David Morgan's Secret To Being Grateful, Even At $17 Silver

Manipulation and apathy can't keep silver prices down forever; there is too much demand and too much money sitting on the sidelines. In this interview with The Gold Report, Silver-Investor.com Editor David Morgan tells us why he is grateful for his balanced approach to investing and life. He also explains why he is still excited about four developers that are moving projects forward at any price.

Silver pieces

The Gold Report: A recent GFMS/Thomson Reuters Silver Institute World Silver Survey shows that while the price of silver dropped 23.6% in the last year, there was actually an increase in demand, particularly from China and India. Why is the price so low when the fundamentals seem to point otherwise?

David Morgan: As the survey shows, there was a deficit of silver, which means fundamentally the price should be higher. But real prices are determined in the paper markets and the pressure there has been downward.

Additionally, the large physical silver holding companies—Sprott Physical Silver Trust (PSLV:NAR), Central Fund of Canada (CEF) and the Zurich Cantonal Bank, the silver ETF—have not purchased any quantities of bullion in quite some time. That begs the question of why these big, traditionally bullish entities aren't stepping in at these low silver prices.

"Excellon Resources Inc.'s all-in costs are down to almost $16/oz through the first half of the year."

The other question investors are asking is, "When is this going to turn around?" They get depressed and say, "I can't win because the manipulators always win. It's pointless to be in this market." That mindset has taken hold of a lot of people who were once very bullish in the silver market.

This is all proof that we're very close to the bottom, if not at the bottom. When sentiment is this low, people become fearful. As Jim Dines says, the cure for low prices is low prices. It won't go on forever, even though it may seem that way now.

TGR: What price are you using for silver when you evaluate companies? Do you pencil in what the fundamentals say the price should be or the psychologically beaten down price of the paper market?

DM: We go with the market, which right now is saying $17 an ounce ($17/oz). The market cannot be argued with; the price is what it is. Regardless how it got there, manipulation or not, it is what it is. We use the 90-day average price because it's a standard in most industries and tends to smooth out the fluctuations. We might not agree with what the market is saying, but that's immaterial to our analysis. Our analysis has to be based on what the market is showing.

TGR: Is there a tipping point where the silver price is so low that even non-silver bugs start to see it as an entry point and come into the market?

DM: There are plenty of people, including money managers, who understand that this is a great price. They are just waiting for the right moment to bite. It usually starts with someone nibbling at the market and starting to accumulate. Or, someone sells aggressively to test the market for the absolute low. The Rothschilds were notorious for this type of market test and probably the first to do so in a manner that the public became aware of such tactics. They sold something they wanted to buy to force the price down so they could start accumulating at the very bottom. Either way, there will come a point where savvy buyers will start accumulating again.

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Disclosure: JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining ...

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