| So after a quarter of a century,
silver finally returned to double-digits. While
we aren’t fans of following day-to-day moves,
the recent zoom past the $10/oz mark is noteworthy.
It seems that the precious metals community is
anticipating the launch of the silver ETF –
so perhaps this is what is causing the grey dog
to bark. Maybe that’s the case, but we certainly
don’t think that abnormal amounts bullion
are being gobbled up by Barclays in anticipation
of the ETF’s launch. Nor do we think that
the public is suddenly hoarding silver.
What is interesting to us is that
the mainstream media and average investor have
no idea what is going on. CNBC has a ticker in
the morning that includes some commodity prices,
but silver remains absent. Web sites such as MSN
and Yahoo spit out headlines about Google, retail
sales, and oil – it is only on rare occasion
that gold is mentioned and that is when the price
breaks $400/oz or $500/oz. Even the commodities
sections of major financial web sites seem to
ignore silver. For example, we can find nothing
about the recent strike at Penoles, the second
largest mining company in Mexico. Compare this
to a hypothetical strike at Exxon, which would
make top headlines.
A little more than twenty six years
ago, when the silver market was being cornered,
the general public started to wake up. At the
very top, there were news stories about average
people taking their silverware in to be melted.
While we are not anticipating a repeat of early
1980, it is logical to think that the bull market
will not end until we see the public paying attention
to what is going on.
The combination of miner unrest
in Mexico, increasingly radical leaders being
elected in Latin America, and the silver ETF is
adding more fuel to the already bullish fire of
silver supply/demand. As with any asset that has
had a huge run in a short period of time, a meaningful
correction could occur at any moment to shake
out the weak hands and momentum players, but we
think that continued annual supply deficits of
silver will not go unnoticed by the mainstream
investing public for long. Oh, and we haven’t
even mentioned the ticking time bomb that is the
U.S. Dollar and how its looming decline will almost
certainly add a great deal of investment demand
to gold and silver at a time when silver supply
and inventories are very limited.
March 3, 2006
Todd Stein & Steven McIntyre
Texas Hedge Report
.*****
Todd Stein & Steven McIntyre are internationally
known analysts and editors of The Texas Hedge
Report, a market newsletter that highlights under
and overvalued securities in the equity, bond,
currency, and commodity markets
For more information, go to http://www.texashedge.com
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