QUOTE AND NEWS
Resource Investor  Nov 21  Comment 
Gold prices fell $0.38 or 0.03% to $1,193.06/oz yesterday. Silver slipped $0.03 or 0.18% to $16.19/oz.
Resource Investor  Nov 21  Comment 
As a refined metals dealer, the one product I must have on hand is one ounce silver coins. As of today, we have run out of most coins, and so have most of the other coin wholesalers in the United States.
Resource Investor  Nov 21  Comment 
The gold jewelry exports from India recorded significant surge of 97.65% year-on-year to $3,425.52 million during the period from April to October this year.
Jutia Group  Nov 21  Comment 
[Business Wire] - Discover Financial Services received the Silver Cradle Award for its dedication to providing its employees with adoption benefits and resources through its Adoption Assistance Prog Read more on this. Discover Financial Services...
Forbes  Nov 21  Comment 
A look at the current NFL Super Bowl Odds. According to Nate Silver, the New England Patriots and Arizona Cardinals would likely match up in Super Bowl in Super Bowl XLIX.




 
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Silver is a precious metal that is used in a wide array of industrial applications as well as in jewelry and photographic film. Industrial applications (for example computers, cell phones, TV, batteries, pharmaceuticals) made up about 54% of the world’s silver fabrication demand in 2007.[1] As a whole, demand for silver has been growing faster than annual production since 1990,[2]and silver inventory has dropped 98% from 1942 to 2004, 5.9 billion oz to 115 million oz, respectively.[3] Silver is even more scarce than gold as the above ground supply of silver was about 5x less than that of gold in 2006.[4] The effect of the falling supply of silver coupled with increasing demand from the US economic slowdown has lifted silver prices to their highest point since 1981 (2007 average silver price = $13.38 /oz).

Silver Uses

This table gives an overview on global supply by producers and demand by industry sectors from 1999 to 2008. Image:SilverUse.jpg

Natural Occurrence / Physical Properties

Silver is often found in a free state, but is also found in good concentration in ores like Argenite. Silver gets it's chemical symbol Ag from the latin word Argentum. Although it is an excellent electrical and thermal conductor, it's cost keeps it from wide use for these applications.

Companies/Funds Helped by Rising Silver Prices

Silver Mining Companies

  • Pan American Silver (PAAS): Pan American is the world's largest primary silver miner with silver production of 17.33M oz in 2007. Just over half of their silver comes from metal byproduct production.
  • SILVER WHEATON CORP (SLW): Silver Wheaton has long term contracts with 5 different silver mining companies which allows Silver Wheaton to buy silver from these mines at an almost fixed purchase price of around $3.90/oz. As a result, Silver Wheaton gets all of their revenues by then selling this silver in the market.
  • Silver Standard Resources (SSRI): Silver Standard acquires and develops mining properties. The company owns or has large stakes in several mines but does not directly mine silver themselves. Silver Standard has 1.5 billion oz of silver from these mines. Silver Standard could potentially be a silver miner as the company plans to start mining in Argentina in 2009. Silver Standard estimates that the Pirquitas mine in Argentina will produce 10M oz of silver per year.

Other Silver Mining Companies

  • Goldcorp (GG): Silver in Guatemala (4.2m oz 2009) and Mexico (Penasquito 1 bil oz 2P)
  • Rio Tinto (RIO): Silver produced in Utah, 6.862 mil oz in 2010, 8.569 mil oz in 2009

Silver Exchange Traded Funds (ETFs)

Many of the ETFs buy actual silver reserves as backing to the fund. As a result, ETFs make up about 50% of the world's silver market.[5]

  • ZKB Silver ETF: This is a silver ETF entirely backed by physical silver. This ETF is not open to US investors.
 AGQ is an ETF which obtains twice (200%) the gains or losses in the price of Silver.

