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Gold/Mining/Energy : Silver Super Bulls -- Ignore unavailable to you. Want to Upgrade?

To: Silver Super Bull who wrote (352)	9/29/2003 11:08:18 AM
From: Larry S.	Respond to of 1281

deadbull, Barron's Commodities Corner was all about silver this week. There isn't anything really new in it but the thread may be interested to see that it was mentioned in Barron's - copied below without chart. Larry MONDAY, SEPTEMBER 29, 2003 COMMODITIES CORNER Ho-Hum Silver Digital photography caps metal's potential By GAVIN MAGUIRE SILVER HASN'T KEPT PACE with the steady march higher by gold since 2001, but does that signal inherent weakness or unrealized potential? Bulls contend that the growing interest in all commodities from large speculative funds such as hedge funds could lift silver 20-30 cents a troy ounce from the current price around $5.25. "There's no doubt that if hedge funds are buying silver, along with other commodities, prices will rise. They control the game in gold, and now they seem to like silver, too, so they're going to drive prices higher," says Leonard Kaplan, president of money managers Prospector Asset Management. And while gold futures at the Comex division of the New York Mercantile Exchange have drawn a flood of speculative orders, boosting open interest -- the number of total outstanding positions -- to 290,000 lots, open interest in silver is about 115,000. Silver bulls say that implies the potential for more buying. More fundamentally, the bulls note that the market has suffered for years from a deficit of newly refined silver, such that inventories have been run down since the early 1990s. While those inventories, built up by central banks, bullion houses, and producers over several years, were substantial a decade ago, they're probably much smaller now. This argument has been a staple of the bullish case through years when prices haven't advanced, but its adherents say that doesn't detract from its validity. "How much silver is left is not clear, but every indication is that the amount is very low compared to what it has been, and a day of reckoning will occur," predicts New York research firm CPM Group in its 2002 annual silver survey. Also supporting the bulls' optimism is the approach of the wedding season in India -- where gold and silver jewelry is regularly given as a bridal gift -- and strong demand from China. They also hope that a sustained recovery in the world economy will increase silver usage in construction and production, as well as in the jewelry sector. However, skeptics can marshal some powerful arguments that prices won't make a sustained pull above the $5.50 area. Chief among those arguments is a shift in photography away from traditional film to digital technology. Photographic-film paper relies heavily on silver for image retention, and accounts for 32%-34% of annual silver demand. Digital technology requires virtually none of the white metal. Advances in technology are likely to continue to draw consumers toward digital cameras -- evidenced by Eastman Kodak's announcement last week it would shift efforts to digital -- taking a hefty portion of silver demand with it. Another factor expected to limit silver's upside is that over 80% of supply comes from mines at which the metal is a byproduct or from scrapped industrial materials. Copper mines are the major source of incidental silver production -- and production of the red metal could be increased notably if copper prices stretch much beyond and hold above their current two-year high levels. Another pertinent issue is the price elasticity of jewelry demand, particularly in major traditional demand centers such as India and the Far East. Jewelry accounts for around 30% of total silver demand, and any sharp price spikes are likely to swiftly curb that demand. Indeed, one dealer with a large U.S. investment bank argues that while gold jewelry demand is also price-sensitive, gold has safe-haven and insurance attributes that ensure buying persists, even into price strength. "Silver lacks the broad spectrum of qualities that gold has that keeps it popular even in, or perhaps because of, times of price strength," he argues. "In fact, there's a good chance that if both silver and gold prices rise, some consumers may not be able to afford both and might opt to buy only gold and no silver as gold might be considered a more reliable store of value," he adds. "If that happens, we could see a quick response from speculators in the form of profit-taking, which could serve to place a lid of sorts on the market." He argues that the $5.70-5.80 region may prove to be the upper limit of any short to medium-term price gains. Dave Rinehimer, director of futures research at Citigroup Global Markets, agrees. "There's definitely room to the upside for silver, but I think it's done pretty well already. So I think we might see it up to $5.75-5.80, but no higher."