In Ted Butler's Archive

By Israel Friedman

(Israel Friedman is a friend and mentor to Theodore Butler. For years he was a diamond importer in Israel. He has followed silver for many decades. He has written articles for us in the past. Investment Rarities does not necessarily endorse these views.)

An increase of 83% in silver this year leaves behind gold with an increase of only 29%. This brings you to ask if it was a fluke or can it be repeated in 2011? In my opinion this increase was driven by real supply and demand factors. It can be repeated in 2011 so by the year end a close of over $52 will tell us that the supply and demand situation is behind the price.

If this is going to happen, silver will close in on the price of gold. In three years the silver prices can be $150 and gold prices $3,000 and the ratio under 20, when today it is 46 times.

It’s very interesting that the big institutional investors are not invested in silver. Only the regular guy puts his money in silver. The rich investor goes to gold. But today they hold back buying. When they compare gold to silver, gold is not a perfect investment.

Because there are more poor and regular investors in the world, the demand for silver will increase annually. When the rich guys find out that silver is in short supply they are going to switch from gold to silver. In my opinion it is going to happen when the price of silver is over $100.

The price of silver will go higher because of supply and demand and short covering. The price of gold will follow with sympathy.

I’m surprised that the CFTC and CME don’t force position limits, as my friend Mr. Butler is advocating. Stalling and not forcing the naked shorts to cover makes the situation of shorts become more dangerous daily. Every day less physical silver is available. The attempt to save the short sellers by the CME exchange can bring the exchange down when physical silver is not available for delivery

What then? Physical silver will dictate the price of silver. You the investor should buy more Eagles. That has to be your answer in case of a shortage. In my opinion when the Far East investor understands the real supply situation they will rush to buy. Then you know what will happen? Shortage!

I hope at the end of 2011 the silver investor will smile. A close of $52 or more will make me happy and encourage me to duplicate this article again next year.

Happy New Year, and a healthy and prosperous one.

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