Companies Hurt by Rising Silver Prices

  • Signet Group (SIG): Signet is an affordable jewelry company. The company is more vulnerable than its high-end competitors to rising silver prices because Signet is less able to raise its prices due to its lower-end client base.
  • Tiffany (TIF): About 30% of Tiffany's revenue comes from non-gemstone silver jewelry.
  • Eastman Kodak Company (EK): Kodak increased prices 20% in May 2008 largely due to rising silver prices.[6] Silver nitrates and halides react with light and are used in photographic film.
  • FUJIFILM Holdings (FUJI): Fuji increased prices 20% in May 2008 largely due to rising silver prices.[7] Silver nitrates and halides react with light and are used in photographic film.

Silver Supply and Demand

In 1980 the price of silver climbed to $50/oz from only $5/oz two years earlier. The reason for this was a massive discrepancy between supply and demand. Previous to 1980 the US government tried to keep silver prices low by periodically loaning out silver from the 2 billion ounce silver inventory that it kept in the U.S. Strategic Stockpile. They loaned out the silver in return for silver certificates, essentially an IOU. By the time the contracts were up, there was a demand of 4 billion ounces of silver, but in reality, there was only 2 billion ounces of silver in the market. As a result prices skyrocketed to make up for the gap between supply and demand.[8]

Today, the majority of silver demand is from industrial applications. Industrial application demand has risen every year since 2001 and now makes up 54% of silver demand with 455.3M ounces. At the same time, above ground supply of silver decreased 8% and government sales (more government sales means more supply) decreased 46% in 2007, primarily because China and India did not sell much silver that year. In addition, silver mining is struggling to find new silver sites and keep up with demand (silver mining grew 4% in 2007).[9]

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Factors that Influence Silver Prices

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  • The Effect of Silver Stockpiling: Silver is one the best conductors of energy which makes it an important component in most electrical devices. It is also a very good reflector of light making it valuable to producers of mirrors, windows, and other glass products. When silver prices rise, large companies that are dependent on the metal tend to hoard it.[12] This can further drive up demand, as was the case with palladium. In 2000, the Russian supply of palladium was disrupted causing prices to rise. In response, companies who used palladium in their products began to stockpile the metal.[13] This drove prices up to $1,100/oz from $330/oz previously.[14]
  • Silver is a Byproduct Metal: About 80% of mined silver is gathered as a byproduct of other metals, such as copper, nickel, zinc, and lead.[15] . Most of this metal comes from mines outside of the U.S. When the dollar falls against other currencies, the cost for importing these metals rise and demand falls, driving down silver production..
  • Shorting Silver: On the Commodity Exchange (COMEX), the silver short position is very large. In fact, silver is the world's only commodity that has a short position which is larger than both its global production and inventories.[16] The extent of this position has been created by naked short selling, which means shares are sold without an arrangement or promise of a borrower. This large short position helps to keep silver prices lower than they may be otherwise.
  • Countries Buying and Selling Silver: When countries sell their reserves of silver in the market they increase the supply of silver available. However, in 2007, sales from countries dropped 46% because China and India did not sell as much silver as they did in the past.
  • Mine Production: Although the majority of silver is produced as a byproduct of other metals, 20% comes from actual silver deposits. Mine production grew only 4% in 2007 to 670.6M oz and additional silver deposits are becoming increasingly difficult to find. [17]
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References

  1. Silver Supply Index
  2. Silver Prices
  3. The Case for Silver
  4. Silver is More Valuable than Gold
  5. Commodities Corner Silvers More Sparkle
  6. Kodak raising prices
  7. Fujifilm forced to raise prices
  8. The Price of Silver in 1980
  9. Silver Supply Index
  10. Silver Supply Index
  11. Silver Supply Index
  12. Why Silver is More Valuable than Gold
  13. Wikipedia:Palladium
  14. Palladium Spot Price
  15. Commodities Corner Silvers More Sparkle
  16. Why Silver is More Valuable than Gold
  17. Silver Supply Index
  18. Silver Supply Index
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