| ong precious metals" ... | | | | investors. |
| I'm beginning to think that's Graeme Irvine's | | | | First, let him explain how Exchange Trading Funds |
| mantra. | | | | for commodities operate, and then describe how |
| He's the business columnist on Longer Life's | | | | the Barclay's proposal is being positioned: |
| Bourse page, and I'll leave it to you to discover his | | | | "In order to establish a commodity ETF, a financial |
| reasons for this four-word chant. Amidst | | | | institution buys and stores a quantity of the |
| Graeme's siren calls, I've taken notice of his | | | | commodity in question and then issues shares of |
| recent daily listings of silver transfers. It seems | | | | common stock at a fixed unit of conversion to |
| that HSBC-Hong Kong is in the process of | | | | represent fractional ownership of that commodity. |
| accumulating a substantially high percentage of the | | | | In the case of silver, Barclays would buy the |
| current market inventory. The range is something | | | | metal, in industry standard 1000oz bars, have |
| like 60%, an achievement I find as breathtaking | | | | them stored in London and elsewhere, and issue |
| as it is intriguing. | | | | common stock shares in a ratio of one share of |
| Why would that much of the world's | | | | stock for every ten ounces of silver. The shares |
| investment-grade silver be moved to one | | | | would then be traded on a recognized stock |
| depository? So far, I've not been able to find | | | | exchange, hence the name, exchange traded |
| anyone willing to provide an answer. The | | | | fund. In the case of the Barclay's Silver ETF ... |
| accumulation is public knowledge, so I'm not | | | | they've even decided on the stock symbol, SLV. |
| suspecting a conspiracy. | | | | The amount of silver bought and stored would |
| I think most investors recall the Hunt brothers' | | | | increase and decrease depending upon the |
| clumsy attempt to corner the silver market three | | | | investment demand for the shares, similar to how |
| decades ago --- driving their Texan empire from | | | | the gold ETFs currently function." |
| billionaire to bankrupt within eight years --- and | | | | The practicalities of a silver ETF include: |
| wouldn't think of trying to duplicate that stunt. | | | | - Stock certificates are certainly easier for the |
| Super-investor Warren Buffet is, of course, much | | | | investor to store than the metal itself, and |
| more sophisticated. His acquisition of 130million | | | | - The 'common stock' format allows more |
| ounces of silver approximately nine years ago | | | | categories of investors the eligibility to participate. |
| was made in tranches calculated to coincide with | | | | What is interesting about the Barclay's proposal is |
| the market rather than drive it. All outward | | | | that its goal is to put 130million ounces of silver |
| appearances indicate that he has no clandestine | | | | into reserve, the exact level of Warren Buffet's |
| intentions; instead, he's simply substantiating his | | | | holdings. Could they be using that precedent as a |
| confidence in the metal and possible lack thereof | | | | model? Burton notes that even though Buffet |
| in the long-term strength of the dollar. | | | | was careful not to disrupt the market, the price |
| Perhaps the HSBC-Hong Kong hoarding is a result | | | | of silver still doubled during that accumulation. |
| of an announcement made in June 2005 by the | | | | Furthermore, Burton says, "I see nothing in the |
| United Kingdom's Barclay's Bank in which they filed | | | | Barclays prospectus suggesting such buying |
| their intent with the USA's Securities & Exchange | | | | restraint, either in time or price." |
| Commission to establish an Exchange Trading | | | | So, Butler reasons, this makes the situation most |
| Fund ('ETF') for silver. Specifically, the applicant is a | | | | favorable for involved investors: |
| Barclay's subsidiary, iShares Silver Trust, and the | | | | "This silver ETF announcement is a true win-win |
| process gained momentum in January 2006 when | | | | for silver investors. (If) their silver ETF becomes |
| the SEC approved their listing on the American | | | | effective, the impact on the price of silver will be |
| Stock Exchange. | | | | great. That's win number one, obvious and |
| The Silver ETF is meeting with strong resistance, | | | | straightforward. |
| most notably by the Silver Users Association | | | | "But if ... this ETF never sees the light of day, that |
| (SUA), who represent entities who make, sell and | | | | will be a big win as well for silver investors. Why? |
| distribute products related to silver. Their | | | | Because it will prove for all to see just how critical |
| complaint is that in order to support the ETF, so | | | | the supply/demand and inventory situation is in |
| much silver would have to be taken out of the | | | | silver. If the government says no way to this |
| marketplace and held in reserve that its | | | | ETF, it will be for one reason only - there is not |
| membership would be burdened by the metal's | | | | enough real silver in the world to fund it." |
| higher cost. As the SUA membership processes | | | | Either way, it's a development worth watching. |
| 80% of all silver produced in the USA, they | | | | Graeme lists the Comex figures daily at the end |
| represent a significant voice in this matter. | | | | of his column and always mentions when another |
| Ted Butler is one of the most respected silver | | | | allotment of silver moves to HSBC-Hong Kong. |
| analysts in the world. His opinion is that, no matter | | | | The growth of those figures could well be the |
| what the outcome of the Barclay's application, the | | | | 'tracer' of things to come. |
| entire episode is a positive development for silver | | | | Stay long precious metals. |