GATA Chairman Murphy interviewed by


By Ted Butler
August 3, 2004

As expected, there was a major liquidation of tech
fund long gold positions, with massive dealer short
covering. According to the latest COTs, as of July
27 the gold cleanout appears complete, with the
path of least resistance now to the upside. How
significant the probable gold rally will be depends
on how aggressive the dealers short-sell on that

In silver we had expected dealer short covering to
a lesser extent. The silver COTs remain neutral
and it is expected that the cleanout in gold dealer
short positions will aid in a silver rally from here.
Also supportive is the tech fund cleanout of short
dollar currency positions, clearing the way for
dollar declines.

On the COMEX silver warehouse stocks situation,
there has been noticeable movement between
various warehouses but the net total out movement
has abated. One feature of the recent warehouse
transfers seems to confirm my theory that a large
dealer, Calyon, was tricked out of its silver by
other dealers associated with HSBC and Scotia
Mocatta. This silver was originally stored at the
Brinks and Delaware warehouses and seems to
be in transfer to the warehouses owned by HSBC
and Scotia Mocatta. The motive for the transfer is
simple -- why pay storage fees to others when
you have your own facilities?

The bottom line is that this silver (around 25
million ounces) appears to have found a new
owner and home and may no longer be available
to the market at current prices.

I discuss such short-term considerations in silver
to include as many relevant aspects in silver as
possible. But to most people it is better to focus
on the long term. Most people don't stand a
chance of short-term trading success; their only
chance for investment success is long-term. That
means buying something of value and putting it
away. This is the approach to take with serious

There are three broad choices for serious,
long-term investments -- stocks (including mutual
funds), bonds (including bank deposits), and all
others. The "all others" category would include
collectibles, real estate, and tangible commodities
(including gold and silver). For most people there
are only two choices, stocks or bonds. Among
commodities and collectibles, choices are few.
That's one reason why most investors gravitate
toward stocks and bonds. Even if an investor held
a strong conviction about holding copper or oil,
there is no practical and simple way to profit
except to invest in the stocks of the companies
producing those commodities.

The only real choice for diversifying is precious
metals, principally gold, or, to a lesser extent,
silver. The predominant investment choice is
gold-mining stocks.

But there is risk in owning gold stocks. Mining in
foreign countries carries a risk of nationalization
and expropriation as well as currency risk. Then
you have the problem of mines petering out,
superfund problems with mine closures, strikes,
accidents, permitting problems, and environmental
concerns. We may not be able to say with
certainty what the price of the metals will be 10, 20,
or 30 years hence, but there should be no question
that they will exist. That's something you can't say
with about a particular stock or bond.

Gold represents a true diversification from stocks and
bonds. That's because gold is outside the financial
system and is no one else's liability. It has prevailed
through the ages and is recognized everywhere. If
there were no such substance as silver, gold would
be the only choice for a precious metal diversification.

But, amazingly, all the attributes of gold are present
in silver as well, and to a much greater extent. If you
like gold, you should love silver. That's because, in
addition to sharing and magnifying all of gold's
attributes, silver has two unique pluses of its own
-- namely, there is less of it and that inventory is
shrinking. Those two factors mean, in future
investment performance terms, that silver is like
gold on steroids.

Not only is there more above-ground gold than
silver, but gold's total value is 200 times greater than
silver's. Silver's total dollar value is less than half of
1 percent of gold's total dollar value. If all investors
dumped all their silver and shifted it into gold, it
would hardly cause a ripple in gold. If only 1 percent
of the world's gold was sold and shifted into silver, a
trade that makes sense to me, it would be
impossible to calculate how high silver would
explode. One percent of the supply of gold has more
value than all the silver in the world. One percent is
more than 15 times the current value of all the silver
in the COMEX, the largest stockpile in the world.

For 3 1/2 years I have suggested that folks buy silver
because of its low risk and potential high price. I've
argued that silver would do better than just about
anything else. How has that recommendation held
up so far?

For the three years ended in 2003, the price of silver
averaged $4.61 per ounce. For the first six months of
2004 it averaged $6.48, 40 percent higher. Silver doubled
in price from the low points of the last three years, to the
highs earlier this year.

For stocks, the S&P 500 is approximately 15 percent
lower from the end of 2000 through June 30, with the
NASDAQ down about 30 percent. And stocks were
much lower in the interim.

Bonds are up in value around 10 percent on top of a
total income stream of 20 percent for the duration.

I'd characterize silver's performance as respectable,
especially considering the low risk and still unrealized
profit potential.

Generally, an investment becomes overpriced if it's
extremely popular with the masses. Clearly, that's
not the case with the precious metals. Silver is about
as under-owned as an asset can get. There are
many well-known and respected market analysts
warning of danger ahead for stocks and bonds, while
I see no intelligent debate on the long-term downside
on silver. In fact, I get requests from readers to direct
them to those who make a legitimate bearish case for
silver, so they can balance what I write. I don't know
where to direct them. Instead, I see more and more
independent confirmation of silver's bullish case.

Some experts say the stock and bond markets are
manipulated by the government. I think there are
elements of truth to that. In the long run, is it better
to buy assets that may be artificially elevated (stocks
and bonds) or artificially depressed (silver)?

Every day there are more shares of stocks and bonds.
There is more gold in existence every day. Only in
silver is there less daily, the result of more demand
than production. The law of supply and demand
dictates that prices must go higher.

One of the world's most successful investors, Warren
Buffett, thought that silver was appropriate for serious
money seven years ago, when he bought a very large
chunk. While the price may be a bit higher than what
Buffett paid, the value is greater now. In the seven
years since his purchase, we have 700 million ounces
less silver in world inventories. It's not every day that
the average investor gets the opportunity to invest
serious money at a better value than did Warren

What makes silver so attractive now as serious
money is its current low price. This low price means
the current risk is minimal. For instance, it is hard to
imagine a sudden drop of $3 or $4 from more than $6
per ounce. But at $12 or $15 or more an ounce, such
a decline becomes more possible, even if only

More important than trying to time any market is to
acquire good assets at undervalued prices and let
them ride. There is no way of knowing when
something may happen. It is more logical to gauge
IF something will happen, especially if there is no
great risk associated with buying and holding such
an asset.

Silver more than meets the standards for serious


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Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112

Centennial Precious Metals
3033 East 1st Ave., Suite 403
Denver, Colorado 80206
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
Don Stott, Proprietor

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203

Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889

178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Fax: 514-875-6484

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
Ed Lee, Proprietor

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
Dr. Fred I. Goldstein, Senior Broker



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