Fundamental & Technical Analysis
Name Nishid Lath Ankit Mehta Saiprasad Prabhu Chintan Shah
Roll No. 117 122 133 141
SILVER FUNDAMENTAL ANALYSIS
Silver is found in native form, as an alloy with gold (see also: electrum), and in ores
containing sulphur, arsenic, antimony or chlorine. Ores include argentite (Ag2S), chlorargyrite (AgCl) which includes horn silver, and pyrargyrite (Ag3SbS3). The principal sources of silver are the ores of copper, copper-nickel, lead, and lead-zinc obtained from Peru, Mexico, China, Australia, Chile, Poland and Serbia. Peru and Mexico have been mining silver since 1546 and are still major world producers. Top silver-producing mines are Proaño / Fresnillo (Mexico), Cannington (Queensland, Australia), Dukat (Russia), Uchucchacua (Peru) and Greens Creek mine (Alaska).
The metal is primarily produced through electrolytic copper refining, gold, nickel
and zinc refining, and by application of the Parkes process on lead metal obtained from lead ores that contain small amounts of silver. Commercial-grade fine silver is at least 99.9% pure, and purities greater than 99.999% (five 9s) are available. In 2007, Peru was the world's top producer of silver, closely followed by Mexico, according to the British Geological Survey
Silver is a metallic chemical element with the chemical symbol Ag A soft, white,
lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal. The metal occurs naturally in its pure, free form (native silver), as an alloy with gold and other metals, and in minerals such as argentite and chlorargyrite. Most silver is produced as a by-product of copper, gold, lead, and zinc refining.
Silver is a very ductile and malleable (slightly harder than gold) monovalent coinage
metal with a brilliant white metallic luster that can take a high degree of polish. It has the highest electrical conductivity of all metals, even higher than copper, but its greater cost and
tendency to tarnish have prevented it from being widely used in place of copper for electrical purposes.
Among metals, pure silver has the highest thermal conductivity and one of the
highest optical reflectivity (Aluminium slightly outdoes silver in parts of the visible spectrum, and silver is a poor reflector of ultraviolet light). Silver also has the lowest contact resistance of any metal. Silver halides are photosensitive and are remarkable for their ability to record a latent image that can later be developed chemically. Silver is stable in pure air and water, but tarnishes when it is exposed to air or water containing ozone or hydrogen sulphide to form a black layer of silver sulphide which can be cleaned off with dilute hydrochloric acid.
Silver that is found with some percentage of other elements in it is called impure
silver. That is why it is graded upon its fineness. According to the Indian standards, silver is graded into six categories Grade 9999 Fineness 999.9 9995 999.5 999 999 970 970 925 925 916 916
Demand The bulk of the 11.9 percent decrease in 2009’s total fabrication demand was primarily driven by the global financial crises, reflected mostly in a sharp drop in industrial offtake, to its lowest level since 2003. Total fabrication demand totaled 729.8 Moz and industrial demand posted 352.2 Moz in consumption.
World Silver Demand
Significant inventory cuts in the industrial supply pipeline, combined with a protracted decline in end-user orders, for example from a far weaker automotive industry, were the primary reason for lower industrial demand last year. While demand was noticeably weaker
in the first quarter of 2009, it gradually improved as the year progressed. Overall, the losses were concentrated in East Asia, North America and Europe.
Implied net silver investment increased by a staggering 184 percent to 136.9 Moz last year, recording its highest level in the past 20 years. While overall jewellery demand dipped slightly by only 1.1 percent in 2009 to 156.6 Moz, India and China posted increases in jewellery demand last year, offsetting losses in most other markets. Silverware demand reversed the trend of the last decade rising by a respectable 4.6 percent to 59.5 Moz, largely due to a surge in Indian fabrication.
