Today's comment is by Eric Roseman, Investment Director of The Sovereign Society, and editor of Commodity Trend Alert.
Dear A-Letter Reader:
In late March, the U.S. Securities and Exchange Commission (SEC) approved the long-awaited Barclays Silver iShares, an exchange-traded-fund (ETF) that will physically own silver bullion. Though a date hasn't been announced for the new offering, the ETF will represent 10 ounces of silver; at current prices, the iShares will sell for over $126 a share with spot silver recently closing at $12.63 per ounce.
This announcement comes right in the middle of the first precious metals bull market since the 1970s. As the booming demand increases, supplies are getting even tighter in 2006.
Commercial end-users of silver have complained that a new ETF will drain already tight supplies from the market and adversely impact their cost base. That's because news of the upcoming silver ETF is catapulting an already tight market into chaos as impending demand saps even more supplies from the market.
Despite the shift from traditional photography to digital several years ago and the resultant lower demand for silver in the photography marketplace, fabrication and investment demand has boomed, more than offsetting the decline in photography consumption.
Spot silver prices continue to hit fresh 23-year highs this year. The Sovereign Society's Commodity Trend Alert recommended buying silver at $5.50 an ounce in December 2003 and the only profitable silver mining company in North America last June at C$3.80 per share. Today, our silver bullion recommendation is up 130%. The silver mining stock, meanwhile, trades at C$12.69, a 240% gain in less than 12 months, including foreign currency profits from the rising Canadian dollar versus the U.S. dollar.
The conditions remain in place for the "perfect storm" as macroeconomic and fiscal imbalances grow even larger in the United States and Western Europe. More investors, including central banks, are building gold bullion reserves after years of dumping the metal. Investors are also furiously increasing their silver portfolio as demand recently hit a record high in 2005. That's because like gold, silver is also regarded as a monetary metal, or a store of value. Historically, gold and silver have rallied together and remain optimal hedges against fiat currency and government printing presses.
As supplies continue to head deeper into deficit coupled with soaring demand created by a new ETF this spring, spot silver prices should hit at least $75 an ounce or higher before this bull market is over. And this time around, we don't need the Hunt Brothers to corner the silver market to boost prices. Supplies are already in deficit and bound to become chronic as more investors and traders ride this great bull market.
ERIC N. ROSEMAN, Montreal, Quebec
Investment Director, The Sovereign Society
Web site: www.commoditytrendalert.com
EDITOR'S NOTE: Eric just finished a brand new report on the booming metals industry. Click here to see how you can claim a FREE copy of this special report.LINK: https://www.isecureonline.com/secure/form1.cfm?
pubcode=CTA&pcode=ECTAG401&alias=1pager