Post by jeffolie on Oct 19, 2009 19:16:10 GMT -6
The following is a concise and meaty review of the factors involving silver. It touches on the Dollar, silver as a biproduct of other mining, industrial applications, market manipulation via shorts, etc.
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Wikinvest on Silver
Silver is a precious metal that is used in many different areas such as jewelry, photography, and a wide array of industrial applications. In fact, 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 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]
Factors that Influence Silver Prices[edit]
[11]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 horde 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]
www.wikinvest.com/concept/Silver_Prices
====================================================
Wikinvest on Silver
Silver is a precious metal that is used in many different areas such as jewelry, photography, and a wide array of industrial applications. In fact, 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 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]
Factors that Influence Silver Prices[edit]
[11]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 horde 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]
www.wikinvest.com/concept/Silver_Prices