Den:
For what it's worth -- and I too am interested in Phil's thoughts -- I don't see with the same logic. You've likely seen this but here's something from a recent Reuters article:
Thursday July 23, 12:28 pm Eastern Time
Silver bursts through resistance on speculative buying
LONDON, July 23 (Reuters) - Silver broke through resistance on Thursday to reach two-month highs on speculative buying sparked by talk that U.S. investor Warren Buffett might be looking to exit the market, analysts and dealers said.
Silver moved through $5.70 an ounce and was last quoted at $5.80/$5.83, from the previous close in New York at $5.66/$5.69.
Gold remained under pressure and was last quoted at $292.90/$293.40 an ounce from the previous close at
$293.90/$294.40.
Analysts said silver soared on investment and speculative buying in the afternoon.
''You are obviously seeing some investment buying amid talk that it is connected with Buffett's exit strategy, with the idea being to run the prices higher, probably well above $6.00,'' Macquarie Equities precious metals analyst Kamal Naqvi said.
Many market players have been expecting Buffett to exit the market sometime after he declared a 130-million-ounce stake in physical silver last February.
Buffett said in February that his Berkshire Hathaway investment firm began buying silver in mid-1997 in the belief that market fundamentals justified a higher price.
Dealers said Buffett could make a tidy profit if he got out at $6.00 an ounce.
''We have absolutely no confirmation that it's him but whoever it is is aiming for $6.00, not the $7.00 or $8.00 of a few months ago. If Buffett could get out at $6.00, he would make a tidy profit,'' one dealer said.
Naqvi saw no fundamental reasons for silver's rally, which seemed to be pushed by at least one investment fund.
Naqvi said gold softened with the weaker yen and a further decline in the currencies of major gold producers Australia,South Africa and Canada."
If Buffet is looking to exit, then that would put a cap on the silver price and bring it down. But in order to drive up the price, he would likely have to a) be buying at higher levels or; b) be hoarding, in order to shorten supplies. If a), then he's spending, not gaining. If b) it can happen, but it takes time, and that's balanced by the fact that he doesn't control all of the market.
Meanwhile, if the price of silver continues to climb, he could sell some and make a tidy profit, but once he starts selling more, the price goes down. Looking at it from another perspective, if Buffet's silver stocks are in the $4 to $4.50 range, for example -- that is, if he was buying over time to average $4 to $4.50 -- and, even if his target price is $6, instead of $8, then he's going to want to control his selling now and to hedge over time. That is, he's going to have to sell some at $7 or $8 up front so that by the time he gets well into it, he can average the $6 exit.
The speculation also belies Buffet's historic, long-term strategy, one which has not tended to be vulnerable to speculative market shifts.
Could Buffet have already exited? Yes. Although I doubt it. (We'll know when he publishes his next results.) If he has, then someone else would be exerting the upward pressure through buying.
As a former journalist, I know that there are a lot of writers who misinterpret basic information, especially when there are rumours involved. My belief is that this is what's happened with this one.
I think Associated Press has a more realistic slant, because it better reflects my interpretation it must therefore, must be right! (Right?)
"Silver Futures Rise Sharply Again
Filed at 5:06 p.m. EDT
By The Associated Press
Silver futures prices rose sharply a fifth day Thursday on the New York Mercantile Exchange amid speculation investment and industrial demand for the metal is rapidly depleting available supplies.
On other markets, lean hog and energy futures fell sharply.
Silver investors continued to react bullishly from news that Comex warehouse stocks fell this week to 83.07 million ounces, down 801,364 ounces and the lowest level since stocks fell to 82.71 million ounces on Dec. 7, 1982.
The declining stocks and sharp increases in the amount being charged to borrow silver to meet demand suggested renewed interest in the metal after months of decline, analysts said.
Silver prices have been on the general retreat since they reached a 9 1/2-year high in February,when billionaire Warren Buffett's Berkshire Hathaway investment company announced it had quietly snapped up nearly one-fifth of the world's silver supply. Prices had reached $7.28 an
ounce and Berkshire had suggested they could go as high as $9, but jewelry-making demand from India, the largest consuming nation, dried up soon thereafter.
Silver for September delivery rose 14.2 cents, or 2.5 percent, to $5.802 an ounce."
Phil?
Greg |
