Silver is a soft metal with a characteristic shiny light-grey to white color. Silver is an element with the atomic number 47, and gets its chemical symbol Ag from the latin word Argentum. The word Silver is one of the few words in the English language that is nearly impossible to rhyme.
Silver is often found by itself naturally in a free state, or as an alloy (a rock containing various metals and elements) with Gold, Copper and Lead ores, or in concentration in ores like Argenite. You may have heard of the term Sterling Silver, this is the name given to an alloy that is at least 92.5% Silver by weight. The other 7.5% is made up of other metals, usually Copper.
Silver is a precious metal that is used in a wide array of industrial applications as well as in jewelry and photographic film. Industrial applications (for example computers, cell phones, TV, batteries, pharmaceuticals) made up about 54% of the world's silver fabrication demand in 2007. As a whole, demand for silver has been growing faster than annual production since 1990, and silver inventory has dropped 98% from 1942 to 2004, from 5.9 billion ounces to 115 million ounces respectively. Silver is even more scarce than gold, as the above ground supply of silver was about 5 times less than that of gold in 2006.
The effect of the falling supply of silver coupled with increasing demand from the US economic slowdown has lifted silver prices to their highest point since 1981 (2007 average silver price was $13.38/oz, and by the end of 2011 it was over $26/oz). In the spring of 2011 Silver traded close to its all-time high of just under $50/oz set back in January 1980. (note: after factoring in inflation and the CPI for over three decades, $50 back in 1980 is equivalent to around $125-$130 today).
Silver is valued for its use in jewelry and decoration, coinage, photographic film, dentistry, brazing alloys and solders, plus many other industrial uses. Because of its relatively low-cost, excellent electrical and thermal conductivity, Silver is used in most circuit boards and electronic components.
The value of Silver is based on both its industrial supply versus demand, and on its relationship to the price of Gold. In this way, Silver is both an industrial metal that is consumed, and a precious metal that investors use as a store of value. Like Gold, Silver has always had favorable liquidity, but does not provide any current income. Silver also does not provide positive cash flow, and owners must pay to maintain, store, and insure it. Silver is sometimes referred to as "Poor Mans Gold".
Silver and Gold are often found together. By total mass, a typical Gold/Silver mine produces around 15 times as much Silver as Gold. However, as of November 2009, Gold was valued at around 65 times the value of Silver. Perhaps also favoring the relative value of Silver is the fact that Silver is getting scarce even though it is more abundant in most mines than Gold. This is because most of the Silver ever mined ended up in landfills due to its use mainly as a low-cost industrial metal, while most of the Gold ever produced remains above ground.
Gold and Silver ETF's pay holding costs that get reflected in their price. An alternative to paying these holding costs, and to receive some cash flow income from dividends, is for investors to own shares in publicly traded Silver producing companies. More active Silver investors and speculators can also trade resource exploration and development stage stocks. These stocks usually don't pay dividends, but this higher risk/return strategy can be another way to own, diversify or hedge Silver opportunities.
Search to discover hundreds of small-cap silver, resource and non-resource stocks at InvestorsGuru.com's Small Cap Directory.
5,000 ounce Silver future contracts are traded on the COMEX under ticker symbol SI for delivery in all months. The most active months for delivery (according to volume and open interests) are March, May, July, September and December.
Companies/Funds Helped by Rising Silver Prices
Major Primary Silver Producers
- Pan American Silver (NASDAQ: PAAS)(TSX: PAA) has mines in Bolivia, Mexico and Peru. World's largest primary silver miner with silver production of 17.33M oz in 2007. Just over half of their silver comes from metal by-product production.
- Silver Wheaton (NYSE: SLW)(TSX: SLW) has mines in Greece, Mexico, Peru and Sweden. Long-term contracts with 5 different silver mining companies which allows SLW to buy silver from these mines at an almost fixed purchase price of around $3.90/oz. As a result, Silver Wheaton gets all of their revenues by then selling this silver in the market.
