CIBC - Slams Silver

February 13, 2009

This week I’m going to comment on Jon Nadler’s remarks in his February 9 article titled The Silver Medalist. Jon pointed out some interesting quotes about the silver market and some of these I have issue with and some I don’t. Mostly what he did is quote CIBC Global Markets and their assessment of the silver market. And one thing that he quotes from CIBC is that in 2008 silver had risen to about $20 an ounce and lately it’s been languishing at around the $10 level; those are facts, no dispute there.  And then they (CIBC) goes on to state at the first sign of a decline in gold, investors are likely to sell their silver holding but retain more of their gold holdings since gold has a supe­rior reputation as an insurance policy, compared to silver. I really don’t have an issue with that, yet.

For one thing, in this part of the cycle, gold has certainly gotten most of the publicity and will continue to do so. Secondly, gold is almost mainstream and even Wall Street’s starting to talk about gold. Silver is not frequently discussed; it certainly is not thought of as a safe-haven asset by most investors in North America. However, that fails to recognize that there are 6.2 billion people on the planet and many of those will never hear of Jon Nadler or David Morgan or Ted Butler or any commen­tator for that matter, but they have eons of history where silver was a store of value. And those people, as things unwind globally, will move to the silver market, simply because gold is outside their price range.

So for now, I think the CIBC statement referred to in the first paragraph is a fairly accurate one. Certainly it’s an opinion. As far as the future is concerned, however, my opinion is a bit different because of what I see coming down the road, and that is my reason for using the word “yet,” above.

What bothers me about this CIBC article that Jon has quoted is that they believe the increase in base metals will lead to a low in silver prices because there’s going to be more and more silver as a result of base metal mining. That’s something I take some issue with for 2009 and probably well into 2010. I’ve already written an article about that; in fact I said 70 percent of silver is not coming to the market—and that was just a catch phrase so people would understand that 70 percent of the silver that does come to market is a result of base metal mining. From everything I have read and all indications I get, the amount of silver mined in 2009 as a result of base metal mining will probably be less than what it was in 2008.

Thus the CIBC article is certainly worth reading and commenting on, and I think Jon handled it very well, because basically what he’s doing is quoting what CIBC said. His look at it is somewhat similar: there has been a big ratio drop. Silver has outper­formed gold from the time silver started its bull market in 2003, but depending where you draw the starting line, you can make just about any argument you want. You can also say that from 2003, which is where I think the silver bull market started,after the gold bull market began, silver has outperformed gold until recently. And since then, gold has outperformed silver based on total performance and the gold/silver ratio. 

The ratio went from basically 80 to 1, down to around 50 to 1, until the credit crisis started unwinding and once that took place, the silver/gold ratio got back up—actually above 80, temporarily. Now it’s worked itself down to around 70 . . . will it continue down or up, nobody knows. I actually suspect that the ratio is not going to get real favorable toward silver, probably for the rest of the year. Not that I’m agreeing with the CIBC article, but I have to maintain my integrity in what I’ve writ­ten to my membership site,, and have told readers of The Morgan Report—that I saw a good rally going into the early months and after that, it might be a time to build cash and look for some good values.

The amount of silver that is available for investment is so small, probably 50 million to 100 million ounces at best. That is a pitifully small market, relative to all the paper that’s flying around. And there will be a day like no other day, when someone is not going to be able to deliver silver to someone who can make some noise, and when that event takes place it will probably be pushed aside, looked at askew, and not recognized as the fact that it is. But eventually the truth will leak out, and once that happens I think more and more people will start to get much more interested in the silver market.


It is an honor to be,

David Morgan


Mr. Morgan has followed the silver market daily for more than 30 years. Much of his Web site,, is devoted to education about the precious metals. David Morgan will be speaking in Vancouver Canada Jan 25- Feb 1st.

David Morgan ( is a widely recognized analyst in the precious metals industry; he consults for hedge funds, high net-worth investors, mining companies, depositories and bullion dealers. He is the publisher of The Morgan Report on precious metals, the author of Get the Skinny on Silver Investing, and a featured speaker at investment conferences in North America, Europe and Asia. You can receive a free 30 day trial subscription here

US silver mining began on a large scale with the discovery of the Comstock Lode in Nevada in 1858.