... this coming Thursday, the Shanghai Futures Exchange begins trading silver contracts. China Daily noted there had been an absence of silver trading ability in China and -- significantly -- it would make the market more liquid.

The silver buffs jumped on that one, predicting the end of big Western speculators manipulating the price, which so many of them believe has been occurring.


Chinese commentators expect the silver contract to do well as most retail investors there prefer that metal to gold, because its minimum purchase value is lower. But silver is also imbedded in the Chinese psyche: It was long the basis of China's currency and in 1935 the Shanghai-based biweekly Finance and Commerce reported personal hoards of the metal in China were estimated at 1.27 billion ounces.

China is not only the world's largest gold producer but is becoming the biggest importer too. We will wait and see whether the same import demand builds for silver.

Shanghai futures trading could mean additional investment demand for silver, just as we have seen Chinese retail investors stock up on gold.

But, more importantly, we might see Chinese corporates looking to pick up silver projects (and companies) abroad, just as they have begun doing with gold deposits and producers.

If Standard Bank's bullion strategist was right in February, China has very large stockpiles of silver, estimated as being sufficient for 15 months' fabrication demand. So China does not need physical silver today -- but buying foreign silver assets is about demand in the years ahead.

It seems all the gold and silver roads are leading to China...

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