- Silver Standard Resources (NASDAQ: SSRI)(TSX: SSO) has mines in Argentina, Australia, Mexico, Chile, Peru, Canada and USA. Owns or has large stakes in several mines worth 1.5 billion oz of silver. Its Pirquitas mine in Argentina is estimated to produce 10M oz of silver per year.
125 Other Silver Mining Companies - both big & small, at various stages of exploration, development & production
Abcourt Mines (TSXV: ABI): Gold, silver and zinc in Quebec
Alcyone Resources (OTC: ALCYF): Silver in Australia
Alexco Resource (TSX: AXR): Silver in Canada
Apogee Silver (TSXV: APE): Silver, lead, zinc in Bolivia
Aquiline Resources (TSX: AQI): Acquired by Pan American Silver in 2009. Silver and gold in Argentina, Canada and Mexico
Arian Silver (TSXV: AGQ): Silver in Mexico
Aura Silver (TSXV: AUU): Silver in Canada, El Salvador, Mexico, USA
Aurcana (TSXV: AUN): Silver, gold, lead, zinc in Mexico
Aurex BioMining AG (not listed): Silver in Austria
Avino Silver & Gold Mines (TSXV: ASM): Silver, gold, zinc, copper, lead in British Columbia
Barrick Gold (NYSE: ABX): Gold, silver and other metals. World's largest gold producer.
Bear Creek Mining (TSXV: BCM): Silver, gold in Peru. 70% stake in one of the largest silver deposits in the world.
Canadian Zinc (TSX: CZN): Silver, zinc and lead in Canada
Canarc Resource (TSX: CCM): Silver in South America
Canasil Resources (TSXV: CLZ): Silver, gold, copper, lead, zinc in British Columbia and Mexico
Capstone Mining (TSX: CS): Silver in Mexico
Cerro Resources (TSXV: CJO): Silver, gold, copper, rhenium, molybdenum in Australia and Mexico
Chariot Resources (TSX: CHD): Silver and copper in Peru. Acquired by China Sci-Tech in June 2010.
Chesapeake Gold (TSXV: CKG): Silver, gold, zinc in Mexico and the USA
CMC Metals (TSXV: CMB): Silver in Canada
Coeur d'Alene Mines (NYSE: CDE): Silver in Argentina, Mexico, Alaska, Nevada and Bolivia. Largest U.S. based primary silver producer.
Compania de Minas Buenaventura (NYSE: BVN): Precious metals in Peru, 16.757 mil oz ('09)
Continuum Resources (TSXV: CNU): Silver, gold in Mexico. Acquired by Fortuna Silver Mines in March 2009.
Cornerstone Capital Resources (TSXV: CGP): Gold, silver, copper, nickel, VMS, potash, and uranium properties in Canada and Ecuador
Cream Minerals (TSXV: CMA): Silver, gold, base metals in Canada, Mexico and Sierra Leone
Dia Bras Exploration (TSXV: DIB): Gold, silver, lead, copper and zinc in northern Mexico
Duran Ventures (TSXV: DRV): Silver, gold, copper, polymetallic metals in Peru
Eagle Plains Resources (TSXV: EPL): 35 gold, silver, uranium, copper, molybdenum, zinc and rare earth mineral projects in Canada
Eastfield Resources (TSXV: ETF): Gold, copper, silver, nickel, molybdenum and Platinum Group Metals in Canada and USA
Endeavour Silver (TSX: EDR): Silver in Mexico
Eskay Mining (TSXV: ESK): Silver, gold in Canada
Esperanza Silver (TSXV: EPZ): Gold, silver in Mexico and Peru
Excellon Resources (TSX: EXN): Silver in Mexico
First Majestic Silver (NYSE: AG)(TSX: FR): Silver in Mexico
First Point Minerals (TSXV: FPX): Silver, gold, base metals in Mexico and the Americas
Fortuna Silver Mines (TSXV: FVI): Silver, gold in Mexico and Peru
Fury Exploration (TSXV: FUR): Silver in Canada. Merged with Golden Predator in 2008.
