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CPM Group bullish on silver has released an article reviewing what appears to be CPM Group’s Annual Silver Survey. We say “appears to be” because the article only calls the CPM work a “report.” Looking at the nature of the CPM observations about silver and the silver market, and the fact that it is May when CPM Group usually releases its Annual Survey, it our guess that is referring to the annual report by CPM Group.

CPM’s Annual Silver Survey is one of the two authoritative annual silver surveys. The other is compiled by Gold Fields Minerals Services for the Silver Institute.

Anyway, the report is quite bullish on silver, noting that in recent years silver investors were net buyers of silver in 2006 for the first time since 1990. The review says:

For the past 15 years, investors have been net sellers of silver from long-held inventories, which is reflected by both increased buying by new investors entering the silver market and decreased selling from long-held silver investment inventories built up from the 1950s through the 1980s, the CPM Group explains in the report.

CMIGS disagrees with the above assessment, based on our observations of premiums on the products we sell.

Between January 2000 and the end of 2003, silver traded below $6. During that time, our clients bought more silver than they sold, which required us to buy 100-oz silver bars and 1-oz silver rounds from refineries.

Further, with silver below $6, buyers had to pay up to sixty cents an ounce premium for 100-oz silver bars, which was a premium in excess of 10% (and at time nearly 15%). Premiums on 1-oz silver rounds, which have a higher cost of production and handling, were even higher.

However, for the last several years, we have not had to go to refineries for either 100-oz silver bars or 1-oz silver rounds. Both have been readily available in the secondary market because of investor selling. And, premiums are significantly smaller on a percentage basis, and they are even smaller on an absolute basis.

In 2006, premiums on 100-oz silver bars were as low as twenty-five cents and were there again a few weeks ago when silver traded near $14. As this is written, premiums on 100-oz bars are closer to forty cents, which is only 3%.

What we see is diametrically opposite of what CPM sees concerning individual investor activity in the silver market.

Yet it should be noted that CPM is looking at the really long-term situation, talking about supplies from the 1950s. But, for the last couple of years, while prices have climbed higher, there has been an abundance of silver in the secondary market, which can only mean selling by individual investors.

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