You are here
Frank Holmes says emerging markets will drive gold and other metals higher
Tuesday, January 25, 2005
InvestmentRarities.com
Cook: Since we teamed, up silver has doubled in price. You
have suggested a much bigger increase. Could this be all
we're going to get?
Butler: No. Without putting too fine of a timeline on it, I think
we're just getting started. There are still many, many dollars
to the upside from here. In some ways, silver is a much
better buy here than it was at lower prices a while back.
Cook: In what respect?
Butler: Because I think we won't have to wait as long to see
meaningful increases in price. Obviously, buying silver at four
or five dollars is better than six or seven, but unless someone
can beam himself back in time, you have to deal with current
reality.
Cook: Which is?
Butler: We're still at bargain prices and the wait shouldn't
be very long from this point.
Cook: Why do you say the wait won't be long?
Butler: Look around you. A couple of years ago, when silver
was lower in price, the commodity world was very different
than today. Everything appeared to be plentiful and cheap
-- energy, metals, everything. Now it's hard to find any
mineral or metal that isn't in tight supply and at much higher
prices.
Cook: The China effect?
Butler: Yes. I agree that China and other high-growth Asian
areas are behind it.
Cook: Will this demand last?
Butler: It looks like a short-term and long-term phenomenon.
Silver was in a deficit before the other metals went into
deficits. We're still using up more silver than we produce,
and more people than ever recognize that fact.
Cook: What about the fall-off in photography?
Butler: Yes, digital photography has made great inroads into
the consumer area, just as it previously did in graphic arts.
But that doesn't necessarily translate into an overall drop in
silver usage.
Cook: Why not?
Butler: Well, for one thing, even if consumer photo film use
is down, the printing of digital images on photo paper is way
up. Silver in film is recyclable, while photo paper isn't. So we
lose silver recovery as film usage declines. I have a source in
the recycling industry who has complained for years about
the loss of his silver production due to a fall-off in consumer
film usage. Talk about ironic.
Cook: With all this silver demand and lack of supply, why
isn't the price much higher?
Butler: Come on, Jim, you know the answer to that:
manipulation. If there's a free market explanation for flat
prices when demand is outstripping supply, I certainly
haven't heard it. If it weren't for metals leasing and COMEX
short selling, you wouldn't be asking about low silver prices.
Cook: When you talk about manipulation, a lot of people
think that sounds kooky. How do you overcome that?
Butler: I know, without a doubt, that the silver market has
been, and is, manipulated. I've tried to document that as
clearly as I possibly can. It's up to all interested persons
to decide for themselves what the weight of the evidence
tells them. If they decide it's manipulated and presents a
great bargain, they will buy it. If they think the idea of
manipulation is kooky, they probably won't buy it. If
someone really believes that today's price of silver is fairly
decided by free market forces, why would they buy it?
Cook: How does this so-called manipulation end?
Butler: It ends with a bang. We suddenly run out of leasing
supplies, or the dealers don't go short on the next rally, or
both. There'll be nothing gradual about it.
Cook: Who is leasing silver now?
Butler: Because the leasing of silver is so secretive and done
behind closed doors, you can never be sure who's doing it,
unless it slips. Certainly nobody is proudly proclaiming to be
leasing metals. If I had to guess, I say China, due to past
commitments.
Cook: Why would the dealers who have made a lot of money
on the short side discontinue doing so?
Butler: Because some of them, at least, are smart enough to
know this game is very long in the tooth and that it can only
end badly. I'm giving them credit for being smart enough to
see the end coming and voluntarily deciding to stop selling
short. But I could be very wrong, in that the dealers may not
see the end coming, and they will get caught with a full short
position on.
Cook: Have they ever done so in any other commodity?
Butler: Admittedly not often, but I did see them do it in copper
about a year ago. They trimmed their shorts and let the price
run to new highs. But you have to remember that silver is
unique in that the size of the overall short position is so large
that there will be no gradual workout. It will come with a bang.
Cook: What happens to the manipulators? Do they have to get
squeezed?
Butler: There's a permanent, or residual, short position in the
silver market that guarantees that someone will get hurt. But
I still subscribe to the theory that the price explosion comes
when the manipulators are the least short they can possibly
be. Like right now.
Cook: These are big boys, the biggest actually. How do they
not stay one jump ahead of the rest of us?
Butler: Well, you are correct that they are among the biggest
financial firms in the world and have a decided advantage over
the rest of us in terms of inside information. But they also
have an inherent disadvantage, in that their great size
precludes them from building a large long position.
Cook: Why can't they build a large long position?
Butler: Because there is not enough remaining real silver in
the world that could be purchased, nor is there anyone
willing to go short to them in large quantities. There has to
be a seller for every buyer. The sellers don't exist in silver
for the dealers to buy from The dealers have always been
the sellers of last resort.