Genco Resources (TSX: GGC): Silver in Mexico. Merged with Silvermex Resources in 2010.
Gitennes Exploration (TSXV: GIT): Silver, gold copper in Peru
Goldcorp (NYSE: GG): Silver in Guatemala (4.2m oz 2009) and Mexico (Penasquito 1 bil oz 2P). Low-cost major gold producer.
Golden Goliath Resources (TSXV: GNG): Silver, gold in Mexico
Golden Minerals (AMEX: AUMN): Silver and other metals in Mexico, Argentina and Peru
Golden Predator (TSX: GPD): Gold, silver in the Yukon Canada and Nevada USA
Great Panther Resources (TSX: GPR): Silver in Mexico
Gunpoint Exploration (TSXV: GUN): Silver, gold in Nevada USA (Talapoosa), Mexico (La Gitana) and Guatemala (El Escorpion)
Hecla Mining (NYSE: HL): Silver, gold in Mexico and USA
Hellix Ventures (TSXV: HEL): Silver, gold in Mexico
Herencia Resources (LSE: HER): Silver, lead, zinc and copper, gold in Chile
Hochschild Mining (LSE: HOC): Silver in Argentina, Chile, Mexico, Peru
Huldra Silver (TSXV: HDA): Silver in Canada
Impact Silver (TSXV: ITP): Silver producer, multiple mines in Mexico
International Minerals (TSX: IMZ): Silver, gold in Ecuador and Peru
Intrepid Mines (TSX: IAU): Silver, gold in Australia and Indonesia
Kimber Resources (TSX: KBR): Silver, gold in Mexico
Klondike Silver (TSXV: KS): Silver in Canada, Mexico
Levon Resources (TSXV: LVN): Silver, gold, lead, zinc and molybdenum in Canada, Mexico, USA
LKA International (OTCBB: LKAI): Silver, gold in USA
Logan Resources (TSXV: LGR): Precious metals, base metals and uranium in Canada
MAG Silver (TSX: MAG): Silver in Mexico
Marifil Mines (TSXV: MFM): Silver, gold, base metals in Argentina
McEwen Mining (NYSE: MUX): Gold and silver in Nevada USA and Mexico. High growth, low-cost, mid-tier producer
Mexican Silver Mines (TSXV: MSM): Silver in Mexico. Merged with Rio Alto Mining (TSX: RIO) in 2009.
Milner Consolidated Silver Mines (TSXV: MCA): Silver in Canada
Minefinders (TSX: MFL): Delores gold, silver mine in Mexico. Acquired by Pan American Silver in 2012.
Mines Management (TSX: MGT): Silver, copper in the USA
Minco Silver (TSX: MSV): Silver in China
Mindoro Resources (TSXV: MIO): Silver, base metals in the Philippines
Mountain Boy Minerals (TSXV: MTB): Silver, gold, base metals in Canada
Musgrove Minerals (TSXV: MGS): Silver, gold in the Americas. Named changed from Journey Resources in 2010.
Netco Silver (TSXV: NEI): Silver, with gold and copper. Toruel epithermal vein and breccia in the Rio Negro Province of Argentina.
Normabec Mining (TSXV: NMB): Silver, gold in Canada and Mexico. Acquired by First Majestic Silver in 2009.
Oracle Mining (TSX: OMN): Gold, silver, base metals in Peru, V.GHK Renamed in 2011. Oracle Ridge Copper Mine, Tucson, Arizona USA.
Oremex Silver (TSXV: OAG): Silver in Mexico
Orko Silver (TSXV: OK): Silver in Mexico
Oro Mining (TSXV: OGR): Gold, silver in Mexico
Pacific Comox Resources (TSXV: PCM): Silver, gold, molybdenum, copper in Canada and Mexico
Palmarejo Silver and Gold (TSXV: PJO): Silver, gold in Mexico. Acquired by Coeur d'Alene Mines in 2008.