Supply Silver mine production rose by 4 percent to 709.6 Moz in 2009. Gains came both from primary silver mines and as a by-product of gold mining. Regionally, the strongest growth stemmed from Latin America, where silver output increased by 8 percent, with the most visible gains recorded in Argentina and Bolivia. Peru was the world’s largest silver producing country in 2009, followed by Mexico, China, Australia and Bolivia. All of these countries saw increases last year except for Australia, where output from the lead/zinc sector declined markedly. Global primary silver supply recorded a 7 percent increase to account for 30 percent of total mine production in 2009. Top Silver Producing Countries in 2009 (millions of ounces)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Peru Mexico China Australia Bolivia Russia Chile United States Poland Kazakhstan Canada
123.9 104.7 89.1 52.6 42.6 42.2 41.8 39.8 39.2 21.7 19.6
12. 13. 14. 15. 16. 17.
Argentina Turkey Sweden Morocco Indonesia India
17.1 14.0 8.7 8.3 7.7 7.3
Primary silver mine cash costs remained relatively stable year-on-year, rising by less than 1 percent to $5.23/oz.
Net silver supply from above-ground stocks dropped by 86 percent to 20.2 Moz in 2009, driven mostly by the surge in net investment, higher de-hedging, lower government sales and a drop in scrap supply. With respect to scrap supply, 2009 saw a 6 percent decrease over 2008’s figure to a 13-year low of 165.7 Moz. This represented the third consecutive year of losses in the scrap category.
Government stocks of silver are estimated to have fallen by 13.7 Moz over the course of last year, to reach their lowest levels in more than a decade. Russia again accounted for the bulk of government sales, with China and India essentially absent from the market in 2009. Regarding China, GFMS states that after years of heavy sales, its silver stocks have been reduced significantly.
Supply from Above-Ground Stocks (Million ounces) Bullion Implied Net Disinvestment -48.2 -136.9 Net Producer Hedging Net Government Sales Sub-total Bullion Old Silver Scrap Total -11.6 -22.3 27.6 13.7 -32.1 -145.5 176.0 165.7 143.9 20.2 2008 2009
Silver deficits now run between 50-100 million ounces per year. The only way to bring the supply and demand for silver into balance is higher prices. This is where the dynamics of the silver market become very exciting for investors.
World Silver Supply and Demand
To document these and other market fundamentals, each year the Silver Institute works with GFMS Limited, of London, a leading research company, to prepare and publish an annual report of worldwide silver supply and demand trends, with special emphasis on key markets and regions. This annual survey also includes current information on prices and leasing rates, mine production, investment and fabrication.
World (in millions of ounces) 2000 Supply Mine Production Net Government Sales Old Silver Scrap Producer Hedging Implied Net Disinvestment Total Supply 591.0 60.3 180.7 -87.1 919.1 606.2 63.0 182.7 18.9 -870.9 593.9 59.2 187.5 -12.6 853.1 596.6 88.7 183.9 --869.3 613.0 61.9 183.7 9.6 -868.2 636.8 65.9 186.0 27.6 -916.3 640.9 78.2 188.0 --907.2 664.4 42.5 181.8 --888.7 684.7 27.6 176.0 --888.3 709.6 13.7 165.7 --889.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Silver Supply and Demand
Demand Fabrication Industrial Applications Photography Jewellery Silverware Coins & Medals 374.2 218.3 170.6 96.4 32.1 335.6 213.1 174.3 106.1 30.5 340.1 204.3 168.9 83.5 31.6 350.8 192.9 179.2 83.9 35.7 367.6 178.8 174.8 67.2 42.4 407.0 160.3 173.8 67.5 40.0 427.0 142.4 166.3 61.0 39.8 456.1 124.8 163.5 58.4 39.7 443.4 104.9 158.3 56.9 65.2 352.2 82.9 156.6 59.5 78.7
Total Fabrication Producer De-Hedging Implied Net Investment Total Demand
891.7 27.4 -919.1
859.4 -11.4 870.9
828.3 24.8 -853.1
842.4 20.9 6.0 869.3
830.8 -37.4 868.2
848.7 -67.6 916.3
836.4 6.8 64.0 907.2
842.5 24.2 22.0 888.7
828.6 11.6 48.2 888.3
729.8 22.3 136.9 889.0
Silver (London US$/oz)
Price 4.953 4.370 4.599 4.879 6.658 7.312 11.549 13.384 14.989 14.674
SOURCE: World Silver Survey 2010