Cook: What does that mean, that the dealers have always
been the sellers of last resort?
Butler: It means that on every rally for more than 20 years,
the dealers have sold short sufficient quantities of paper
silver COMEX contracts to contain and cap every rally.
And without that manipulative selling, the price would be
well into the double digits.
Cook: This big bang theory that you subscribe to argues
that silver will explode upward with a vengeance. How high
could it go?
Butler: High enough, and with such violence, to take your
breath away.
Cook: What do you think the free market price of silver
would be if it came to rest?
Butler: It depends on where we are in time, and in the
economic, business, and mining cycles. There will be
peaks and valleys. I agree with my friend Izzy that we're
still in the first inning of a very long baseball game. But
just to put it into perspective, there will be times in the
future when we will have price changes in one day, both
up and down, greater than the full current price today.
Cook: If it stays manipulated, could we continue the
present trend of rising prices and sudden declines?
Butler: Sure, that's the clear pattern of the manipulation.
But it's important to grasp that silver can't stay
manipulated indefinitely.
Cook: Why not?
Butler: Because of the law of supply and demand. Sooner
or later, and it's starting to feel like sooner, we will hit
the wall on the physical side. Then the paper COMEX games
will be trumped.
Cook: Is inflation a factor for you?
Butler: Not really, although it's only a positive going
forward. I recognize and acknowledge inflation as a long-term
phenomenon, but it plays zero role in my basic analysis.
It's way down on my list of price determinants.
Cook: Did the inflation of the 1970s cause silver to rise?
It certainly seems that way. Or was it solely the Hunt
brothers?
Butler: I think the inflation then influenced the general
psyche and did result in overall buying of the precious
metals. And, certainly, the Hunt brothers played a very
important role in the silver explosion. But the important
lesson is not how similar things are to the '70s but how
different things are now.
Cook: How so?
Butler: Mainly how industrially dependent we have become
on silver, and how much less of it remains in existence. We
have 2.5 billion fewer ounces of silver above ground today
than in 1980, yet the price is down almost 90 percent from
the peak, not even adjusting for inflation. On top of that we
have more people in the world, more buying power, and the
largest short position ever.
Cook: What about those that say that household silver will
come on the market to be melted at sharply higher prices?
Butler: I don't see that as a problem. First off, it remains
to be seen if that occurs again. Certainly the stuff that came
to market in 1980 can't be melted again, since it's gone.
More importantly, worries about silver coming to market at
$40 or $50 are absurd. We're under $7 right now, and
someone is going to worry about what might happen at
$40 or $50? That's like fretting about what your tax bill
might be if you make so much in silver. It's not something
to worry about.
Cook: Your analysis lately has been breathtaking. Your
idea that silver is more scarce than gold is really quite
shocking. Any more thoughts on that?
Butler: Just that it is not widely known or understood yet.
That's the kicker. When the investment world comes to
grasp that this is true, then the dramatic price adjustment
will take place. Those who act before the rest of the world
will reap great rewards.
Cook: Then you came out with the government statistics
indicating that the amount of underground silver yet to be
mined is shockingly low. Wouldn't you think this kind of
research would impact the price of silver?
Butler: Of course it will. It's just a matter of time. When
people first hear of a new idea that is at odds with their
preconceived knowledge, there is a natural resistance to
accept that new idea or to act on it. That's what creates
the tremendous opportunity.
Cook: You're certain it's that good?
Butler: Either what I'm writing is correct or it isn't.
I've explained my reasoning and documented my sources. It
is up to the reader to decide for himself. I can tell you I
would never knowingly write anything I didn't think was
completely correct. In the four years you have sponsored
my work, how often have you found it to be incorrect?
Cook: Not very often. I can't think of any important new
fact about silver in the past few years that wasn't
introduced by you. You really have come to dominate silver
analysis. What motivates you?
Butler: I think it has to do with remaining true to my main
objective, which is trying to end this silver manipulation.
Because some of the new things I write about tend to be
controversial, I try to be very careful about what I put
down on paper. I don't want to publicly embarrass myself.
Nor do I want to see any reader get hurt based on my
writings.
Cook: OK, so what's your current advice to these
readers?
Butler: The fundamentals in silver have been and are at
a strong "10," and now the market structure timing
model is also at a strong "10." We've just witnessed a
monumental cleanout of tech fund longs and dealer
shorts in silver, and probably in gold as we speak (Jan. 6).
The risk has been taken out of the market and it's back to
dimes to the downside, dollars to the upside in silver. If
people were waiting to buy silver until the tech
fund/dealer extreme was resolved, then they should wait
no longer. Once again, we are at a true mother-of-all-
buying-opportunities point.
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
3033 East First Ave., Suite 807
Denver, Colorado 80206
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
