Analysts predict soaring silver prices

Analysts predict soaring silver prices

Coeur d'Alene, Idaho (Platts)--25Sep2006

Whether or not the price of silver, along with gold, is being manipulated
to the downside by bullion banks and big Wall Street traders was the subject
of some disagreement at the 4th annual Silver Summit in Idaho last week.
However, analysts told Platts they were unanimous on one point: the silver
price is headed seriously upward, fueled both by fundamentals and
near-historic levels of investor and speculator interests.

"I am rabidly bullish on silver, and as we digest the first stage of this
bull market, we are poised to reach new real-time price highs," said Sprott
Asset Management's John Embry, adding that he expected silver to be more
volatile than gold but, in the end, to outperform the yellow metal.

Embry continued: "As we slide down the slippery slope of credit
expansion, we will see further erosion of faith in fiat money. The Federal
Reserve will be faced with a monetary policy either of deflation or
hyperinflation as debt piles up. Hyperinflation will be the more likely
policy, and far from being a relic, silver will re-assert itself as money."

Embry referred to a Sprott-issued report in 2004 entitled "Not Free, Not
Fair in which he suggested that in leasing gold banks and other major traders
had conspired to suppress the gold price. At the Silver Summit he declared
there was similar "obvious price fixing" in the silver markets. "The silence
of the silver-mining companies in the wake of these manipulations must end,"
he said.

CPM Group's Managing Director Jeffrey M. Christian said he could find no
evidence of silver price manipulation, but said market forces would drive the
white metal's prices much higher than current levels in the near term, should
investor or speculator interest top 150 million oz.

"The silver market is shifting from 16 years of persistent net sales from
inventories to net purchases for addition to inventories," said Christian.
"Investors are buying silver. The iShares silver ETF is only a sideline, a
consequence, of the surge of investor interest in silver."

According to Christian, the Indian government sold 35-mil oz of silver in
2005, but sales could decline to 32.5-mil oz in 2006. "Silver was legally
re-exported from India in March and April 2006 after stocks of unsold new
imports built up there," said Christian. "The silver went mostly to dealer
holdings in London, where the metal will be available for delivery into the
silver ETF."

Christian likened current market conditions to those of 1979, when silver
shot up to nearly $50/oz and the silver-gold ratio dipped below 10:1. "This
represents investors buying more silver," he said. Total silver bullion
inventories, meanwhile, have fallen from more than 2-billion oz in 1986 to
nearly zero now, he noted.

--David Bond, newsdesk@platts.com

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