- Silver Investors Divided on Direction, Await Berkshire Hathaway Results
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Feb. 22 (Evening Standard/KRTBN)--Silver bulls" hearts fluttered earlier this year as they relived memories of Warren Buffett"s famous raid on the market for the precious metal.
The price, which dipped below $4.70 in December, had added more than $1 by the middle of February, prompting speculation that the Sage of Omaha was again dabbling in the market exactly a year after revealing the acquisition of the equivalent of 16 percent of the world"s annual supply.
However, as investors in Buffett"s Berkshire Hathaway conglomerate eagerly await his year-end report this week, the silver market already seems to be bored with the Buffett story. The price has fallen back and analysts are torn about which way it will go next.
Rhona O'Connell, at brokers T Hoare & Co, says the current price at $5.50 an ounce is hovering around her target for the whole of this year. However, she is no fan of silver as a long-term investment, citing its ability to double and then halve in a matter of days. Like Cinderella "she spends a very long time below stairs, comes to the party with a bang, but at midnight she disappears and, unlike Cinderella, seldom reappears".
She says one of the problems is that silver is about the only metal where supplies are not dependent on price. This is because nearly three-quarters of output is merely a by-product of other minerals, whether it be lead, zinc, copper or gold.
So any benefits the silver market has seen in the 1990s have come less from excess demand and more from the shutdown of lead and zinc mines due to poor prices for those metals. Even so, the silver price has gone nowhere in the 1990s while alternative investments, such as shares, have roared ahead.
O'Connell says any rallies are often driven by speculators, many of whom are in the US where the market is much more closely followed. Arab investors who bought in a famous surge in the Eighties will try to unload stocks if silver breaches $10 again, says O'Connell. Others are more optimistic. Falling stocks are seen as a bull point by Lawrence Eagles of brokers GNI.
Eagles says an excess of consumption over supply between 1990 and 1997 has been made up for by a one-billion-ounce rundown of world bullion inventories, with a likely further reduction last year.
"Most people believe we are getting to quite low levels of silver inventories. Therefore, a pick-up in the world economy and a pick-up in demand should lead to a stronger silver price."
He reckons silver could move to $10. At that level, production might start to expand again and "people might start to melt down the knives and forks".
Many would concur with Deborah Russell of Gold Fields Mineral Services that nobody really knows where the price is going. True stock levels are an unknown quantity and those that are disclosed can be manipulated. In the words of O'Connell, silver is "a tart, basically, not for widows and orphans".
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(c) 1999, Evening Standard, London. Distributed by Knight Ridder/Tribune Business News. BRK, END!A$16?EV-SILVER |
