Friday, March 10, 2006

Beware of Silver

The enormous rally in gold may pale next to silver if the US authorities allow a silver ETF (Exchange-Traded Fund) to begin trading.

During the last 15 years, the aboveground silver supply has dwindled more than 55%. Yet demand continues to increase.

And, according to the Texas Hedge Report, the advent of a silver ETF might reduce the amount of available silver by more than 600 million ounces, because much of the available supply of aboveground silver would be diverted to back the silver ETF shares.

How could this happen?

For every $100 an investor puts into this ETF, the ETF would have to buy $100 worth of silver - and physically take delivery of it. The supply of aboveground silver could dwindle from a mountain into a molehill virtually overnight.

What does this mean for us?

Be very careful is using our strategy with Silver. As we're likely to see some interesting rises in Silver, that we've never seen before.

As for me, I'm steering clear.

Murray

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