New innovations boost silver demand, but could price be taken down again?
Ongoing advances in the usage of silver could boost industrial demand. But, while pricing looks strong there are warnings of a possible short-seller price take-down again.
Posted: Monday , 17 Sep 2012
LONDON (Mineweb) -
At last week's Denver Gold Forum, Hecla's CEO, Phil Baker, took time in his presentation on his company to point out some parallels between silver today and the huge change in demand structure which took place at the close of the 19th and the start of the 20th Centuries as technological advance (the use of silver in photography) dramatically changed the structure of the silver market. At that time, silver's usage had primarily been in silverware, jewellery and in monetary usage, but photographic demand eventually rose to account for around 50% of the market.
Baker's view is that now, although photographic usage has dived dramatically with the onset of digital photography, we are now entering a new era of technological change affecting silver's industrial consumption growth which is happening before our eyes. But this time it is not any single industrial sector which is creating the demand, but a slew of new uses which have grown up over the past ten years or so, and will continue to grow at a rapid rate as some of silver's unique properties in the electronics and medical fields in particular continue to boost industrial consumption of the metal.
Meanwhile, the silver price has received a significant boost with the announcement of the new U.S. Fed policy to resume pumping money into the economy to try and kickstart employment recovery. As Ted Butler has noted in his latest newsletter, although the gold price has risen by over 9% over the past four weeks, that of silver has risen by some 23%, continuing the past pattern of silver tending to rise faster than gold on the upside. However Butler points out that the price rises in both appear to be being driven by large volumes of paper gold and silver traded on COMEX, but is puzzled by the lack of silver deposits into the major silver ETF, SLV. This, he reckons, could be a sign of tightness in the market.
However, Butler also warns that this could prelude the big short position holders in silver, and in gold, acting to try and take down the market. (Butler is one of the premier believers in the ongoing rigging of the silver markets by the big banks which tend to hold major positions in the metals) and points out that we are at around the anniversary of what he feels was a major take-down in silver last year when it fell $15 - or 35% - in three days.
Silver's price volatility, for whatever reason, is both an attraction and a detraction for potential investors. But, by and large silver moves up when gold does, but faster, and if the gold price continues to advance again after a period of consolidation, it is difficult to see that silver will not follow suit and exceed gold's advances. The gold:silver ratio, for those who follow that particular metric, has come down a little to 51, after around 54 before the latest price rises and this would be expected to fall further should both gold and silver continue to advance.
Bank analysts are also beginning to revise their predictions of year-end gold, and silver, prices upwards following the Bernanke QE3 announcement. Forecasts of $1900 gold by the year end are now becoming almost commonplace, and suggest a silver price of approaching $40 again should these gold price predictions come about.
iPad Version : Silver bars are displayed at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna: REUTERS/Lisi Niesner