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Shayne McGuire manages the $800 million GBI Gold Fund and is the Head o Global

Research at Teacher Retirement System o Texas (TRST), one o the world’s largest pensiunds. Prior to holding these positions, Mr. McGuire managed a $2 billion European equi

portolio and was ranked among the best Latin American analysts by Institutional Investo

1995 and 1996. He has written two books on gold investing, and his orthcoming book is

Silver Bull Market: Investing in the Other Gold (John Wiley & Sons, April, 2013). We talk

to Mr. McGuire about his new book and his views on silver. His comments represent pers

views and not those o the TRST.

Silver News: Explain why you changed the precious metals mix in the GBI Gold Fund tha

you manage to accommodate the purchase o silver.

Mr. McGuire: Although the metal exhibits more volatility, silver is more highly correlated

with gold than anything else. For example, although silver declined during the 2008 crisis

outperormed all commodities and equity markets, showing that the market regards it moras a precious metal, like gold (which rose in that year), than an industrial one. Yet, silver

has outperormed gold over the last decade in part because o its dual nature, being both a

precious metal and also one that has multiple applications in industry and medicine. Altho

gold remains the dominant metal in our Gold Fund, silver is now a component.

SN: Who owns silver?

Mr. McGuire: Silver is predominantly an investment held by individuals, particularly high

net worth individuals, since most institutions wanting exposure to precious metals simply

buy gold. I have never met an individual or institutional investor that only owned silver; m

silver owners hold investments in gold, as well. Some people preer silver because o its

dual nature, as it benets rom economic expansion (rising industrial demand or the high

conductive metal) as well as its high correlation with gold, a sae haven investment. Thou

An Interview withShayne McGuire

December 2012

•An Interview with Shayne McGuire

•Dillon Gage Releases New Mobile App

•Silver ETF Introduced at Hong Kong Stock

Exchange

•BMO Launches Physical Silver Deposit Program

•Silver Demand Forecast to Hit Record in 2014

•China is World’s Second Largest Silver Fabrica

Poised to Become Second Largest Producer

•Bath Tub Sports Silver Ion Circulation Compon

Shayne McGuire

continued on page 2

“… silver has outperformed gold over the last decade in

 part because of its dual nature, being both a precious metal

and also one that has multiple applications in industry and 

medicine.”

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ontinued from page 1

more abundant underground than gold, above ground it is rarer and central banks

old no silver, a supply-demand consideration attractive to some. Others like the

act that it is more accessible to more investors on a per-ounce basis, something that

as contributed to pushing its price up aster than gold’s price.

N: In your orthcoming book you discuss how silver is traditionally the “poor

man’s gold.” Why is this the case and is it changing?

Mr. McGuire: What makes the term sel-evident is that silver’s price per ounce

s roughly one-tieth that o gold, but there is more to it than that. Silver can

e more volatile and has a smaller investor base, a act that is refected duringignicant sell-os in the metals space. (1980 was a very bad year or silver, less

o or gold.) Since the 1960s, when the U.S. Treasury began selling the last o its

oldings, governments and central banks have been largely absent rom the silver

market. Gold is a major holding o central banks, which grants it respectability as a

monetary asset. But they have not held silver or decades.

N: You also say that gold and silver prices have traditionally correlated to each

ther but that relationship is out o balance, making silver undervalued. Please

xplain.

Mr. McGuire: For 3,000 years, until the late 19th century, the gold-silver ratio (gold

rice divided by the silver price) ranged between nine and 16 times, refecting

heir physical scarcity relative to one another. Today, that physical scarcity remainswithin this range and yet the gold-silver ratio is above 50, which shows the higher

nvestment appeal o gold. The surge in this ratio began in the late 19th century, as

old and silver began to trade very dierently as bimetallism declined with the rise

the gold (monometallic) standard. Silver was demonetized and its value plunged

o a low o 25 cents per ounce during the Great Depression. However, since the

arly 1970s, the metals once again began trading in a similar way and today silver

s ar more highly correlated with gold than with copper, a purely industrial metal.

N: You suggest that silver can be a hedge against infation, which you believe

ould rise as the U.S. works its way out o its current debt situation. Discuss your

houghts about this.

Mr. McGuire: Silver historically has been highly sensitive to a rise in infation. The

metal surged during the infationary 1970s and, with the change in government

olicy in the depths o the Great Depression, the price o silver tripled in less

han two years. During the 1960s, when infation began to rise due to climbing

Vietnam War-related government spending, silver demand surged and higher prices

ltimately orced the U.S. Treasury to remove silver rom U.S. coinage. Every

ingle case o hyperinfation, ortunately a very rare historical event, was preceded

y government decits that got out o control. Hopeully world leaders will keep

udgets under control, but gold and silver are signaling that infationary risks are

resent.

