Shining Silver

On the world's commodity exchanges, silver for some years has been about as volatile and exciting as molasses. The U.S. Treasury, as the chief free-world supplier of the metal, has kept the market quiet by selling bullion at a low $1.29 per oz. in order to keep the price below the point (about $1.40 per oz.) at which melting U.S. coins for their silver content becomes profitable. Last week, after the Treasury yielded to the rising demand on its own dwindling stocks by lifting the price lid after four years of control, silver exploded as the shining new commodity.

Cautiously waiting until the weekend close of business, the Treasury announced that its dwindling stock of silver would no longer be available at the $1.29 bargain price. Instead, the Government will sell for whatever the market will bear--and ration such sales to just 2,000,000 oz. a week rather than the generous 4,000,000 or so it had been letting go recently.

Enough Sandwiches. Only the timing of the Treasury's move caught traders by surprise. No one doubted that the U.S. would some day have to give up its effort to control the price of silver.

A series of crisis measures late in May, including a ban on exports and a limiting of Treasury sales to industrial users only, was a reminder that the Government's stock of silver--and therefore its ability to control the price--was coming to an end. Anticipating the inevitable, dealers began bidding up silver prices. And the Treasury, with enough new "sandwich" coins (made of layers of copper and nickel) around to prevent shortages should speculators be tempted to melt old-style 90% silver coins, decided to move sooner rather than later.

When the lid came off, silver soared. At Manhattan's Commodity Exchange, a usually listless arena that deals in metals and hides, shirt-sleeved brokers shouted spot silver up to $1.775 per oz. on the first day. At midweek the price rose to $1.87 during one frenzied session when a record 16.25 million oz. worth nearly $30 million changed hands. At week's end the spot price closed at $1.8315, 42% above the dethroned Treasury price. The silver fever spread to the London Metal Exchange, where brokers planned to operate for the first time a formal futures market in the new glamour metal.

Not all the speculation is on the exchanges. Acting for a group of well-heeled investors, Chicago Coin Dealer Leonard Stark has been advertising for $ 10 million worth of old-style silver certificates at a 15% premium over their face value. Banking on the fact that the Treasury will continue to redeem them for .77 oz. of silver each until next June, Stark's group stands to make a handsome profit.

Lucky June Brides. No one really knows how high silver will go. Assistant Treasury Secretary Robert Wallace insists that there is little reason for a boom "from a supply and demand standpoint," since Government sales should cover the difference between the 40 million oz. mined and the 160 million oz. that will be used by industry this year. But the bulls, pointing out that Government stocks will be exhausted (except for a strategic reserve) next year though demand will continue to rise, look for silver to go as high as $3 per oz. The bears, eying such untapped supplies as the two billion oz. contained in U.S. coins and some five billion oz. stashed in trinkets and religious objects in India, expect the market to settle around $1.60 per oz.

U.S. consumers will feel the new prices. Estimates are that higher silver will cost industry $80 million this year. Makers of photographic film, which takes one-fourth of the U.S. silver supply, will be hardest hit. Kodak last week announced that its black-and-white film prices will go up next month, though it promised the increase would not be "disturbing." This year's June brides may consider themselves lucky; most silverware makers will raise sterling prices by as much as 25%.

Even so, the Administration is not complaining about inflation. One reason is that, by selling its remaining silver on the newly ebullient market, the Government stands to make a handy $30 million to $50 million profit.

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