• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G. Chandrashekhar

MUMBAI, Nov. 5

WEAK commodity fundamentals has led to just a modest overall investor interest in silver, although more recently there has been some safe-haven interest again in the metal, following gold.

For the year 2002, silver has a statistical market surplus of 777 tonnes, up from 523 tonnes of 2001.

Total fabrication demand is down two per cent this year to 26,319 tonnes, despite the position that total supplies at 27,096 tonnes are also down one per cent.

In 2003, the silver market could go into a statistical deficit of some 377 tonnes, with production forecast to decline again by 1.2 per cent to 26,778 tonnes, while total fabrication demand is forecast to rise 3.2 per cent to 27,155 tonnes, according to Commodities Forecaster Report of Macquarie Research Equities.

"Assuming a recovery in 2003, we see the silver market move into a modest deficit, easily met by existing stocks. Therefore, we continue to expect silver prices to trade between $4.50 and $5 per ounce with lease rates possibly sparking occasional volatility,'' said Mr Kamal Naqvi, analyst.

Critically, physical demand for silver still appears unlikely to recover strongly in the near-term— electronics demand is still suffering along with that sector; jewellery and silverware demand has been affected by weaker economic growth and concerns over rural incomes in India following a poor monsoon, while photographic demand is suffering from the growing use of digital technology.

Meanwhile, physical supply remains plentiful, with very little impact seen from production cuts in lead, zinc and copper (the silver by-product itself ensures that these mines tend to be lower-cost), commented Mr. Naqvi. Silver surged towards $5/oz three times so far this year— early in the year, then in June and in July.

In all case, the metal moved either because of severe tightening in near-term leases rates (to 30 per cent early in the year which eased almost as quickly as it began) or based on renewed optimism towards industrial metals plus a firm gold price.

In no case was any move due to silver-specific commodity fundamentals and this remains the problem for silver.

Enthusiasm for silver dampened considerably since mid-year, as is evident in the Comex reported positions with non-commercial net position falling from an impressive three-year peak long position over 50,000 contracts in early June to the current level of less than 15,000 contracts, the analyst pointed out.

Send this article to Friends by E-Mail
Comment on this article to BLFeedback@thehindu.co.in

Stories in this Section
Plantation sector seeks power tariff changes

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line