Posted by commoditydaily on April 6, 2011
Dear Members,
Nifty rose 432 point (5928 yesterday’s high) after triangle breakout @ 5522 as expected.
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Posted by commoditydaily on April 6, 2011
Created 1 Apr 2011
GFMS produced the report for the Silver Institute published last week. We have used this as a basis for this article on silver supply and demand in the last three years. Our objective in this piece is to have recent history confirm what we expect of the future for silver.
The first fact that jumps off the page is that the future for silver looks remarkable with industrial silver demand rising from 15,160.19 tonnes [487.4 million ounces] in 2010 to 20,712.29 tonnes [665.9 million ounces] in 2015.
Much of the growth in the global total of industrial silver consumption will be driven by stronger demand for a number of established uses including the manufacture of electrical contacts and the use of silver in the photo voltaic industry. New uses center on silver’s antibacterial qualities, while other new uses tend to make use of its conductive properties, including solid state lighting and Radio Frequency Identification (RFID) tags. Overall please note that silver’s importance in the technology of the day is huge. We go so far as to say that the demand from silver has transformed from a want to a need! Whether we are in a boom or bust silver’s demand will remain robust. It is now needed to make all facets of an economy run well and at all levels, even down to individual needs. This secures its future and assures us that silver prices are well supported. Here is the list of the amounts used in different applications that emphasize this point.
While photographic use of silver allows for the re-cycling of silver, reclamation of silver from most of the above uses is difficult to nigh-on-impossible. This in itself assures either a constant or rising demand for these applications.
Of particular note is the growth in Asia where we are watching around half of the globe’s population developing at infrastructural level as never before. This growth will continue at double figures, per annum for at least the next decade.
Gold is rarely consumed as it is deemed far too valuable. Reclamation efforts relative to the value of the gold ensures that scrap merchants will go to extraordinary lengths to recover the gold. In silver’s case these efforts would cost more than the sale of the silver so used. As the silver price rises further reclamation efforts will become profitable and more silver will be recovered, but we are still a long way off from that day.
HSBC, the world’s largest bullion dealer [in both gold and silver] is confirming that silver’s role as a monetary metal is gathering the most momentum, particularly in emerging economies. They say that the macro economic trends from emerging markets are positive for both gold and silver. They put the growing Chinese middle classes [now well over 400 million people of the 1.3 billion Chinese citizens] as fueling an "explosive" growth in demand for silver as a hedge against fast rising inflation. The Industrial and Commercial Bank of China, the world’s largest bank by market value, agrees this. I.C.B.C. sold 13 tonnes [418,000 ounces] of physical silver to Chinese citizens in January, alone, compared with 32.97 tonnes [1.06 million ounces] for the whole of 2010.
We have seen China turn from an exporter of silver to a huge importer in the last three years. And that’s just the start! China was a net importer of over 3,110.42 tonnes [100 million ounces] of silver last year, whereas while it was selling ‘official’ holdings of silver only a few years ago it was exporting an equal amount annually.
China’s ravenous new demand for silver as a store of value in inflationary times is growing exponentially. This is illustrated by the fact that silver imports last year increased four-fold over 2009.
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While we don’t yet have the numbers for supply of silver in 2010 we do not expect them to have risen more than 10% over 2009 levels [in the Table above]. Once we have these we will pass the information onto you.
With 70% of silver mined as a by-product of base metal mining there is a danger of demand outstripping supply. The present sources of by-product silver are operating at peak capacity. Pure silver producers like Silver Wheaton are growing but unlikely to be able to fill the gap. Mines like Coeur d’Alene which is becoming a 50% gold and 50% silver producer do have a considerable capacity for growth and will do so. But again with demand burgeoning on both the investment and industrial sides supply will find it difficult to meet demand.
Another difficulty for supply is that they are inflexible because of their dependence on mining. We do foresee rising scrap sales from the developed world where the sight of a profit on jewelry etc, can prove too tempting to the individual, but we cannot see this being more than 10 to 20% more than in 2009. In the emerging world such a concept is basically foreign to them because both silver and gold represent financial security to investors there.
If the developed world were stable and if the emerging world was used to their newfound wealth, and were their history not as close to social rupture as it has been and could be, emerging market investors would probably not trust gold and silver as much as they do now. But that is the case now. We believe [if history is to guide us] that it will take at least another generation [25 years] of wealth and stability in the emerging world for this attitude to change. Until then scrap supplies from the emerging world will remain at extremely low levels.
In 2011 we are seeing prices far above those imagined three or four years ago. But then the world is facing far more uncertainty and instability that was ever imagined then too. The decay of currencies ability to measure value has been increasing over that time too, making the soaring prices of silver and gold to become more than plausible. Indeed a strange feature of the silver price has been it moves with gold as though tied with a piece of elastic string to the gold price, rising higher and falling lower at each move. So why does it not move more like copper or another base metal used as a simple commodity? And where, if it doesn’t move like them, is it headed?