The Silver Supply Deficit Silver is misunderstood, as is any rare, strategic natural resource. For many years, the world has used more silver than it has produced, yet most people assume that silver is abundant. This was certainly the case before the industrial revolution. Since then, we've had a dramatic shift in perception, just as the mainstream investor begins to catch on and yet before the inevitable price explosion. Over the last two generations, major government stockpiles of silver have been sold off for use by industry. Currently, though, the amount of silver mined each year is far less than the amount used. Industrial users will soon begin to feel the pinch of longer delivery times. When this happens, silver prices will skyrocket
Silver vs. Gold Silver is rare compared to gold. Even long-time silver investors often overlook this fact. Even though gold is a highly desired item, it is NOT an industrial commodity. Whereas gold is desired, silver is needed. This makes it even more critical to take action quickly. Consider that the world’s investors get their main clue from price. Because gold has traded at more than 50 times the price of silver, investors assume that gold is more rare than silver. Yet there is 200 times more gold available than silver in dollar value. Only 35% of silver supply comes from pure silver mines. The rest is the by-product of gold, copper, zinc, and lead mining. In the wake of digital imaging, the recycling of photographic scrap for silver has flattened out. Return of silver jewellery dropped by 20% in 2007, and is expected to remain at similar levels for some time. Given the large market cap in gold compared to silver, even if all the owners of silver decided simultaneously sell their silver and buy gold, this would only amount to 0.5% of the gold market cap. In contrast, if only one half of one percent of gold owners decided to switch into silver, that would represent 100% of the silver market cap. This would have an enormous impact on the price of silver. The Economy When it comes to silver supply, the economy simply doesn’t matter. In a strong economic scenario, surging industrial demand and depleted inventories would propel silver, creating larger annual deficits and forcing prices significantly higher. In a weak economic scenario, many base metal producers would slow production, and as a consequence, the world silver supply would decrease.
Mining is already expensive, but 65% of the world's silver comes as a by-product of other metal production. As a result, silver production cannot be increased without much disruption to other mining activities. That would mean substantial overproduction of copper, lead, and zinc.
Demand India is generally believed to have a ravenous appetite for gold; it is also a major consumer of silver. Of the 4,000 tonnes that India used to import annually, around 2,600 tonnes was used to make jewellery and ornaments. Traders maintain that the import of silver is poised to recover and may hit a fresh record next month, given the good monsoon and the resultant boost in rural incomes. More than 60% of India's silver demand comes from farmers, who stash their savings in silver bangles and coins but, this dipped last year because income in these regions comes from agricultural output which is determined largely by the June-to-September monsoon and, last year, the country experienced one of the worst monsoon seasons in over four decades. However, with bountiful rains this year, the situation is set to reverse. And, traders maintain that India's appetite for silver has also been boosted because gold has become too expensive at current prices. According to official data, India's silver imports in the first six months of 2010 are up 579%, at $1.69 billion. As of April this year, India has also started hallmarking of the white precious metal to ensure purity. With market surveys detecting increasing amounts of impurities in jewellery being sold across the country, public sector trading major, Minerals and Metals Trading Corporation (MMTC) is banking on its branded jewellery, silverware gift items and coins to push up its market share. MMTC is the largest importer of gold in the country. The firm's silver imports fell by more than 44% in the fiscal year to end March 2010, as high prices dented demand. Silver shipments fell to 697 tonnes in 2009-10 from 1,250.39 tonnes in the year-ago period.
