.
Gold EFTs launched recently are already worth $3.4billion and have
taken some 250 tonnes off the market. While the gold market is big
enough to absorb the demand, silver is not.
"A silver ETF would only exaggerate silver's illiquidity given the
sheer volume of physical silver needed to be shipped and stored,"
said the letter.
SUA said the silver price jumped 30 percent in a single month in
1998 when investor Warren Buffett bought an estimated 100 million
ounces.
The world's central banks have little silver left in their vaults to
dampen speculative excess. The US government has sold off its
strategic reserves over the last 60 years, disposing of its final
15m ounces from the US Defence National Stockpile Centre in 2000.
Washington now has to buy silver to mint its own commemorative coins.
By contrast, central banks are still major holders of gold. They
have been selling up to 500 tonnes a year, acting as a constant --
if diminishing -- brake on the rise in price over recent years.
Ross Norman, director of TheBullionDesk.com, said the SEC would not
agree lightly to a new fund that could disrupt industry. "Barclays
is swimming through treacle to get this through the SEC," he said.
"If approved, the ETF will allow a whole new audience to jump on the
commodity bandwagon, and it could significantly boost silver prices.
But silver can't get too far out of whack because traders play the
ratio with other metals, so it corrects back," he said.
While gold recently touched an 18-year high, silver is still below
its medium-term peak of $8.29 in April 2004 -- a level that now
offers major technical resistance. It was trading yesterday at $7.87.
Silver, a schizophrenic metal that can't make up its mind whether it
is base and sometimes precious, has typically tracked gold in major
booms, though with two to three times the leverage and volatility.
----------------------------------------------------
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----------------------------------------------------
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----------------------------------------------------
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