you're reading...

Silver rises $4 in a Week to a High Of $40, Why? Supply-Demand-Manipulation

NEW YORK (TheStreet ) — Gold prices were hitting a new record Friday and silver prices touched $40 an ounce as the precious metal bulls came out in full force.

Gold for June delivery was adding $12.40 to $1,471.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price hit another high of $1,474.50 an ounce. The spot gold price was jumping more than $12, according to Kitco’s gold index.

Most Recent Quotes from www.kitco.com

Silver prices surged 68 cents to $40.24 an ounce, after hitting a 31-year high of $40.30 an ounce.

“These levels for silver are going to be a spring board to $50,” says Anthony Neglia of Tower Trading, “maybe sooner than I think.” Neglia sees $37 as the new support area for silver whereas a few weeks ago it was $30.50. “My buy recommendation is the July 50/55 call spread which is up 50% in a week.”

As silver looks to $50, gold is looking to $1,500, which seemed like a far-fetched dream for a few weeks as the metal could not conquer the $1,450 level. Now it has and many experts think the $1,500 level will be reached in days or, at the most, weeks.

When will gold hit $1,500 “is a good question,” says Will Rhind, head of U.S. operations for ETF Securities, “I think that right now with the market the way it is, who knows, it could be a matter of days.”

Pat Heller, general manager at Liberty Coin Service, has noted that “the ‘general public’ is coming to the realization that the U.S. dollar is falling in value and contributing to noticeably higher consumer prices,” which is making hard assets very appealing as a whole new portion of the population gets interested. “I think the price increases over the past two weeks are partly a reaction to this.”

What’s Moving Silver’s Price to $40?

NEW YORK (TheStreet ) — Silver prices hit $40 an ounce. This was the bullish signal many traders were waiting for and price targets now range from $45 to $50 for 2011. Voracious investment demand and turmoil in the Middle East-North Africa region have been pivotal to silver’s pop, but don’t tell the whole story. Silver prices have a reputation of being manipulated, volatile and less liquid. Silver hit a record high of $50 an ounce in 1980 after the famous (or infamous) Hunt brothers bought the metal aggressively for seven years — at one time owning more than 200 million ounces of silver.

The silver bubble burst soon thereafter shedding 50% of its value almost immediately, and over the last 30 years the metal has traded as low as $4 and as high as $36.74 an ounce.

Along with gold, silver prices are at the mercy of investment demand, safe-haven buying, inflation fears, momentum trading and price manipulation. Silver prices are also cheaper than gold offering cash strapped buyers a cheaper safe haven alternative. But the one thing that silver prices have going for them that gold doesn’t are oodles of industrial demand.

Indeed, silver can be found in a plethora of products, from iPads to cars to solar panels, making it the perfect metal for those wanting a hedge against currency debasement as well as exposure to a global economic recovery.

David Morgan, founder of Silver-Investor.com, says he could see silver prices as high as $45 in 2011 “and if things get really crazy we could go beyond that.”

Silver is also at the mercy of stocks. When equities plummet, investors are often forced to sell silver for cash, but any significant dip can trigger a wave of buying as investors purchase silver at “cheaper” prices, resulting in a strong tug of war. Because fewer people own silver than gold, the market is smaller, which results in violent price action.

Here are five fundamental factors that will contribute to silver’s strong price moves in 2011 and why many analysts think silver’s bubble is far from bursting.

5. Price Manipulation

Price manipulation is the most controversial theory that has circulated among gold and silver bugs for 20 years. Some argue that precious metal prices have been illegally suppressed over the last two decades by central banks, governments and trading houses. The Gold Anti-Trust Action Committee, or GATA, is the biggest complainant and mainly points to the “hugely disproportionate short positions,” according to Chris Powell, secretary and treasurer of the organization.

The manipulation headline has been gaining traction of late after trader Brian Beatty filed lawsuits at the end of October against JPMorgan and HSBC for conspiring to “suppress and manipulate” silver prices on the Comex.

Silver Investment the Dominant Driver of a Remarkable 2010

Industrial Demand for Silver Posts a 20.7 Percent Increase Over 2009

(NEW YORK – April 7, 2011) Booming silver investment was the primary source of the astounding
78 percent intra-year increase in silver prices in 2010. A sturdy rebound in total fabrication demand, led by the industrial sector, was also significant, according to World Silver Survey 2011, released today by the Silver Institute.

