 Wallace Street Journal
Silver Balderdash
David Bond
Archives
Editor, Silver Valley
Mining Journal
August 24, 2004
Wallace, Idaho - Here we go again. No sooner did silver start
scratching at the door of $7.00 than the humdiddlers this Friday
(West Coast time) morning breathlessly warned long-side "speculators"
through a Reuters megaphone that they were marching like lemmings
toward the proverbial cliff.
The Silver Losers Association,
funded by such fine and trustworthy entities as Eastman-Kodak,
diamond-miner Tiffany's and perennial silver-basher Mitsui, will
no doubt be discovered to have been behind this latest insult
to the intelligence of even someone from Reuters' motor-pool.
To quote (as Reuters did) Mitsui's Andy Smith - who gleefully
hollers "FIRE" every time a gold or silver bull shows
up at the theatre - without soliciting a temperate countervailing
point-of-view is rankly amateurish.
Reuters' Veronica Brown walked
into a sucker-punch so ancient it's funny, were it not flung
with such force every time silver pokes its head above water:
"Silver Speculators Sweat as Photo Demand Fades," reads
the headline. And blah-blah-blah, to wit: "Speculators in
silver are facing bigger risks as digital camera sales flourish
and demand for the metal from photographic film makers fades,
analysts said on Friday," the story leads.
Really? We don't see anyone
on our side of the fence "sweating" as silver closed
out the week at $6.85 - a gain of 5 cents and a mid-day peak
hitting a four-month high. The only sweat we can smell is that
forming on the brows of goofballs like Smith who've been telling
the unwitting since God was in knickers that silver's support
is somewhere around the $1.10 an ounce level and that gold's
overpriced at $35. Why? Because of course if silver stays above
$1.10 an ounce for more than a few minutes Kodak will find a
substitute for it. Rochester was on the verge of replacing silver
in film in the 1960s, the 1970s, the 1980s - or so the headlines
promised. After all, at $50 an ounce, there was so much silver
in a roll of Kodak film, and silver was so expensive, that the
value of the silver in that roll of film skyrocketed to nearly
one half of one cent.
Digital is, of course, a mass-market
substitute for silver-halide film that may very well drive the
white metal from the photo business where image quality or the
ability to enlarge the print beyond 5x7 inches is not a primary
consideration. Demand for silver in photography has, as Reuters
notes, dropped over the past seven years by a whopping 20 million
ounces - about 10 percent of total photo demand. And no doubt
it's a trend that will continue - Agfa-Gevaert just sold its
film-making division to its managers "due to the booming
popularity of digital cameras."
But so what? Nearly every single
molecule of silver used in the manufacture of silver returns
to the market as "scrap" when it's recycled by the
film processor. (Those who don't remove every molecule of silver
from their film in the stop bath, fixer and wash very quickly
end up with solid black, utterly useless, negatives; those who
don't recycle said recovered silver are breaking the law - at
least in the U.S.) So, once again, one for the road, once more
for good measure, and shout it loud enough it can be heard in
the cheap seats: SILVER IN PHOTOGRAPHY IS A ZERO-SUM GAME! One
less ounce of photo film silver demand is one less ounce of silver
supply. Conveniently absent from the shorts' incessant jabbering
is that industrial applications of silver are up 70 million ounces
per year over the same time period - and industrial silver, that
resides in your cell-phone or refrigerator or computer, and coats
your skyscraper windows, never comes back to the market. If silver
were to go to $100 we doubt anyone would see a Big Melt of glass
or cellphones.
Whew! Now that we've gotten
that business over with, on to another interesting silver wrinkle.
We've lately been Googling Tiffany in the wake of our discovery
of their open-pit lake-rearranging diamond mine in Canada's Northwest
Territories. What popped up yesterday was this interesting missive
from Dow Jones out of Tokyo: "Silver is key for Tiffany
in Japan - Leeb Fund." Stephen Leeb says gold and platinum
are slowly pricing themselves out of the reach of Japan's jewelry
mass-market - Tiffany's second largest, behind only the U.S.
- and that silver could nicely restore the New York jeweler's
sales and balance sheets which have of late tattered.
"Japanese consumers looking
for trinkets made from a 'precious' metal, but who don't have
enough yen for gold and platinum, might just turn to silver.
Leeb feels that Tiffany's Japan operations, which have placed
an emphasis on marketing silver, is in a position to benefit
from such a likely trend," Dow Jones' Jim Hawe reported.
Continued the article: "Leeb
said in a recent interview with Dow Jones Newswires that silver
could be the sleeper for turning around operations in Japan,
because the precious metal is priced at historically low levels
- meaning it will long be a viable jewelry option even as gold
and platinum become too pricey for the average consumer.
"Platinum is trading around
$900/oz, almost three times its level just five years ago, and
gold has recovered strongly from a low of around $250/oz in July
1999 to almost $430/oz earlier this year. Leeb noted that silver,
on the other hand, is trading at a mere fraction of its record
(1980) high." Hmmmmmmm. Well, Tiffany had better quit beating
up on U.S. silver miners, then.
And silver will no doubt, after
a ride to $10 or so this time, take its third and final lump
downward. And all the Silver Users' horses and all the Silver
Users' men won't be able to prevent the ensuing unstoppable rise.
Oh, they'll find another gullible reporter or two to cry "WOLF!"
but the silver investor today is older, wiser, and patient. The
shorts are out of bullets. The blanks they fired yesterday made
lots of noise, but judging from the reaction, nobody's ducking
anymore.
Aug 20, 2004
David Bond
Archives
David Bond covers gold
and silver mining equities for a number of national and international
publishers, including Platts Metals Week, a division of McGraw-Hill.
He lives in Wallace, Idaho, heart of the planet's richest silver
fields, the Coeur d'Alene Mining District. He is former editor
of the Wallace Miner, and holds regional and national firsts
in investigative journalism from the Atlantic City Press Club
(National Headliner) and from the Society of Professional Journalists
(SDX/SPJ) and has edited or written for newspapers on both coasts,
Canada and Alaska.
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