N: Is now a good time or people to buy silver? Are there guidelines or how

much investors should hold?

Mr. McGuire: As I discuss in my new book, I believe there are a number o mportant drivers o silver and I list more than a dozen. Perhaps the most important

ne is the act that monetary policy is the only major expansionary tool available

o leaders today. Governments are ghting both scal battles, as they struggle to

educe decit-driven spending, and the need to keep sluggish economies growing.

Yet, events in Europe have shown the risks presented by austerity, as a number o 

conomies in the region are back in recession and the U.K. economy -- the poster

hild or the need to rein in spending -- is slowing dramatically. Addressing the

world’s present dilemma, Bridgewater Associates, the world’s most respected

edge und, amously said: “In the end, governments print money.” I we are going

nto a new wave o monetary expansion, this should benet silver signicantly.

nvestors in silver need to careully consider the proper weighting o silver in their

otal investment portolio, perhaps with the help o an investment planner.

Dillon Gage Is On theGo with Release of New Mobile App

Users Can Access Precious Me

Information From Anywhere

Dillon Gage Metals has just made it easier toaccess precious metals inormation while on

the go with the release o its ree, new mobile

application. The app, which can be downloade

rom iTunes and Google Play, is compatible w

Android, iPhone, iPod Touch and is optimized

iPhone 5.

Through the app, users can access spot quotes

as well as current and historical data, or silve

gold, platinum and palladium. The historical d

tab displays pricing inormation or various ti

rames, rom ve-days to ve-years. This eat

allows users to analyze trends and assess timinor uture trades. Additionally, market news o

precious metals complex is available rom Dil

Gage’s blog, which provides insights rom the

Dallas-based company’s experts.

“On a daily basis we nd people need to have

market quotes and data at their ngertips. Thi

application lls that need,” says Terry Hanlon

President o Dillon Gage Metals.

The new 6.8 MB app requires iOS 4.3 or later

To download the ree application, visit the

iTunes store or Google Play.Dillon Gage is a member o The Silver Institu

   D   I   L   L   O   N    G

   A   G   E

Dillon Gage’s new precious metals mobile app allowsto access spot quotes, historical data and other inform

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Silver Demand Forecast to Hit Record in2014: Silver Institute ReportSilver industrial demand will rise an estimated 6 percent to a record high in 2014, and

will account or an estimated 57 percent o total silver abrication that year, according to

The Outlook or Silver Industrial Demand , a ree report released by the Silver Institute.

An overall improving economy, growth in the automobile industry and recovery in the hous

and construction industries are primary reasons or the orecasted increase in demand, accorto Thomson Reuters GFMS, which produced the report or the Silver Institute.

“Overall, industrial otake in 2014 will account or some 57 percent o total silver abricati

its highest contribution in our 25-year data series, against a still noteworthy 54 percent share

2011,” the report stated.

During 2012 through 2014 some silver industrial markets will outperorm, including silver u

in the production o ethylene oxide, a chemical used in the manuacture o products such as

polyester. Silver oxide is employed as a catalyst to produce ethylene oxide.

Geographically, China has seen growing demand or silver, accounting or 8 percent o glob

demand in 2000 and last year contributing to 18 percent. United States demand will remain

enhancing its position as a leading manuacturer o high-end silver materials.

The report highlighted the use o silver in products that had not existed in prior years, such a

smartphones and tablets. While each item uses a small amount o silver, their cumulative e

could be substantial over time. “It is worth noting that some products did not exist until just

ew years ago, so although their individual silver content is modest, they nonetheless represe

silver demand that simply did not exist beore,” the report noted. “Furthermore, there are ma

uses o silver which may be considered niche or novel now, such as in biocides, printed inks

and superconductors. Should such markets, however, achieve a greater commercial role, the

may come to cumulatively account or an increasingly important share o industrial abricat

Overall, thereore, the development o ‘novel’ silver uses will, albeit modestly, add to the gr

we expect to see in many established applications, resulting in healthy gains or silver indus

demand going orward.”

Silver ETFntroduced at

Hong Kong StockExchangeETF Securities on November 28

egan oering three new precious

metals exchange-traded unds (ETFs)n the Hong Kong stock exchange.

The ETFs are: Physical Silver ETF,

Physical Gold ETF, and Physical

Platinum ETF. They track London

enchmarks.

According to Fred Jheon, Managing

Director and Head o Asia Pacic

t ETF Securities, the rm is the

rst ETF provider to oer a suite

precious metal products to the

Hong Kong exchange that are backed

y the physical metals. The HKxchange currently has three other

nstruments that track gold, including

GLD, the world’s largest gold tracker.

