Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Thursday, January 25, 2007

Breakout Time for Silver

Uranium isn't the only hot metal. Gold and silver are heating up right now. Let's look at a chart of silver.

I don't know what the short-term drivers of this move are, besides a wobbly US dollar and strength in energy. The longer-term factors are certainly in play...

Jewelry demand: A spokesman for the World Jewelry Confederation recently said that China, India, and Russia "are expected to stand at the center of the expected double-digit [growth in] silver consumption in the coming years".

Industrial demand: According the Silver Institute, industrial demand for silver rose 11% in 2005 and represented 47% of total demand, up from 37% in 1995. As emerging-market nations continue to rapidly industrialize, demand for silver will keep pace.

Low stockpiles: According to CPM Group, a commodities-research firm, there are roughly 300 million ounces of silver in above-ground stockpiles, a 50-year low.

Silver ETF: The iShares Silver Trust hold physical silver to back its shares. iShares Silver Trust currently holds 116,112,664.800 (over 116 million ounces and recently filed papers to add 168 million ounces to back the issuance of new shares.

We’ve seen 3 companies rush to launch gold ETFs or funds in India, and it’s likely that a silver fund for India isn’t far behind. Investor demand for the metal could be the driving force for 2007 – a force that pushes silver to $20 per ounce and beyond.


Check out my new gold and energy blog at