Some interesting thoughts on Silver by Israel Friedman

I will with-hold what my own price targets are for silver since I dont typically like discussing that, but there are a few basic fundamentals in regards to silver that makes it very attractive to me.

Silver Bar - Argor-Heraeus

Silver Bar - Argor-Heraeus

For one, the USGS has indicated that silver will be the first element in the periodic table to become extinct. I have had a friend who is a scientist point out to me this is impossible, since silver is an element and elements cannot be destroyed. Perhaps so, but I contend there may be a time when it is not available in quantity to any man.

Secondly, I would also like to point out that there has been no time in history where the current ratio of available silver to gold has ever existed in an economy except for once, and that was 3000 years or so ago.

I am referring to ancient Egypt. They mined their own gold, but had to import their silver. Thus, in the regional system of the Egyptian economy, the available ratio of silver to gold was 2.5 ounces to every ounce of gold.

Only now, there are identifiable reserves of some 500 million silver ounces, yet there are roughly 4.8 billion ounces of gold – a ratio of 9.6 ounces of gold to every ounce of silver.

Today we do not see a single regional economy, but a global one, with all nations interlinked by a common global reserve currency.

Today, like in ancient Egypt we are not seeing a “once in a lifetime opportunity”. This isnt even once in a century, or once in a millennium.

The last time anything remotely like this happened was 3000 years ago, and even then it was no where near this pronounced a ratio difference.

Something to think about.

The Silver Shortage Will Come

Israel Friedman

Based on the supply and demand situation of silver, it’s only a question of time when a silver shortage will come. Nobody can predict exactly when this is going to happen, but we have more and more signs that those who control the price of silver are sweating to balance the supply.

The biggest question I have is, will the shorts be successful to cover their short position on time? Right now the CFTC seems to want to force all the manipulators to get in line by making them obey new rules of position limits, but I feel that the banks who are the big shorts will be exempt. Mr. Butler thinks that the CFTC will do the right thing, but I am skeptical. We argue about this a lot, as we both have strong opinions.

If the banks will not be forced to cover their short positions, only a true shortage in silver will bring the right price. Be prepared for that to happen. How much will silver be worth in a shortage situation? It’s tricky to calculate, because a real shortage has never happened in silver history. But it is how you must think. My own thoughts go back to what some things cost during and after World War II in Europe. When there is not enough of something is when you see real crazy prices.

So I will give you my calculation. It will be a gradual explosion of prices and slowly the users and the new investors will eat up the world visible silver, which today is around 500 million ounces. In my calculation the first 100 million ounces of visible silver will disappear at a price of $60 to $100 an ounce. The second 100 million ounces will disappear by $250, and the third 100 million ounces will disappear between $250 and the price of gold ounce for ounce.

We will be left with 200 million ounces of silver which the owners will be not taking profits on at any price. The bullion in private hands I calculate will be the first to take profits, but Silver Eagle holders will hold for the long run. I still believe that Silver Eagles will do the best investment-wise and I will not be surprised that at one point the Eagle price will trade much higher than the price of silver in a bubble mania.

I am a fanatic silver believer and what I write is only my private belief. There are not many believers in silver. Just look at CNBC, the newspapers, other media, and gold investors. Hardly ever a good word on silver. Silver for them is a forgotten metal. One day they will be shocked when the shortage of silver will come and the price will go up and then gold will be a forgotten sister. There is more gold in the world than silver, so parity in prices is a must.

I think Ted Butler spoke the truth in a recent speech he gave: “The supply/demand set up in silver, which has evolved over an incredibly long period of time, has been one continuous process promising to culminate in an explosion in price at some point. Quite simply, we are rapidly approaching that defining moment when there just won’t be enough physical material to go around at anything but rapidly escalating prices. Those escalating prices will encourage and drive others, including industrial consumers, to enter what should become a buying frenzy. Superimpose upon that the sudden destruction of a decades-old downward price manipulation and you have all the necessary ingredients for a price event that will be referred to forever.”

I would like to congratulate my friend Mr. Butler for releasing a newsletter on silver, and I hope it will become the No. 1 newsletter for the metal market.