Hi-Yo Silver Fund
Below is a MRR and PLR article in category Finance -> subcategory Investing.
Hi-Yo, Silver Fund!
Summary
Every decade, someone seems intent on acquiring massive amounts of silver. This strategy nearly bankrupted the Hunt brothers in the 1980s, yet doubled the metal's price when Warren Buffet attempted it in the 1990s. Today, significant silver reserves are heading to Hong Kong. What's driving this move?
The Curious Case of Silver
"Stay long precious metals." This seems to be Graeme Irvine's mantra, a sentiment echoed in his business column on Longer Life's Bourse page. Recently, he has been highlighting the substantial transfers of silver, notably with HSBC-Hong Kong accumulating around 60% of the market's current inventory?"a truly astounding achievement.
Why the Rush to Hong Kong?
While it's clear this large accumulation is happening, the reasons remain elusive. This is not seen as a conspiracy, largely because it's public knowledge. Surely, investors recall the Hunt brothers' failed attempt to corner the silver market three decades ago. Their actions led to bankruptcy, a fate few would aim to replicate.
However, Warren Buffet's approach was notably more strategic. Nearly a decade ago, he acquired 130 million ounces of silver, carefully aligning his transactions with market conditions rather than trying to manipulate them. This move wasn't secretive, merely a demonstration of his confidence in silver amid concerns over the dollar's long-term strength.
The Role of Barclay's Bank
The focus on silver might also relate to Barclay's Bank's 2005 announcement of their intention to create an Exchange Trading Fund (ETF) for silver. A Barclay's subsidiary, iShares Silver Trust, filed this proposal with the USA's Securities & Exchange Commission (SEC), gaining approval to list on the American Stock Exchange in early 2006.
The proposed Silver ETF has faced significant opposition, particularly from the Silver Users Association (SUA), which argues that diverting large amounts of silver to reserve the ETF would raise prices, impacting those who make, sell, and distribute silver products. As they handle 80% of US-produced silver, their concerns carry weight.
Insights from Ted Butler
Renowned silver analyst Ted Butler views these developments as positive for silver investors, regardless of the outcome of Barclay's application. He explains that commodity ETFs function by buying and storing the commodity, then issuing shares that represent ownership of the stored product. For silver, Barclay's plans to store 1000-ounce bars, issuing shares for ownership, which would be traded similarly to gold ETFs.
Butler notes Barclay's ambition to reserve 130 million ounces of silver?"the same amount Warren Buffet once held. This raises questions about market impact, as Butler suggests the proposed ETF lacks clear constraints on purchasing strategy, unlike Buffet's careful approach.
A Win-Win for Investors
Butler argues this situation benefits investors either way: If the ETF succeeds, silver's price will likely rise, benefiting shareholders. If it fails, it will highlight the critical supply and demand issues in the silver market. Lack of enough silver to back the ETF would reveal the metal’s scarcity.
Graeme continues to track these developments, noting daily Comex figures and new transfers of silver to HSBC-Hong Kong. The growing numbers could signal the trends of the future.
Ultimately, the advice resounds: Stay long in precious metals. This evolving story is worth watching.
You can find the original non-AI version of this article here: Hi-Yo Silver Fund .
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