The case for buying silver - Dominic Frisby


Staff member
Rating - 100%
12   0   0
Five reasons to buy silver ? and five reasons not to
Silver is the most frustrating of metals for investors, with lots of potential that it hardly ever realizes. Here, Dominic Frisby outlines the case for buying silver ? and the case against it.

His reasons for silver are decent, but his reasons against silver are murky and poorly informed. The only thing I agree with is that silver isn't "money" in the sense of how the majority perceive "money" today.

I'll actually go through his negatives and refute them when I have time later on. He does make some valid observations, but they don't justify his "reasons" not to buy silver.
I feel like silver is about to break out any day now  ;D

1:) Silver isn't cheap?
Being that silver has so many utilities, silver is extremely cheap relative to how much silver is above-ground and available to market, compared to our global mine supply vs global demand. Deficits are met by scrap metal refining and government/institutional stockpiles. As for the "Hunt brothers cornering the market", this has been refuted before:


Platinum, Palladium, Gold and Silver all saw a massive increase in price over that time. It is estimated that the hunt brothers involvement contributed to a 2% increase in price overall.

The 2008 silver spike was a testament as to how little money needs to enter the silver space for price to increase dramatically. In 2011, the CFTC imposed position limits, which the big commercial banks were exempt from, and allowed them to regain control over the speculative market. We saw deficits in those years of 100-150 Million Oz's just from physical investment demand. The US government used their stockpiles to meet that demand and the institutional banks regained leverage over speculative investors via the imposed position limits.

2:) ratios don't matter?!?
Yes they fkn do! It doesn't take a rocket scientist to figure out that if you mine silver at a 8:1 ratio to Gold, while we have a rapid decline in ore grades, new silver discoveries, and dwindling aboveground stockpiles, it's only a matter of time before that ratio begins to narrow. There are so many uses for silver and demand isn't decreasing. The only thing decreasing is the amount of silver available to mine each year.

3:)Price manipulation:
This guy really has no idea. When you have the president of the USA stating this upon signing the coinage act in 1965 when they removed silver from coinage, it becomes transparently clear that it was possible to manage the price of silver by using existing stockpiles to meet market demand at any time:

"If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content."


So, this guy saying "price manipulation stories have been doing the rounds since the 1970's" as a means to dispell the manipulation narrative, is just silly. If it weren't for the intentional trickling of supply to the markets by the US government, there would've been a shortage long, long ago.

If anyone is interested, the can see this taking place in the silver surveys up to 2015 listed under the category of "government sales":

Regarding his comments on the derivatives market, there is still a means to manage the price and control market sentiment through massive positions held by the commercial banks. Given the above statements by President Johnson, there would appear to be an interest from the US government to keep the price of silver "in line".

He mentions "if it is suppressed, there is nothing we can do about it anyway". That's not true at all. You cannot suppress the price of silver when we have more physical demand than supply. This is the key to the manipulation. The Comex manipulation is used (IMO) to steer or redirect investment demand in the paper market. Physical stockpiles are used to manage the free-market price discovery mechanism. Pretty simple to understand once you piece it all together.

4:) You don't need much silver.
This is the most ridiculous of his points. If silver is used in industry in small amounts but still demanded in large volumes, this just means that most of silver being used is not going to be economically feasible to recycle. Silver recycling hit a peak when we went to digital photography, as much of the old photographic equipment and supplies that utilised silver were sent in for recycling.

5:) silver isn't money.
I agree with his points in large, but physical silver is still being minted in government coins and is still utilised as an investment. Demand for investment grade bullion averaged 30 million Oz's a year. Since 2008, we've seen demand explode to an average of 200 million Oz's a year - or 1/4 of mine supply - or the entire scrap metal refining supply per year. If physical investment demand increases, where will the supply come from to meet global demand? Government/institutions do not have endless reserves to keep the price "in line".

Another thing I'd like to add is: just because silver is mined mainly as a byproduct metal, doesn't mean the price is not important to miners. The primary miners are the most critical, as they need a financial incentive to pursue silver. They supply 25% of the total global supply (including scrap metal refining). 250 million Oz's is a lot to take off the table when it comes to the overall silver market.

Another point worth mention is the below ground supply of copped, lead, zinc and gold. We are set to reach peak lead and zinc mining in 2028. Peak copper in 2032, and there's already mounting evidence to suggest we've already hit peak gold mining. A reduction in mine supply of these primary metals will translate into a reduction of silver supply. This will be amplified by the fact that many of the major silver mines in the world are set to deplete their resources over the next 4-7 years.

The prospects for silver look sensational if you have what it takes to hold it long-term. If you carefully analyse the supply and demand fundamentals, you will see the opportunity that presents itself today.