You may have read in recent years that both Microsoft’s president Bill Gates and Berkshire Hathaway (founded and still led by Warren Buffet) acquired large hoards of physical silver when silver prices neared their low ebb in the late 1990s first few years of this decade. Bill Gates purchased at least $10 million worth, with his “personal investment money.” Meanwhile, Berkshire Hathaway bought 129.7 million ounces. According to published accounts, the latter bought their silver at $4.40 per ounce, in 1997. The recent news on Wall Street is that Berkshire Hathaway has quietly sold off their silver position in the past year. One of my favorite economists, Jason Hommel, opined that Warren Buffet sold his silver too soon. Given the timeframe of their sales, we can presume that Berkshire Hathaway sold out when spot silver was between $9 and 12 per ounce. Hommel wrote: “This is very bullish for silver, because it explains why silver’s rise took longer than we thought (Warren was selling), and it also means that there is much less silver above ground than we thought. Buffet’s hoard of 130 million ounces no longer exists!”
At the same time that Berkshire Hathaway was selling their silver, iShares Silver Trust–the first of two newer silver exchange traded funds–started buying silver. To “fund the fund” they will need at least 100 million ounces. There one more silver ETF in development. And given the early success of iShares Silver Trust (stock symbol SLV) , I wouldn’t be surprised if one or two more silver ETFs jump on the band wagon.
As I recently mentioned, economist Jason Hommel presented some great silver market fundamentals, explaining why silver must rise. I think that he is correct in his analysis. With gold approaching $700 per ounce, and silver bouncing around $14.40, it is obvious that the precious metals bull is gaining speed.
Things don’t look good for the U.S. dollar–all through the rest of this decade and perhaps beyond. It is noteworthy the U.S. Dollar is again starting to lose ground to many foreign currencies. For example, a Canadian dollar now costs $0.90 USD. (Remember a few years back when they were making “Canadian Peso jokes? Not anymore!) With a progressively weaker dollar expected, I am quite bullish on silver. At anywhere under $16 per ounce, silver is a bargain. And at the current +/-$14.40 per ounce, it is a screaming buy. We may see silver at $20 per ounce by the end of Aught Six. There could be a full scale dollar crisis, precipitated by the out of control U.S. debt spiral. If that happens, then all bets are off for silver, as well as gold. Some economists in the “gold bug” camp have suggested prices as high as $100 per ounce silver and $5,000 per ounce gold!)
The bottom line: The bull market in precious metals is still in its early stages. Buy on the dips.