We are pleased to welcome ETF

ecurities and their three commodity

ETFs to the Hong Kong ETF

market,” said Calvin Tai, Head

Trading at HKEx in a public

tatement. “The introduction o the

rst ETFs on silver and platinum will

urther enrich our product oerings

n precious metals. These three

ew ETFs are also in line with our

orporate strategy to diversiy by

dding asset classes to our equities

nd equities-related products.”

The stock codes or these new ETFs

re: ETFS Physical Silver ETF

3117), ETFS Physical Gold ETF

2830), and ETFS Physical Platinum

ETF (3119). HSBC will hold the

ullion in their vaults and meet ‘good

elivery standards’ set by either theLondon Bullion Market Association

LBMA) or the London Platinum and

Palladium Market (LPPM), according

o ETF Securities ocials.

The annual expense ratios or these

ew ETFs are 0.39 percent or the

old ETF, 0.5 percent or silver and

.6 percent or platinum.

 The demand for silver oxide, used in the production of ethylene oxide, is expected to rise through 201

BMO Launches Physical Silver Deposit ProgramFollowing its Gold Deposit Program in September 2011, BMO Financial Group has opened

Vaulted Physical Silver Deposit Program.

The program is backed on an ounce-or-ounce basis with physical bullion at all times and w

not hold or use unallocated bullion, certicates, ETFs or any other nancial instrument that

represents encumbered bullion, according to company ocials.

The Silver Deposit Program rules require that all bullion is separated and identiable and he

at an approved vault in Canada, that it cannot be used or any purpose, and that it is segrega

rom other BMO assets. There are no storage ees but withdrawal and delivery ees may belevied. Customers may take physical delivery o a minimum 100 ounces.

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China today is the world’s leading market or both physical

nvestment and paper trading o silver utures and other similar

roducts, and is the second largest silver abricator today,

ccording to a report rom Thomson Reuters GFMS that was

ommissioned by the Silver Institute.

nvestment demand

rom Chineseilver investors has

umped in recent

ears, making China

he world’s biggest

market or both

hysical investment

nd paper trading

silver utures

nd other similar

ontracts, the

eport noted. In

act, during the rst

ull year ater the liberalization o the Chinese silver investment

market in 2009, net demand or silver bars and coins doubled to

.8 million ounces (Moz). In 2011, the gure soared to 17.0 Moz,

ccounting or 8 percent o global net purchases o silver bars and

oins. Total silver demand in China has grown by over 100 million

unces in the past ten years alone to a record 170.7 million ounces,

ue to a strong manuacturing sector and robust investment in

nrastructure. These actors were bolstered by the liberalization

the Chinese silver market starting in 2000, according to The

Chinese Silver Market . By the end o 2011 China had become the

world’s second largest silver abricator, accounting or 17 percent

global abrication. Overall silver abrication demand has grown

rom 67.1 million ounces to 159.5 million ounces during the period002-2011, a rise o 137 percent.

www.silverinstitute.org

@SilverInstitute on Twitter

1400 Eye Street, NW, Suite 550

Washington, DC 20005

T 202.835 0185

F 202.835 0155

Bath Tub Sports Silver Ion CirculationComponentsAmerican Standard Brands has introduced its Archive Freestanding Premium

Air Bath, which eatures silver ions molded directly into the water circulation

omponents to keep them rom building up germs.

The US$9,000 bath tub matches the company’s Archive product line and is made

rom acrylic with berglass reinorcement. It also includes air jets designed or back nd oot massage. The tub has an optional chromatherapy LED lighting system.

This bath tub relies on silver ions in the circulationcomponents to keep germs from building up.

China is World’s Second Largest Silver FabricatorPoised to Become Second Largest Producer, Report Says

Much o the industrial demand or silver comes rom the electr

and electronics sectors, including personal electronic products

as smartphones, tablets, notebooks and TVs. In 2011, the elect

and electronics sectors’ silver demand rose to 40 million ounce

rom 17.1 million ounces in 2010.

China’s jewelry market is growing as well, over 200 percent to

54.4 million ounces rom 2002 to 2011. Further growth is expein coming years as ongoing urbanization should lead to the

expansion o retail jewelry outlets in larger cities.

China is now second to India in silverware abrication.

On the supply

side, Chinese mine

production has almost

doubled over the

last decade, assisted

by the base metals

mining sector, leading

to a sharp rise in

silver produced as a

by-product. China’s

mine production o 

silver now accounts

or 14 percent o 

global supply, and

it is likely to be recorded as the second largest silver producing

country in 2012.

China’s interest in silver shows no sign o slowing down, the

report noted. “In spite o a rapid development in the Chinese si

market, both silver demand and supply are expected to achieve

even urther growth in coming years.”

For a copy o The Chinese Silver Market  click here.