China-silver get the connection???
It seems China is in the news day after day, and
rightfully so. The Chinese economy is responsible for almost
everything I have purchased the past few years. Recently many
financial commentators have mentioned that the Chinese have
begun to exchange those U.S. obligations into hard commodities
such as copper. This trend is likely to continue, as trading
paper back to tangibles is the wisdom of the ages for beating
the fiat dealers.
I just returned from Toronto and met with a few friends for
lunch before making my flight back to Washington. During this
luncheon I was asked to provide a few highlights on the silver
market. Perhaps the most important point to be emphasized
was that according to the Silver Institute the Chinese use
about 1/70th the amount of silver per household that is used
by advanced economies.
This is changing rapidly however the host of the luncheon
pointed out the Chinese people desire refrigerators, computers,
CD players, TV's, microwave ovens, and automobiles. Simply
stated the Chinese want to have a life style similar to that
enjoyed by Europe, America and Canada.
Since China represents 1.3 billion people if the usage came
to that of the Western economies it would require 130 million
ounces of silver annually. This will not take place overnight
of course but the trend is in place. In fact check China is
interested in silver from the Silver Institute http://www.silverinstitute.org/news/pr06oct04.html
Another interesting fact that Dr. Michael Berry wrote in his
morning notes; Silver and Uranium share an interesting history.
They are relatively unknown and until recently both have been
contrarian investments unloved, unwanted and out of favor.
It takes courage and insight to buy a contrarian investment.
Both metals are now seeing the "light of day." Uranium's
price has just begun its upward trajectory to the $60 to $100
range and silver is going to see much higher levels. Both
metals have been under explored and under produced for the
past 20 years.
Dr. Berry was also at the luncheon mentioned
above, in fact we sat next to each other and he pointed out
some interesting facts about China and their influence in
the commodity sector going forward. What caught my attention
was when he mentioned that the Chinese keep their silver business
Earlier I wrote a bit about the Chinese and the lands they
have devoted to the study of silver see http://www.silver-investor.com/dm_aug04_poormansgold.htm
The great one, the Mogambo (most recently sighted at the Silver
Summit 2) points out that "China's government has announced
the takeover of the biggest mining company in Canada. An ABC
news article says that "Chinese firm, Minmetals, which
is owned by the Chinese government, is said to be paying about
$US5.7 billion, for Noranda Mining. It has also been reported
that the Chinese oil company Sinopec, which is controlled
by the Chinese government, is in talks to acquire a large
lease of oil bearing land."
Further Bob Moriarty of 321gold went to China and says, "I
sorta thought the demand from China might be responsible for
50% of the price of any commodity. Wrong. All I could see
was building cranes and worker bees swarming over construction
sites seven days a week." So, his original estimate of
50% may be too low? Wow!
He went on to say, "China doesn't just have an impact
on commodity prices. Prices are going up from here on copper,
iron, moly, silver, oil, gold and everything else you need
to construct a modern economy in the shortest timeframe in
all of recorded history."
China-silver, China-silver, China-silver, I realize that is
only three times, repeat until you see, hear, and understand
the connection. There is a connection, China is going to need,
want and use silver and a lot of it. Will this change the
dynamics for silver in a big way, yes in a way few see or
According to a recent press release from Silver Standard
"The Chinese economy has grown at an astonishing pace
over the past 10 years, with annual silver consumption increasing
from 24 million ounces to 47 million ounces. China appears
to have an insatiable demand for all metals and we strongly
believe that there will be continued growth in silver consumption.
We are very pleased to participate in the Minco Silver strategic
alliance in a country that has large silver resource potential
with an increasing domestic silver demand."
Certainly moving from 47 million ounces of silver use in China
to 130 is a three fold increase from current demand, but not
unlikely. Especially considering the use of wireless technologies
and superconductivity in their electrical grid. Stay tuned
for the real China-silver connection it keeps getting more
October 07, 2004
David Morgan has a weekly radio show on the
metals at http://www.netcastdaily.com/fsnewshour.htm,
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