Wednesday, December 14, 2011

Canadian Mint launching a silver IPO

The Canadian Mint, flush with success of its $600-million initial public offering of gold exchange traded receipts is now looking seriously at opening a Silver exchange traded receipts IPO.

Ian Bennett, the Mint’s chief executive officer, during the opening of trading on the Toronto Stock Exchange recently commented, 'A lot of people during the road show expressed an interest in silver. That is something that the fertile minds of our bankers and the people at the Mint are going to be looking at.'

Some major questions on this come to mind.

Firstly, storing silver is going to take a vast amount more room than storing for gold. If the same quantity of silver is traded, then it is going to require about 50 times the space.

Secondly, is there really that much silver to go around? Currently more ‘paper silver’ is being traded than there is actual silver in storage. Silver, in fact is in a chronic shortage. Where are the going to get their silver from? Canadian Mines are not exactly flush with silver.

Thirdly, Precious metal ETFs are prone to ‘fractional lending’. Banks already engage in the delightful process of lending out gold used to back currency to others at a vastly reduced rate if interest giving rise to the question, who actual owns the gold? Is silver going to be next?

Fourthly, with the price of silver being shorted so violently what guarantee is there that anyone will get the returns they expect from a newly issued silver exchanged receipts product, even IF the paper receipts were backed by real silver?
Mr. Bennett also noted that demand for the Mint's gold has been, 'so strong the past two years that at times "little old Canada" has been the number one bullion supplier to the world, surpassing the U.S., which is typically number one.' The Royal Canadian Mint is the only mint in the world that refines its own product and can guarantee a product when the US Mint gets periodically bogged with supply problems.

When it comes to silver, there is no substitute to buying real silver in coin, round or bar form and having it stored away. Eventually the shorting will cease and the price of silver, unsuppressed, will naturally rise to its rightful level.

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