Silver Coming or Going?

July 10, 2005

The following is a clip from the July Morgan Report.

Quote: "Silver prices in 2004 averaged $6.65, a sizeable rise of 36% year-on-year and a 17 year high." World Silver Survey 2005 page 11.

This months quote may seem to be a cheerful note to all silver investors but upon further examination it is not as good as it appears. Silver at $6.65 seventeen years ago would need to be $10.80 in constant dollars. In other words, if the inflation lie was taken out of the data silver at $6.65 average price in 2004 is not a new high, in fact silver would have to rise another SIXTY PERCENT to equal it's high of seventeen years ago.

Readers may like to know that the Executive Chairman for Gold Field Mineral Service (GFMS) that produces the Silver Survey for the Silver Institute was questioned by David Morgan two years ago at the Silver Institute Conference in Scottsdale Arizona, and I pointed out that five dollar silver in 1979 did NOT EQUAL five dollar silver in 2003. Mr. Klapwijk briefly acknowledged this, and then went on with his presentation. It is obvious that he did not take my comments to heart, nor does he tell the World Silver Survey reader that the reference in this years survey is in nominal dollars only!

The idea that the nominal price is the true price is a propaganda used by the establishment to convince the population that commodity prices over several years can be compared. The truth is silver is far below where it should be in inflation adjusted terms. The other consideration is that the "adjustment" to a $10.80 silver price is using the official government inflation rate, which in our view understates the true inflation rate. (End Clip).

The graph above shows silver's price adjusted for inflation. As often pointed out silver today represents a value situation, meaning this commodity is undervalued. The reader can see the price of silver in constant "dollars" was higher in 1972 for example than today. In fact just a brief study of this graph indicates that from 1973 to 1985 silver on an inflation-adjusted basis was above 10 for over a decade!

From approximately 1998 onward silver has sunk below the 10 level and even with all of the "price" appreciation in U.S. dollar terms, the graph above should help the reader to picture clearly that silver is still undervalued and would have to climb significantly to make it back to the level of purchasing power above 10.

Performance of Gold and Silver

One tenant that I have been speaking about since the beginning of the bull market in the precious metals is that silver would out perform gold on a percentage basis. As can been seen from the above chart gold outperformed silver from mid 1999 until mid 2003 when the gold/silver ratio hit 80. From that point to present day silver has outperformed gold and in my view will continue to do so.

Half way mark

As metals investors we might take a look at metals price as of close July 1, 2005 the halfway point for this year. The following update is provided by . As can be seen gold is off approximately two percent, and silver is basically flat. The Platinum Groups metals show Platinum is flat and Palladium off almost four percent. Even the base metals are down with the exception of copper. Interestingly is the fact that both the Gold Bugs Index (HUI) and the Philadelphia Gold and Silver Index are both off roughly six percent.

So, at this point in 2005 it has been rough for metals investors. It might also be pointed out that we see a ratio of approximately 3 to 1 between gold stocks and gold itself. Gold is off two percent and the gold indexes are off six percent or a factor of three. Therefore, gold stocks show leverage works in both directions moving down harder than the metal itself, and yet gold stocks generally move higher than gold when gold does move higher. Again, normally at the three to one ratio, which of course is the main incentive for investing in the precious metals stocks to begin with.


Comex Silver Coming or Going?

We have received several emails regarding the huge shift in Comex silver this past week. We have investigated and (subject to change) at this time the Comex has stated the error is a booking keeping problem. See and click on Silver Warehouse Stocks.

What you will find if you study carefully is the "accounting error" is in the Scotia Mocatta listing. Looking at the left hand column adding the Registered (7172892) with the Eligible (13760695) we arrive at a total of 20933587. So far so good, the math is correct, however the problem exists because this total needs to move over to the far right hand column under the Total Today heading.

Looking at the Scotia Mocatta we find both the Registered and Eligible move over correctly, however the total is shown as 8596980, when it should read 20933587. If we use the correct total, we will find the total amount of silver on the Comex as of July 8th, 2005 is 103,164,646 in fact this total is shown in the left hand column, but not carried over to the right hand column.

Some of the emails we have received

Letter #1

It is no wonder at all that 13M ounces of silver left the COMEX warehouse. In the first 5 business days of July, they delivered 2800 silver contracts. The 13M ounces that left COMEX is only 2600 of those delivered contracts.

People are taking delivery that need the silver, not investors who will leave the silver in the warehouse. Also, 13M ounces is only 404 tons -- it will all fit in 7 to 10 trucks, depending on the size of the trucks. The real question I have is who took their silver?

