There has been much speculation as to why silver prices are touching 20-month lows. London-based Gold Fields Mineral Services (GFMS) has produced an interim review of the silver market, and its research shows that two issues have combined to drive down silver prices: the economics of supply and demand; and the continued strength of the U.S. dollar.
GFMS points out that although silver is taking a beating against the U.S. dollar, it has performed well in relation to many other currencies. Against the Euro, for instance, the average year-to-date silver price is up more than 10%.
However, numerous supply-related issues cloud the picture.
GFMS predicts a 6.5% growth rate in mine production in 2000, with the lion’s share of the increase coming from higher output in Australia and Peru, and a modest recovery in Mexico. There will also be an increase in scrap, due mostly to Indian distress sales.
The depressed Indian jewelry and silverware market will certainly absorb less silver in 2000, given that drought and flooding in different parts of that country have contributed to the rupee’s continued slide against the U.S. dollar.
Meanwhile, official sector sales are forecast to decline significantly from 1999 levels, reflecting lower sales of Chinese government stocks.
Those holding bullion stocks are divesting at a rapid rate — even faster than record levels set in 1999.
Two bright spots remain: industrial demand for the metal has reached double-digit levels (mostly as a result of development in electronics); and a modest rise is projected for use in photography.
— The preceding is an excerpt from an information bulletin published by Gold Fields Mineral Services.
Be the first to comment on "The Silver slump"