Buffett Reveals Huge Stake in Silver Market for Berkshire

Warren Buffett, the billionaire investor known for his Midas touch, has turned to silver.

Buffett, chairman of Berkshire Hathaway Corp., said in an unusual news release Tuesday that his holding company has purchased 129.7 million ounces of silver in the last six months. That much silver may represent more than 20% of the world’s estimated supply at the end of 1997.

The statement from Buffett, made after markets closed Tuesday, follows weeks of allegations by some traders that the silver market was being manipulated, as prices have soared to nine-year highs.

Omaha-based Berkshire said it began purchasing silver July 25 and made its last purchase Jan. 12. In that period, the price on the Commodity Exchange in New York jumped 27%, from $4.32 to $5.48 an ounce.

In recent days the price has surged anew. On Tuesday silver leaped 37.2 cents, or 6%, to $6.61--its highest level since July 1988.

Berkshire, which rarely discloses its strategies, made the statement “because of recent price movements in silver and because Berkshire has received inquiries about its ownership of the metal.” It said it has “no present plans” to sell, or buy more.

The company said Buffett has studied silver’s fundamentals for the last 30 years. “Last summer, Mr. Buffett and Mr. [Charlie] Munger, vice chairman of Berkshire, concluded that equilibrium between supply and demand was only likely to be established by a somewhat higher price,” the statement said.

The statement offered at least a partial answer to the big question the market has had about where stockpiles of U.S. silver have gone.

“Silver is just not available,” one trader said Tuesday.

Last week, New York law firm Lovell & Stewart filed suit in U.S. District Court in New York alleging the silver market was being manipulated by trading firm Phibro Inc. and others--triggering memories of the infamous attempt by the Hunt brothers to corner the silver market in 1980.

The suit alleged that the buyers were removing silver from warehouses that hold supplies that can be registered for delivery against futures contracts at the Comex in New York and shipping them to London.

The London warehouse does not provide storage statistics, which would make it appear that supplies were becoming tight. Berkshire’s silver was purchased for London delivery, the company said.

Phibro’s legal counsel denied the allegations, and Patrick Thompson, head of the New York Mercantile Exchange, parent of the Comex, said Friday that there was “absolutely no basis” for allegations that silver was being manipulated.

But Comex warehouse silver stocks fell another 327,101 ounces to a 12-year low of 103.7 million ounces as of Monday. Stocks have fallen by nearly 50% in the last year.