Wednesday, February 01, 2006

 

Will ETF Drive Silver Up $1.50?

The National Post in Canada makes the case for a 'silver squeeze.' "Like many metals and commodities, silver is on a tear, largely based on rising demand. London-based GFMS Ltd. estimates industrial demand for silver rose by 6% during 2005, largely due to continued strength in the electronics sector."

"Silver is used in a diverse range of applications, from plasma TV screens to solar panels. Silver even has anti-bacterial properties, leading to its use in a line of odour-eating gym clothes and bacteria-killing bandages."

"Consumer and industrial products use up more than 40% of the world's silver. Photography remains a strong component of demand, with 21% of the market, while another 28% is used to make silverware and jewellery. The remaining 10% of silver demand is taken up by investments in coins, medals or silver itself."

"However, another driver of the silver market now is the tantalizing prospect that the Barclays Global Investors silver-backed exchange traded fund (ETF) may soon trade in the United States. 'The actual launch of an ETF could see prices gaining a further US$1.50 an ounce as small and large-scale investors are expected to flock into the market,' said James Moore, London-based publisher of TheBullionDesk.com."

"In 2004, miners produced only 634.4 million ounces, despite global demand of 879.2 million ounces. The gap was filled by the scrap market and government sales. A silver ETF would scoop up a significant chunk of available silver stockpiles, reducing the pool of above-ground silver and arguably making the metal more expensive for industrial buyers."

"In fact, analyst George Albino estimates that a US$300-million ETF would take up 25% of the world's deliverable silver. 'The silver price, we believe, is presently reflecting some possibility of the formation of a silver ETF,' his report said. 'The impact of the silver ETF on the silver market could be staggering, as would be the resultant upward pressure on silver-related equities.'"

"Most of the world's silver is produced as a by-product from mining other metals, such as gold or zinc. The world's biggest silver producer is also the world's biggest mining company, BHP-Billiton PLC. The biggest Canadian producer is Toronto-based Barrick Gold Corp. But there are also a handful of companies that specialize in silver. Canadian firms benefiting from the rising silver price include Pan American Silver Corp. (PAA/TSX) and Silver Wheaton Corp. (SLW/TSX). Pan American is up 25% over the past month, while Silver Wheaton has risen 30%."

"Exploration companies have picked up steam, too. Western Silver Corp. (WTC/TSX-V) is up 37% over the past month, while Silver Standard Resources (SSO/TSX) is up 17%. Then there's tiny penny stock, Scorpio (SPM/TSX-V). Its shares are up more than 80% in the past month. Scorpio acquired the Nuestra Senior Project in Mexico in 1998. The property had been mined in the past, but Scorpio saw a chance to revive the operation as a pure-play silver project."

Comments:
Thanks to the reader who posted this link!
 
Well.. my first Green Mint Boxes (American Eagle) arrived today - just about the size of a shoebox - but a bit heavier.

Of course, what does the mailman ask? "What do you have in here, GOLD amd SILVER?" - no kidding.

I said, off the cuff, that they it was lead hand weights (cringe.) That explanation will only work once - I'm having the next shipment sent to a friend's house. I hope this bull market thingy works out!
 
Only $1.50? Who're they kidding??
 
Yeah, I'm liking my 30% SLW gains. :)
More American Eagles go on sale tomorrow. I wonder how fast they will sell out.
 
"In fact, analyst George Albino estimates that a US$300-million ETF would take up 25% of the world's deliverable silver. 'The silver price, we believe, is presently reflecting some possibility of the formation of a silver ETF,' his report said. 'The impact of the silver ETF on the silver market could be staggering, as would be the resultant upward pressure on silver-related equities.'"

Expanding on my earlier comment...

We're already past "peak silver". Could you imagine what would happen if someone took a quarter of the world's oil reserves off the market? It's obvious Mr. Albino didn't make the $1.50 comment, since no one would consider that a "staggering" increase.
 
(We're already past "peak silver".)

really, when did that happen?
 
john_law_the_ii:

really, when did that happen?

Don't have a date per se, but I've picked up these bits of information over the past few years:

* 95% of mined silver no longer exists in usable form.
* Demand has exceeded supply for 15+ years.
* World stockpiles have been drawn down to fractions of their former levels.
* Geological estimates of the size of remaining unmined silver deposits are less than those already mined.

The last point is theoretical, but so are estimates of remaining undiscovered oil reserves.

As with "peak oil", the idea is that supplies can no longer keep pace with demands, no matter how much exploration and/or extraction occurs going forward. In silver's case, this will reportedly lead to serious industrial shortfalls within the next decade and practical exhaustion within our lifetimes.
 
Sorry to go off topic. This is interesting though! It'a PDF file.

http://www.gata.org/CheuvreuxGoldReport.pdf
 
TJ & The Bear

thanks.
 
Thank you TJ & The Bear
That report is near disturbing and I might just buy more gold. :)
 
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