Interview with Ron Insana of CNBC and Jeffrey Christian, managing director of the CPM Group, Monday 1/12/98:
RI- Let me ask you here about the allegations that the silver market has been manipulated. There's been a lot of talk over the last many months that this was a manufactured short squeeze and a lot of hedge funds were involved. What do you make of that line of reasoning?
JC- I don't find any basis in reality for those allegations.
RI- Why not? There's been an awful lot of talk that people have been off loading silver and sticking it in warehouses and just drawing down stocks so that the price would move higher. Not that there's much industrial demand for silver at this point in the economic cycle.
JC- People in the physical silver market haven't seen any of that. I mean the physical silver market really, sincerely is tight. Silver lease rates are high and the silver price is moving into a backwardation. There's really no evidence that there is a large stock of silver that's being stored or hidden someplace.
RI- If Asian economies are imploding and India is suffering something of a currency crises as well, and maybe a slowing economy, where is the silver going? Is it going into India where the demand for that product has been high in the past?
JC- Well, India's economy has not been caught up in the Asian maelstrom so far. Indian demand was very high through last year and the last couple of weeks we saw Indian demand for legal imports turn off, partly because the price of silver got over $6. That led to some buildup of silver stocks in Dubai which is the entre port into India.
But the Indian demand has been relatively strong. If you look at the rest of Asia the only country that's really been having financial troubles that's important to silver is Thailand, and Thai silver demand is largely for re-export as manufactured jewelry. With the lower Baht the labor costs of manufacturing silver and gold jewelry in Thailand are now much lower. So what you're seeing is actually an upturn in those industries because its now a lot cheaper to have your jewelry manufactured there.
RI- Does that account for all the physical silver that suddenly seems to be missing?
JC- I don't see any silver missing. I think I can account for all of it. Most of the silver that we've seen come off the Comex warehouses in the US over the course of 1997, most of the silver we've seen taken out of the London and Zurich vaults over the course of 1997 has in fact gone into India,Pakistan, and investors stocks in the Middle East- which is something that a lot of people have over looked. Also, into Thailand and other places.
RI- So you think this is a fundamental development and not a manufactured short squeeze?
JC- The fundamentals have been pushing the silver price upward and it's interesting because if you go into the website of one of the guys who's involved in this lawsuit, his long term silver view is extremely bullish, or very bullish to use his terms. That would suggest to me that he doesn't necessarily see it as a manufactured squeeze either.
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