Silver Price and Investment
Silver posted an average price of $20.19 in 2010, a level only surpassed in 1980, and a marked increase over the $14.67 average price in 2009. This buoyancy is very much alive today, with the 2011 price averaging $31.86, based on the London fix, through the end of the first quarter.


World investment rose by an impressive 40 percent last year to 279.3 million troy ounces (Moz), resulting in a net flow into silver of $5.6 billion, almost doubling 2009’s figure.

Exchange traded funds (ETFs) registered another sterling performance in 2010, with global ETF holdings reaching an impressive 582.6 Moz, representing an increase of 114.9 Moz over the total in 2009. The iShares Silver Trust accounted for almost 40 percent of the increase, with other notable gains achieved by Zurcher Kantonalbank, ETF Securities, and the Sprott Physical Silver Trust.

A significant boost in retail silver investment demand paved the way for higher investment in both physical bullion bars and in coins and medals in 2010. Physical bullion bars accounted for 55.6 Moz of the world investment total last year. Coins and medals fabrication rose by 28 percent to post a new record of 101.3 Moz. In the United States, over 34.6 million U.S. Silver Eagle coins were minted, smashing the previous record set in 2009 at almost 29 million. Other key silver bullion coins reaching milestones include the Australian Kookaburra, the Austrian Philharmoniker, and the Canadian Maple Leaf–all three posting record highs in 2010.

Increasing a hefty 47 percent last year to 178.0 Moz, implied net silver investment recorded its all-time high. Much of the increase was due to ETFs, the over-the-counter market, and investment in physical bars.

Fabrication Demand
Total fabrication demand grew by 12.8 percent to a 10-year high of 878.8 Moz in 2010; this surge was led by the industrial demand category. Last year, silver’s use in industrial applications grew by 20.7 percent to 487.4 Moz, nearly recovering all the recession-induced losses in 2009, and is now seeing pronounced advances in 2011. Jewelry posted a gain of 5.1 percent, the first substantial rise since 2003, primarily due to strong GDP gains in emerging markets and the industrialized world’s improving economic picture. Photography fell by 6.6 Moz, realizing its smallest loss in nine years, as medical centers deferred conversion to digital systems. Silverware demand fell to 50.3 Moz from 58.2 Moz in 2009, essentially due to lower demand in India.


Mine Supply and Costs, Above-Ground Stocks, Scrap Supply, Producer Hedging and Government Sales

Silver mine production rose by 2.5 percent to 735.9 Moz in 2010 aided by new projects in Mexico and Argentina. Gains came from primary silver mines and as a by-product of lead/zinc mining activity, whereas silver volumes produced as a by-product of gold fell 4 percent last year. Mexico eclipsed Peru as the world’s largest silver producing country in 2010, and Peru is followed by China, Australia and Chile. Global primary silver supply recorded a 5 percent increase to account for 30 percent of total mine production in 2010.

Primary silver mine cash costs remained relatively flat year-on-year, falling by less than 1 percent to $5.27/oz. from a revised $5.29/oz. in 2009.

Net silver supply from above-ground stocks increased to 142.9 Moz in 2010, primarily due to higher scrap supply, a shift of net-producer hedging to the supply side, and a considerable rise in net-government stock sales. Regarding scrap supply, 2010 witnessed a 14 percent increase over 2009 as gains in industrial and jewelry recycling exceeded an ongoing decline in recovery from photographic sources.

The swing to net-producer hedging of 61.1 Moz ended a four-year run of de-hedging and is attributed to higher silver prices and was limited to a group of by-product, rather than primary silver producers.

Net government sales of silver rose to 44.8 Moz, primarily the result of increased sales from Russia, with China and India remaining relatively silent for the second consecutive year.

World Silver Supply and Demand (million ounces)
(totals may not add due to rounding)


  2009 2010
Mine Production 718.3 735.9
Net Government Sales 15.5 44.8
Old Silver Scrap 188.4 215
Producer Hedging 61.1
Implied Net Disinvestment
Total Supply 922.2 1056.8


  2009 2010
Industrial Applications 403.8 487.4
Photography 79.3 72.7
Jewelry 158.9 167
Silverware 58.2 50.3
Coins & Medals 79 101.3
Total Fabrication 779.2 878.8
Producer De-hedging 22.3
Implied Net Investment 120.7 178
Total Demand 922.2 1056.8

About the World Silver Survey, the Silver Institute and Ordering Information




No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

  • 26,507 hits

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 117 other followers

Contact Email



Twitter Updates

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

%d bloggers like this: