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Marshall Auerback on silver
1. RESOURCEĂŠCLIPS
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Marshall Auerback On Silver
Part I of a March 31 Interview
~ By Kevin Michael Grace - April 5, 2011
Q: Why is silver doing so well? A: I think it’s based on good evidence. It’s in contrast to the gold suppression,
which is a central-bank orchestrated scheme. You’ve got a situation now where
A: Historically, when you get a really big gold market going, silver has always it seems to be being done amongst the banking community, but I have no doubt
been viewed as the leveraged way to play it. The other consideration is that you that it has being done with official encouragement, explicit or implicit. To give
don’t have the same issues with regard to potential central bank sales and leas- you an example, 10 years ago Warren Buffet bought a silver position, and he
ing. It’s a lower price, so you can get more retail activity involved as well. Over the liquidated it a few months later. The story I heard from one of his dealers was
course of most precious-metals bull markets, the gold-silver ratio tends to close that he basically told them, “Boys, it’s not politically correct to speculate in silver.”
in silver’s favour. Now who told him that I don’t actually know; I suspect it came from government
sources. More interesting to me is that he had had a significant position, and
Q: How high do you think silver will go in six months to a year? it was liquidated with a great degree of ease with a loss at time when it wasn’t
easy to do. This suggests that there was an external agency involved. I have
A: In a year I could see it going to $50. no doubt that there is some degree of government involvement as well, but the
primary agents are the investment banks, the commercial banks.here, it could be
transformational for the company, but this is exploration at the higher risk of the
spectrum. Whereas Poland is completely the opposite.”
Q: If more people come to believe that silver and gold are being sup-
pressed, could we see an explosion in gold and silver prices?
A: Yeah I do and for a rather technical reason. Gold, for example, has been in
persistent deficit just on a supply-demand basis for many, many years. The only
reason why it has not exploded beforehand, in the 2000s and the 1990s, a lot of
that price rise over that gap was filled by forced selling by the mines themselves.
They’re doing a lot less of that right now, as the price has gone higher. The other
factor has been central banks leasing out their gold to enhance the yield on it.
The problem is that when you have a market that is in persistent deficit, and the
stuff is melted into jewellery, it doesn’t tend to come back into the market very
Q: I head a lot of talk about “backwardation” of silver. [Futures contracts quickly. If an Indian woman receives gold as part of her dowry, she’s not going
selling lower than current spot price.] Why is this significant? to think, “Oh well, it’s $1,500; I’m going to melt it again and sell it to the reserve
bank of India.” What I think is that a lot of the gold that has been lent out cannot
A: Because it means there is immediate demand for the product, genuine user be physically returned. My guess is that ultimately you’ll have some sort of ratifi-
demand. What you are saying when a commodity is in backwardation is, “I need cation of that by a change in accounting. The central banks will one day openly
it; I need it now; and I don’t care what price I have to pay for it.” acknowledge, “Okay, we can’t actually get the stuff back, so we’re going to
retroactively convert those gold loans into sales.” In terms of affecting the overall
Q: Not long ago, we had a gold to silver price ratio of almost 60:1. Now it’s supply or flows in the market, it doesn’t mean anything, but it would call atten-
37:1. How do you see the gold-silver ratio playing out in, again, let’s say tion to the degree of stock that has been used under the years to suppress the
six months to a year? price. I think it would also call attention to the magnitude of the suppression and
probably clarify the actual central bank holdings. This could actually incite quite
A: It could get down to 25-20:1, perhaps. I think both silver and gold are going to a high degree of speculative interest. Most people think that maybe half the gold
continue to go up. I think as long as we have this ongoing monetary uncertainty, has been sold or lent out. GATA’s analysis suggests it’s much more substantial
lack of clarity on behalf of the central banks and prevailing concern about fiat than that.
currencies, whether it’s misguided or not, you will continue to see silver and gold
as commodities of choice. They are votes of no confidence in the official sector. Marshall Auerback is Director of and Corporate Spokesperson for Pinetree
Capital Ltd, a Toronto-headquartered diversified investment, financial advisory
Q: With regard to junior miners close to producing silver, do you expect and merchant banking firm focused on investing in early stage micro and small-
they will really push to get online as quickly as possible? cap resource companies. Pinetree, which has a market cap of $439 million, is
invested primarily in Uranium and Coal, Oil & Gas, Precious Metals, Potash,
A: You have this virtuous cycle where it’s a hot market. People are looking Lithium and Rare Earths and Base Metals. Mr Auerback was previously an
increasingly for silver plays, and the investment bankers never underestimate advisor to a number of fund management organizations, such as PIMCO, the
“
the ability to cook up deals. The funding wicket is open again, so that will create world’s largest bond fund management group, RAB Capital and David W Tice &
more opportunities for these guys to create resources. That’s a very common Associates. He has a BA from Queen’s University and a law degree from Corpus
prevailing situation when you have a decent bull market in any commodity. Christi College, Oxford.
Q: Are you familiar with this group called GATA?
In a year I could see silver going to $50
A: Yes, I’ve known Bill [Murphy, GATA Chairman] for almost 15 years now.
—Marshall Auerback
Q: What do you make of their argument that the price of silver is being
suppressed?
www.resourceclips.com publisher: Andrea Butterworth abutterworth@resourceclips.com - 778.432.0593
editor: Kevin Michael Grace kgrace@resourceclips.com - 250.483.3753
sales: sales@resourceclips.com
![RESOURCEĂŠCLIPS
About ResourceClips.com
We provide investors in the Canadian junior mining sector
with up-to-the-minute articles about companies in the news
essentialĂŠresourceĂŠnews and a quick source of critical investor information.
Marshall Auerback On Silver
Part I of a March 31 Interview
~ By Kevin Michael Grace - April 5, 2011
Q: Why is silver doing so well? A: I think it’s based on good evidence. It’s in contrast to the gold suppression,
which is a central-bank orchestrated scheme. You’ve got a situation now where
A: Historically, when you get a really big gold market going, silver has always it seems to be being done amongst the banking community, but I have no doubt
been viewed as the leveraged way to play it. The other consideration is that you that it has being done with official encouragement, explicit or implicit. To give
don’t have the same issues with regard to potential central bank sales and leas- you an example, 10 years ago Warren Buffet bought a silver position, and he
ing. It’s a lower price, so you can get more retail activity involved as well. Over the liquidated it a few months later. The story I heard from one of his dealers was
course of most precious-metals bull markets, the gold-silver ratio tends to close that he basically told them, “Boys, it’s not politically correct to speculate in silver.”
in silver’s favour. Now who told him that I don’t actually know; I suspect it came from government
sources. More interesting to me is that he had had a significant position, and
Q: How high do you think silver will go in six months to a year? it was liquidated with a great degree of ease with a loss at time when it wasn’t
easy to do. This suggests that there was an external agency involved. I have
A: In a year I could see it going to $50. no doubt that there is some degree of government involvement as well, but the
primary agents are the investment banks, the commercial banks.here, it could be
transformational for the company, but this is exploration at the higher risk of the
spectrum. Whereas Poland is completely the opposite.”
Q: If more people come to believe that silver and gold are being sup-
pressed, could we see an explosion in gold and silver prices?
A: Yeah I do and for a rather technical reason. Gold, for example, has been in
persistent deficit just on a supply-demand basis for many, many years. The only
reason why it has not exploded beforehand, in the 2000s and the 1990s, a lot of
that price rise over that gap was filled by forced selling by the mines themselves.
They’re doing a lot less of that right now, as the price has gone higher. The other
factor has been central banks leasing out their gold to enhance the yield on it.
The problem is that when you have a market that is in persistent deficit, and the
stuff is melted into jewellery, it doesn’t tend to come back into the market very
Q: I head a lot of talk about “backwardation” of silver. [Futures contracts quickly. If an Indian woman receives gold as part of her dowry, she’s not going
selling lower than current spot price.] Why is this significant? to think, “Oh well, it’s $1,500; I’m going to melt it again and sell it to the reserve
bank of India.” What I think is that a lot of the gold that has been lent out cannot
A: Because it means there is immediate demand for the product, genuine user be physically returned. My guess is that ultimately you’ll have some sort of ratifi-
demand. What you are saying when a commodity is in backwardation is, “I need cation of that by a change in accounting. The central banks will one day openly
it; I need it now; and I don’t care what price I have to pay for it.” acknowledge, “Okay, we can’t actually get the stuff back, so we’re going to
retroactively convert those gold loans into sales.” In terms of affecting the overall
Q: Not long ago, we had a gold to silver price ratio of almost 60:1. Now it’s supply or flows in the market, it doesn’t mean anything, but it would call atten-
37:1. How do you see the gold-silver ratio playing out in, again, let’s say tion to the degree of stock that has been used under the years to suppress the
six months to a year? price. I think it would also call attention to the magnitude of the suppression and
probably clarify the actual central bank holdings. This could actually incite quite
A: It could get down to 25-20:1, perhaps. I think both silver and gold are going to a high degree of speculative interest. Most people think that maybe half the gold
continue to go up. I think as long as we have this ongoing monetary uncertainty, has been sold or lent out. GATA’s analysis suggests it’s much more substantial
lack of clarity on behalf of the central banks and prevailing concern about fiat than that.
currencies, whether it’s misguided or not, you will continue to see silver and gold
as commodities of choice. They are votes of no confidence in the official sector. Marshall Auerback is Director of and Corporate Spokesperson for Pinetree
Capital Ltd, a Toronto-headquartered diversified investment, financial advisory
Q: With regard to junior miners close to producing silver, do you expect and merchant banking firm focused on investing in early stage micro and small-
they will really push to get online as quickly as possible? cap resource companies. Pinetree, which has a market cap of $439 million, is
invested primarily in Uranium and Coal, Oil & Gas, Precious Metals, Potash,
A: You have this virtuous cycle where it’s a hot market. People are looking Lithium and Rare Earths and Base Metals. Mr Auerback was previously an
increasingly for silver plays, and the investment bankers never underestimate advisor to a number of fund management organizations, such as PIMCO, the
“
the ability to cook up deals. The funding wicket is open again, so that will create world’s largest bond fund management group, RAB Capital and David W Tice &
more opportunities for these guys to create resources. That’s a very common Associates. He has a BA from Queen’s University and a law degree from Corpus
prevailing situation when you have a decent bull market in any commodity. Christi College, Oxford.
Q: Are you familiar with this group called GATA?
In a year I could see silver going to $50
A: Yes, I’ve known Bill [Murphy, GATA Chairman] for almost 15 years now.
—Marshall Auerback
Q: What do you make of their argument that the price of silver is being
suppressed?
www.resourceclips.com publisher: Andrea Butterworth abutterworth@resourceclips.com - 778.432.0593
editor: Kevin Michael Grace kgrace@resourceclips.com - 250.483.3753
sales: sales@resourceclips.com](https://image.slidesharecdn.com/marshallauerbackonsilver-120906005241-phpapp02/85/marshall-auerback-on-silver-1-320.jpg)