Supply India hardly produces any silver and is basically a silver importing country. It holds the 20th place in the list of silver producing countries and the total production of silver in India in 2004 was around 2.1 million ounces. The three major silver producing states in India are: • • • Rajasthan Gujarat Jharkhand
Rajasthan is the leading silver producing state in India with a production of around 32 thousand tons. Gujarat follows on the second place with a production of around 20 thousand tons. As mentioned above, India is primarily a silver importing country, as the production of India is not sufficient to satisfy the ever-growing domestic demand. The production of silver in India stands out at the figure of around 2.1 million ounces placing it at the 20th position in the list of major silver producing countries. The import of silver in India hovers over 110 million ounces that shows the huge size of Indian domestic demand. Imports However, this import level fell sharply as a result of the decline in demand due to rise in silver prices and inconsistent monsoon on which the income of the rural sector depends. But, even this sharp decline could not affect India’s reputation of being one of the largest consumer countries of silver in the world. India stands third after United States and Japan among the leading consumers of silver in the world. The countries from which India imports silver and maintain the flow of silver in the market are: China United Kingdom European Union Australia Over 50% share of import of silver in India is held by Chinese silver. The major importing centre of silver in India was Mumbai but now it has been shifted to Ahmadabad and Jaipur due to high sales tax and octroi charges.
Market influencing factors: 1. Price movements of other metals 2. Income level of the rural sector of the economy 3. Available supply verses Fabrication demand 4. Fluctuation in deficits and interest rates 5. Inflation
Major trading centres of silver 1. London 2. Zurich 3. New York (COMEX) 4. Chicago (CBOT) 5. Hong Kong 6. Tokyo Commodity Exchange (TOCOM)
In India, silver is traded at the following places 1. Delhi 2. Indore 3. Rajasthan 4. Madhya Pradesh 5. Mathura (Uttar Pradesh) 6. Rajkot (Gujarat) Also, silver is traded in the Indian commodity exchanges like National Commodity & Derivatives Exchange ltd, Multi Commodity Exchange of India ltd. and National Multi Commodity Exchange of India ltd
Uses of Silver
Many well known uses of silver involve its precious metal properties, including currency, decorative items and mirrors. The contrast between the appearances of its bright white colour in contrast with other media makes it very useful to the visual arts. It has also long been used to confer high monetary value as objects (such as silver coins and investment bars) or make objects symbolic of high social or political rank. • Currency
Main articles: Silver coin and Silver standard Silver, in the form of electrum (a gold-silver alloy), was coined to produce money in around 700 BC by the Lydians. Later, silver was refined and coined in its pure form. Many nations used silver as the basic unit of monetary value. In the modern world, silver bullion has the ISO currency code XAG. The name of the United Kingdom monetary unit "pound" (£) reflects the fact that it originally represented the value of one troy pound of sterling silver. In the 1800s, many nations, such as the United States and Great Britain, switched from silver to a gold standard of monetary value, then in the 20th century to fiat currency. • Jewellery and silverware
Goddess Minerva on a Roman silver plate, 1st century BC Main articles: jewellery and silversmith Jewellery and silverware are traditionally made from sterling silver (standard silver), an alloy of 92.5% silver with 7.5% copper. In the US, only an alloy consisting of at least 92.5% fine silver can be marketed as "silver" (thus frequently stamped 925). Sterling silver is harder than pure silver, and has a lower melting point (893 °C) than either pure silver or pure copper. Britannia silver is an alternative hallmark-quality standard containing 95.8% silver, often used to make silver tableware and wrought plate. With the addition of germanium, the patented modified alloy Argentium Sterling Silver is formed, with improved properties including resistance to firescale.
Sterling silver jewellery is often plated with a thin coat of .999 fine silver to give the item a shiny finish. This process is called "flashing". Silver jewellery can also be plated with rhodium (for a bright, shiny look) or gold. Silver is a constituent of almost all coloured carat gold alloys and carat gold solders, giving the alloys paler colour and greater hardness. White 9 carat gold contains 62.5% silver and 37.5% gold, while 22 carat gold contains up to 8.4% silver or 8.4% copper. Silver is cheaper than gold, though still valuable, and so is very popular with jewellers who are just starting out and cannot afford to make pieces in gold, or as a practicing material for goldsmith apprentices. Silver has also become very fashionable, and is used frequently in more artistic jewellery pieces. • Dentistry
Silver can be alloyed with mercury, tin and other metals at room temperature to make amalgams that are widely used for dental fillings. To make dental amalgam, a mixture of powdered silver and other metals is mixed with mercury to make a stiff paste that can be adapted to the shape of a cavity. The dental amalgam achieves initial hardness within minutes but sets hard in a few hours.
