silver ~ thom calandra's view

  1. 2,839 Posts.
    Afternoon all,
    Some more confidence being expressed out of San Francisco.
    Good luck to fellow believers,

    Silver finally in the bullion rally
    Exploration companies' shares skyrocketing

    By Thom Calandra,
    Last Update: 11:41 AM ET Jul 28, 2003

    SAN FRANCISCO (CBS.MW) - Gold is back on the front-burner, as is that other precious metal, silver.

    Silver, more an industrial metal than gold, rose almost 10 percent in the seven trading days through last Thursday, then eased Friday. It's up again Monday, with silver's active New York-traded future trading at its highest point since July 2002.

    "This time the price has moved up on increased volume, and this morning the price printed $5.20 an ounce," said David Morgan of "I think this is confirmation of the gold rally."

    Up until now, silver hasn't followed gold. The metal, which is used in computers, refrigerators, microwave ovens and so on, didn't participate in the gold rally for much of the last year. "That was disconcerting," says Morgan, who has tracked the silver market for 20 years.

    "I think people are starting to understand the silver story -- that it performs very well with inflation," says Morgan, speaking to me from Spokane, Wash. "We have less silver in bullion form than we do in gold available for investment. Sure, there has been 12 times as much silver mined as gold, but there are very few companies that produce at a profit."

    Many of the newsletter writers and the analysts who follow precious metals are confident the two metals will stage impressive rallies for the remainder of 2003.

    "The bottom line is that both gold and silver could jump higher at any moment," says James Turk, longtime financier and editor of Freemarket Gold & Money Report. "We may see $400-plus gold and $6-plus silver at any time."

    Turk says a close Monday in silver futures of $5.10 to $5.12 an ounce will create "a strong base of support under the market." His target for silver is $6.45 by late September or early October, with the ratio for gold's price as a multiple of silver's declining to 62 from its current 71. At a ratio of 62, a $6.45 silver price would translate into $400 an ounce, if Turk is correct, and I believe he will be.

    I'll have more on precious metals this week in subscription service The Calandra Report, including a round-up of several top-rated analysts and the inside track on the metals-exploration companies whose shares have the most to gain from a lasting bullion rally.

    The exploration sector has been on fire for the past month, with small and mid-sized companies racking up gains of 50 percent and more. Some of these shares are volatile as all get-go.

    One company Morgan favors, for instance, Sterling Mining (SRLM), was up as much as 75 percent Monday morning on the over-the-counter market. Morgan explains that Sterling recently secured the lease of the Sunshine Mine in Idaho, North America's richest silver mine.

    The Sunshine Mine has produced more than 350 million ounces of silver since 1884, Morgan says. The mine has a 26 million-ounce reserve and 160 million-ounce resource.

    The Calandra Report's primary silver recommendation, Wheaton River Minerals (WHT), is up 40 percent in the past two month on the American Stock Exchange. The Canadian company, also listed on the Toronto Stock Exchange, produces gold, silver and copper at several locations and just paid $85 million to buy Luismin SA de CV, a Mexican gold and silver producer.

    Gold ETF works on issues

    In the U.S. stock market, one closed-end fund, Central Fund of Canada (CEF), is a repository for silver and gold. Shares of Central Fund, which trade on the American Stock Exchange and in Canada, trade at a premium to the gold and silver prices. In the past two weeks, that premium has increased to about 12 percent from less than 10 percent -- a sign ordinary investors are taking more than a passing interest in filling their portfolios with paper bullion.

    In related news, a long-awaited exchange-traded fund for gold, to be called Gold Equity Trust (GLD), is running into several issues at the U.S. Securities & Exchange Commission. Gold Equity Trust, sponsored by the World Gold Council, is expected to resubmit its application to the SEC, with clarification in several areas.

    An exchange-traded fund, such as the famous Nasdaq 100 QQQs, trades exactly like a security, in real time. Until the launch of a gold ETF in Australia this year, there had been no commodity-linked ETF in the world. See: Drum roll, please.

    The sponsor's of this latest version of paper gold were hoping to see their security trade on the New York Stock Exchange sometime this summer. Now, it looks like the trust, with a proposed ticker symbol of GLD, won't trade until autumn, if it gains SEC clearance.

    The World Gold Council and the Wall Street banks that are laying the groundwork for the New York Stock Exchange-traded gold trust have been mum about their product since filing a lengthy application with the SEC earlier this year. Sources tell me regulators at the SEC may be concerned about the absence of control by the exchange-traded fund's manager/trustee, HSBC, over the banks that are considered custodians and sub-custodians for the actual gold the trust will hold in London-based vaults.

    (Note: In the interests of full disclosure on silver, I own shares of Central Fund of Canada, Western Silver Corp. (WTZ) and Bitterroot Resources Ltd. (BTT).)

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