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Posted by commoditydaily on April 6, 2011
The Lesson From Japan For PM Investors
Jeff Clark, BIG GOLD
1 April 2011
It feels a little callous writing about Japan with respect to precious metals after the country suffered such a terrible tragedy. However, I think it’s worth discussing because there’s a lesson in it for all of us. In fact, I think the moral could be couched in terms of a warning.
Japan’s Background with Precious Metals
It’s commonly known in Japanese culture that citizens harbor gold to protect against unforeseen events. The gold isn’t sold unless it’s needed for an emergency. With respect to the Japanese government, the country’s central bank is the 8th largest holder of the metal (including the IMF and GLD). Beyond investment, Japan represents about 6% of worldwide gold fabrication (excluding investment demand), the majority of which is in electronics. Scrap recycling has been heavy in recent years, while jewelry demand is low.
Regarding silver, the tiny island represents about 9% of global demand. Industrial uses comprise the biggest part of that, which includes the automotive industry, construction, medical uses and solar. Jewelry and silverware have minimal end-use, and photography, like most everywhere else, has been falling heavily.
Japan’s Trend with PMs
While the percentage of Japan’s buying to worldwide demand won’t drastically change in reaction to the recent disasters, they, like several other countries, are pursing another tactic to get minerals. The government is considering revising its mining law, specifically when it comes to seabed mineral exploration and extraction. This is noteworthy because Japan hasn’t touched its mining law in 50 years. To be sure, revisions will be stricter for permitting and monitoring, but the process will be streamlined for Japanese companies.
Why now? As an executive at Mitsubishi Materials put it, "it’s an issue of national interest" because China, Russia, and South Korea are already exploring parts of the country’s exclusive economic zone. They are undoubtedly feeling the pressure of not only wanting what they think is rightfully theirs, but also of wanting to capitalize on high metals prices.
The Lesson from Japan
Premiums for gold and silver there have risen in response to the disasters, which isn’t surprising. Japanese investors scrambled for physical metals after the earthquake, immediately pushing premiums to three-year highs. And it wasn’t just buyers in the earthquake, tsunami and nuclear-plant zones; those in less affected parts of the nation have been rushing to buy precious metals, too. The end result is that available supply has been glutted.
The reactionary buying in Japan could not just support metals prices, but push them higher. This is certainly due to the draining of supply, but also because it’s complicating delivery and exacerbating fabrication problems. The country is a net gold exporter, but there may not be many planes and boats loaded with bullion leaving ports anytime soon, given that many modes of transportation are down and the distribution of more urgent food and other supplies is complicated.
This could dry up gold supplies elsewhere in Asia, as Japan exported 2.7 million ounces last year. While this is only roughly 2.3% of global supply, these ounces are concentrated in Asia, a region that has already seen many countries’ citizens hoarding precious metals. If supply becomes scant across Asia, it’s easy to see how this could light a fire under prices.
As Mark Pervan, head of commodities research at ANZ, said, "This is a buy-on-the-dip opportunity. Investors, not just Japan but globally, have been looking for a trigger to get back into the market. The rise in premiums in Japan could be it."
The lesson is this: When disaster strikes, it’s almost certainly too late to buy. Not only will you pay a higher premium, you may have difficulty getting your hands on bullion. You have to purchase your insurance before adversity hits.
And the warning is this: We saw how supply dried up and premiums skyrocketed during the market meltdown of 2008. Europe saw the same result when Greece imploded. We’re now seeing it happen in Asia due to Japan’s woes. We keep seeing this picture repeat. While no one wants to bet on calamity, is the U.S. really immune from trouble? Are you?
Even if no natural disaster strikes North America, there’s a certain hazard that’s inescapable at this point. The abuse being heaped upon the U.S. dollar has not fully played out. Sooner or later the decline of the mighty greenback will affect almost every area of your life. In fact, what does your day involve that doesn’t require money? Eating, showering, driving, working, shopping, entertainment – all of these will be grossly impacted by the demise of the currency unit used in this country.
The monetary base continues to explode. With no fanfare, it set another new record last week – $2.35 trillion. It’s up 18.7% just since New Year’s eve, and 39.2% since December 2008. These actions will have consequences. They will lead to a monetary earthquake.
Your heart went out to the people of Japan when you saw the pictures of the devastation from the earthquake. Will you be ready when the currency earthquake hits here? One of these days it’ll strike, and then it will be too late to buy.
I hope you have sufficient asset protection to withstand the monetary storm that’s building off our coast.
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