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What effect will investment demand have on the price of silver?

David Morgan, Eric Sprott, Doug Dobbs
January 6, 2006
Video Transcript

Mike Maroney: Indeed, many of the analysts we interviewed believes strongly the out of control printing of paper money to satisfy unimaginable debt will eventually lead to a plummeting dollar and be yet another key factor on driving more and more investors to hard assets like silver. Now this begs another very important question, what effect would this projected new wave of investor demand have on a silver market that's already in, relatively, short supply?

David Morgan: You can think about it, as like the ocean is like the general money supply. You might think of gold as like an Olympic sized swimming pool. You might think of silver as being a kid's waiting pool. A little bit of water in that waiting pool moves it up in that waiting pool very quickly. An Olympic pool takes a little more, but you know, we're talking about an ocean's worth of capital floating around, not knowing what to do, scared capital that's shifting around looking for the best opportunity. When a little bit of that ocean starts flowing into that Olympic pool, and then some that spills over into that waiting pool, where do you think the markets are going to go?

Eric Sprott: Obviously, what I think is driving the silver price is, in fact, invest and demand. You see it in the data from both the demands. You see it in the demand coming in. Most investment classes have faired so poorly in the last ten years and very few and the only two I can think of are gold and silver that have done so well in the last 11 years. That it's brought the interest of the public into it and not just the public, we've had a huge increase in institutional increase in the gold market, but we have not yet seen that in the silver market. I think, that's just a matter of time before institution's major money managers get involved into silver. Of course, when the made and or maybe a central bank gets involved in silver over here, which would make some sense in certain countries that happen to be silver producers, then they should buy the silver. If major entities got involved, it could dramatically change the silver market very quickly, because there's very little inventory, as I suggest that I don’t think, there's any excess supply, so how are you going to get the new guy in that says, "I want to buy a billion dollars worth of silver.” It will be very, very difficult. Investment demand is the thing that will drive silver.

Doug Dobbs: Silver like gold is a monetary instrument. There is a significant amount of demand for silver. Silvers very useful in the industrial fabrication and that market is growing as well and I think that actually helps make fundamentals of silver very, very attractive. In light of the other use for silver and that is as a monetary instrument or as an investment. So you have clearly, more dollars chasing fewer goods today. There's a limited amount of silver out there in the market, but there's an awful lot more dollars chasing it around. So with the idea that the government by it's nature is going to continue to try and stimulate the economy by printing more dollars, more dollars chasing fewer goods is going to cause the price of that good to go way up. It's just as fundamental economic tenet that that happens with any kind of product or with any kind of a commodity. So that's really what is the basis behind the idea that, you know, as this happens the prices of silver will continue to rise.

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