Letter #2

Dear Mr. Morgan,

After a 2nd day of very low inventories numbers at Comex, I am beginning to wonder. Man Financials Hartfield Report's Evening Recap for Friday stated in part...

"December silver is in a stronger technical position to work higher and with COMEX warehouse silver stocks declining sharply this week, the market looks to be getting support from physical demand for the metal."

If this is a 'clerical' or 'counting' error there should be just over 105moz. As it stands, nearly 14moz are not showing up. Lease rates rocketed higher Friday. Very interesting.

A subscriber,

Letter #3

Hi Dave, 

I checked the COMEX silver stocks this morning (Sydney time) and they read again under 100 Moz - due to another typo - after they had corrected the typo from 07/07 during the following trading day. It seems unlikely that someone would make the same typo two days in a row, especially when they've had to correct it. Another fact that I haven't seen mentioned is that there was another typo about a week ago, after which the inventory read 230 Moz!

Bottom line, my feeling is that the COMEX wants to get an idea of how many people follow the inventory data, and what happens to the price in response to the figures posted. What I'm saying is that these typos may have been introduced deliberately. And seeing how nothing much happened to the price, we may see the inventories drop below 100 Moz in reality soon. The COMEX may not realize that most of us are not traders, and that all of us are long, so the inventory figures are just an entertainment while we wait.

All the best, Jan


As can been seen the opinion varies considerably, yet people do pay attention to the silver inventory on the Comex. In fact the physical market is key in silver and gold as well in determining the price eventually. The futures market does set the day-to-day spot price for both the metals, but paper silver or paper gold hardly are a substitute for the real metal.


At this time I would like to conclude with a note of appreciation.

First, I must say a strong Thank you to Mr. Jim Puplava of, Jim was one of the very first to listen to the silver story and do his own due diligence to determine if the facts presented were correct. Jim has probably helped me with my website and business as much as anyone. I must also acknowledge his wife Mary who in the beginning did or re-did almost all of my graphics, the Puplava's are doing a tremendous service to all that are wise enough to listen and/or read their website.

In a specific way I want to publicly acknowledge Ted Butler for giving me a great deal of his time and helping me and many others grasp the significance of precious metals leasing and how the Commercial Interests influence gold and silver price movements. Ted has been a leader in outside the box thinking and questioning the 'status quo" for many years. Thank you Ted, independent thinking is all too scarce a commodity!

I also wish to publicly acknowledge Mr. Franklin Sanders of The Money Changer see . Mr. Sanders has also given me unselfishly of his time and helped with monetary questions and silver history whenever the need has developed. Franklin's help was instrumental in my speech at the Silver Institute this year. The time and patience with me is greatly appreciated.

Certainly, it is important to acknowledge Bill Murphy of see and all who have carried the flag and dreamed the impossible dream. Bill and I discuss varying aspects of the markets from time to time and share sources occasionally. Outspoken and seldom forgotten is the fighting Irishman, Bill Murphy; he is truly one of a kind.

Another that must be mentioned is Mr. Charles Savoie that has done a tremendous amount of research month after month and is exclusive to the website. Charlie, has stated to me many times that I could put up a disclaimer prior to reading his work, because we do not agree on everything, however I am a firm believer in free speech and think any comment is totally unnecessary because it presupposes the reader cannot determine for themselves what they wish to agree with or not.

Finally, I wish to acknowledge Mr. Nick Laird of Australia see , who has never hesitated to help me with data or data displayed in a certain format whenever I have requested. In fact my first public appearance in Canada several years ago, was made possible do to Nick's willingness to help me.

Yes, I could go on, many silver mining executives, geologists, trade show hosts and subscribers to my service have helped me in numerous ways. This is a general Thank You, that my work is dependent upon the good will and time devoted by others to help me improve my website and service.

So after stating the well deserved Thanks to so many let me conclude by stating. The second half of 2005 should develop into a more interesting market for metals investors, particularly in the fourth quarter.


July 9, 2005

David Morgan

Mr. Morgan is a contributor to Mining Industry Review an e-TV program available at He also hosts a weekly Metals Wrap up each week on the Financial Sense News Hour see Mr. Morgan and has written numerous articles, his e-mail newsletter is issued on a monthly basis and includes economic news, overall financial health of the global economy, currency problems ahead and the reason why people need to be invested in the precious metals. Mr. Morgan pours over nearly every metals, economic, and financial newsletter and business publication and digests it to save his readers valuable time and money.

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

The word ‘silver’ originates from the Old English Anglo-Saxon word 'seolfor'