Silver prices have been more volatile than gold since the beginning of 1988, but the metal failed to sustain a rally. By early fa ll, it was hovering in the $6.25 (US)-per-oz range, about the price at which it trotted from the gate at the beginning of the year. Silver, an inflation hedge for the masses, still suffers from oversupply. More than a few analysts, however, are optimistic that the investment community will absorb a large portion of the surplus. U.S. investment house Shearson Lehman Hutton, for one, reported this year that “on the whole, silver has responded so far to developments relating both to the industrial and the precious sector, and signs of economic growth and steady industrial activity have tended to buoy values * * .” The silver surplus reported for the non-communist world at the end of 1987 — 1,225 tonnes — was down from the previous year and well below the more than 5,832 tonnes recorded for 1983.
On at least two occasions this year the London price of silver jumped to more than $7, including a brief period in July when Peru, the world’s second- largest producer nation, announced it was going to purchase silver from state-owned mines at prices above market levels and suspend exports of the metal for up to two years. International traders are baffled by the move. They wonder how Peru will replace foreign exchange earnings lost from the suspension of silver exports. Also, silver got a second bounce from news that a summer drought in the U.S. mid-west would probably curtail grain production this year and mean higher supermarket prices. (Economic perils, threatened or real, often lift precious metals prices.)
Silver is usually mined as a byproduct of other ores, including gold, lead, nickel, copper and zinc. Topping Peru as the world’s leading producer nation of the precious metal is Mexico. Canada and the U.S. claimed the third and fourth spots last year. Total non-communist world mine production of silver in 1987 was 10,554 tonnes, up 2% from the previous year.
In August of this year, the Hunt brothers in the U.S. were ordered to pay $134 million (us) to Peruvian state-owned mining company Minpeco SA after a New York jury found them guilty of conspiring to fix the price of silver in 1979-80. You may recall that the Hunts, who allegedly set out to corner the silver market at the turn of the decade, were themselves cornered. The metal approached $50 per oz during a short- lived period towards the end of 1979 and beginning of 1980; the three Hunts claimed the price fluctuations were caused by world economic conditions. Further legal challenges await the brothers, who were once ranked among the wealthiest in the U.S.
As an industrial metal, silver has numerous applications. The photographic industry accounts for about 50% of the industrial demand and the electronics industry about 20%. Other uses include jewelry, brazing alloys and solders, and coinage.
Coin demand, Shearson writes, should play a role in silver, sustaining its status as a precious metal. The 1988 Olympic Games, the investment firm writes, should boost coin sales appreciably. Shearson also reports the oil markets could have a significant effect on the price of silver in the medium term; a stronger oil market would fuel inflationary concerns, which in turn should either firm or strengthen silver’s value.
Should we be looking for an appreciable bounce in 1989? Hedge your bets.
Silver prices have been more volatile than gold since the beginning of 1988, but the metal failed to sustain a rally. By early fa ll, it was hovering in the $6.25 (US)-per-oz range, about the price at which it trotted from the gate at the beginning of the year. Silver, an inflation hedge for the masses, still suffers from oversupply. More than a few analysts, however, are optimistic that the investment community will absorb a large portion of the surplus. U.S. investment house Shearson Lehman Hutton, for one, reported this year that “on the whole, silver has responded so far to developments relating both to the industrial and the precious sector, and signs of economic growth and steady industrial activity have tended to buoy values * * .” The silver surplus reported for the non-communist world at the end of 1987 — 1,225 tonnes — was down from the previous year and well below the more than 5,832 tonnes recorded for 1983.
On at least two occasions this year the London price of silver jumped to more than $7, including a brief period in July when Peru, the world’s second- largest producer nation, announced it was going to purchase silver from state-owned mines at prices above market levels and suspend exports of the metal for up to two years. International traders are baffled by the move. They wonder how Peru will replace foreign exchange earnings lost from the suspension of silver exports. Also, silver got a second bounce from news that a summer drought in the U.S. mid-west would probably curtail grain production this year and mean higher supermarket prices. (Economic perils, threatened or real, often lift precious metals prices.)
Silver is usually mined as a byproduct of other ores, including gold, lead, nickel, copper and zinc. Topping Peru as the world’s leading producer nation of the precious metal is Mexico. Canada and the U.S. claimed the third and fourth spots last year. Total non-communist world mine production of silver in 1987 was 10,554 tonnes, up 2% from the previous year.
In August of this year, the Hunt brothers in the U.S. were ordered to pay $134 million (us) to Peruvian state-owned mining company Minpeco SA after a New York jury found them guilty of conspiring to fix the price of silver in 1979-80. You may recall that the Hunts, who allegedly set out to corner the silver market at the turn of the decade, were themselves cornered. The metal approached $50 per oz during a short- lived period towards the end of 1979 and beginning of 1980; the three Hunts claimed the price fluctuations were caused by world economic conditions. Further legal challenges await the brothers, who were once ranked among the wealthiest in the U.S.
As an industrial metal, silver has numerous applications. The photographic industry accounts for about 50% of the industrial demand and the electronics industry about 20%. Other uses include jewelry, brazing alloys and solders, and coinage.
Coin demand, Shearson writes, should play a role in silver, sustaining its status as a precious metal. The 1988 Olympic Games, the investment firm writes, should boost coin sales appreciably. Shearson also reports the oil markets could have a significant effect on the price of silver in the medium term; a stronger oil market would fuel inflationary concerns, which in turn should either firm or strengthen silver’s value.
Should we be looking for an appreciable bounce in 1989? Hedge your bets.
Be the first to comment on "Annual Silver Review (November 01, 1988)"