Photography and electronics
Photography used 30.98% of the silver consumed in 1998 in the form of silver nitrate and silver halides. In 2001, 23.47% was used for photography, while 20.03% was used in jewellery, 38.51% for industrial uses, and only 3.5% for coins and medals. The use of silver in photography has rapidly declined, due to the lower demand for consumer colour film from the advent of digital technology, since in 2007 of the 894.5 million ounces of silver in supply, just 128.3 million ounces (14.3%) were consumed by the photographic sector, and the total amount of silver consumed in 2007 by the photographic sector compared to 1998 is just 50%. • Mirrors and optics
Mirrors which need superior reflectivity for visible light are made with silver as the reflecting material in a process called silvering, though common mirrors are backed with
aluminium. Using a process called sputtering, silver (and sometimes gold) can be applied to glass at various thicknesses, allowing different amounts of light to penetrate. Silver is usually reserved for coatings of specialized optics, and the silvering most often seen in architectural glass and tinted windows on vehicles is produced by sputtered aluminium, which is cheaper and less susceptible to tarnishing and corrosion. Silver is the reflective coating of choice for solar reflectors. • Other industrial and commercial applications
Yanagisawa A9932J alto saxophone: has a solid silver bell and neck with solid phosphor bronze body. The bell, neck and key-cups are extensively engraved. Manufactured in 2008, silver and silver alloys are used in the construction of high quality musical wind instruments of many types. Flutes, in particular, are commonly constructed of silver alloy or silver plated, both for appearance and for the frictional surface properties of silver. • Medicinal
Silver ions and silver compounds show a toxic effect on some bacteria, viruses, algae and fungi, typical for heavy metals like lead or mercury, but without the high toxicity to humans that are normally associated with these other metals. Its germicidal effects kill many microbial organisms in vitro, but testing and standardization of silver products is difficult. Hippocrates, the "father of medicine", wrote that silver had beneficial healing and antidisease properties, and the Phoenicians used to store water, wine, and vinegar in silver bottles to prevent spoiling. In the early 1900s people would put silver coins in milk bottles to prolong the milk's freshness. Its germicidal effects increased its value in utensils and as jewellery. The exact process of silver's germicidal effect is still not entirely understood, although theories exist. One of these is the oligodynamic effect, which explains the effect on microorganisms but would not explain antiviral effects. Silver is widely used in topical gels and impregnated into bandages because of its widespectrum antimicrobial activity. The anti-microbial properties of silver stem from the chemical properties of its ionized form. This ion forms strong molecular bonds with other substances used by bacteria to respire, such as molecules containing sulphur, nitrogen, and oxygen. When the Ag+ ion forms a complex with these molecules, they are rendered
unusable by the bacteria, depriving them of necessary compounds and eventually leading to the bacteria's death. • Clothing and shoes
Silver inhibits the growth of bacteria and fungi. In clothing, such as socks, it keeps odour to a minimum and reduces the risk of bacterial and fungal infection. The combination of silver and moisture movement (wicking) may help to reduce the harmful effects of prolonged use in active and humid conditions. Silver is incorporated into clothing or shoes in one of two ways: A process in which silver nanoparticles are integrated into the polymer from which yarns are made. A process in which the silver is coated onto the yarns, such as X-Static or Sanitized Silver.
Silver has been making new Highs since last few months. It has been observing a bull run after it has crossed the mark of Rs 29500.
Head And Shoulders Bottom Pattern (3years)
Silver first touches the left shoulder, then forming the head and later touching the right shoulder and finally giving a breakout. Similar Pattern has been observed below where the graph if of 6 months.
Double Top (1 year)
Long Term Support (1year)
Short Term Support
Ascending Triangle in Uptrend
Simple Moving Average ---- 5 days moving average --- 35 days moving average
Relative Strength Index (RSI)