Pershimco Resources (TSXV: PRO): Silver, gold in Mexico
Piedmont Mining (OTC: PIED): Silver, gold in USA
Portal Resources (TSXV: PDO): Silver, gold in Mexico, USA, gas and oil in Mexico. 2012 changed name to Galileo Petroleum (TSXV: GPL).
Quaterra Resources (TSXV: QTA): Silver in Mexico
Redcorp Ventures (TSX: RDV): Silver, gold, copper, lead, zinc in Canada. Delisted in 2009.
Revett Minerals (TSX: RVM): Silver, gold, copper in USA
Rio Tinto (NYSE: RIO): Silver produced in Utah, 6.862 mil oz in 2010, 8.569 mil oz in 2009. Major global precious & base metals producer
Royal Gold (NASDAQ: RGLD): Silver royalty claim on Penasquito and Dolores
Sabina Gold & Silver (TSXV: SBB): Silver in Canada
Scorpio Mining (TSX: SPM): Silver in Mexico
Silvercorp (TSX: SVM): Silver and other metals in China and Canada. China's largest primary Silver producer
SilverCrest Mines (TSXV: SVL): Silver in Chile, El Salvador, Mexico
Silver Dragon Resources (OTCBB: SDRG): Silver in China
Silver Eagle Mines (TSX: SEG): Silver in Mexico. Acquired by Excellon Resources in 2009.
Silver Fields Resources (TSXV: SF): Silver in Canada, Mexico, USA
Silver Grail Resources (TSXV: SVG): Silver in Canada
Silvermet (TSXV: SYI): Silver in Canada, Turkey
Silvermex Resources (TSX: SLX): Silver in Mexico. Acquired by First Majestic Silver in 2012.
Silver Quest Resources (TSXV: SQI): Gold, silver in B.C. and the Yukon Canada. Acquired by New Gold Inc. (AMEX: NGD)(TSX: NGD) in 2011, with Independence Gold (TSXV: IGO) spin-out.
Silverstone Resources (TSXV: SST): Silver in Mexico. Acquired by Silver Wheaton in 2009.
SNS Silver (TSXV: SNS): Crescent silver mine in Idaho USA, see Gold Finder Explorations (TSXV: GFN)
South American Silver (TSX: SAC): Silver, indium, gold, copper in Bolivia, Chile
Southern Silver Exploration (TSXV: SSV): Silver in Mexico, Arizona USA
St. Eugene Mining (TSXV: SEM): Silver, lead, zinc in Canada. Acquired by Claude Resources (AMEX: CGR)(TSX: CRJ) in 2011.
Starcore Intl Mines (TSX: SAM): Silver, gold in Mexico
Stealth Minerals (TSXV: SML): Silver, gold, copper in B.C. Canada
Sterling Mining (OTC: SRLMQ): Sunshine silver mine, Idaho. Chapter 11 in 2010, acquired for $24M by Silver Opportunity Partners LLC.
Stroud Resources (TSXV: SDR): Natural gas wells, gold in Ontario Canada, silver in Mexico
Suparna Gold (TSXV: SUG): Guiana Shield in Suriname, South America
Teryl Resources (TSXV: TRC): Silver, gold, copper in Alaska
Tumi Resources (TSXV: TM): Silver in Mexico, Sweden
UC Resources (TSXV: UC): Silver, gold in the Sierra Madre Mining Belt Mexico
US Silver (TSXV: USA): Second largest primary silver producer in the USA. Combining with RX Gold & Silver (TSXV: RXE)
Valencia Ventures (TSXV: VVI): Silver in the Americas, Chile assets sold to Apogee Silver 2012.
Wildcat Silver (TSXV: WS): Silver in Santa Cruz County, Arizona, USA
Yale Resources (TSXV: YLL): Silver in Mexico
For more up to date information you can also search our small-cap directory to discover hundreds of resource and non-resource stocks.
Silver Exchange Traded Funds (ETFs)
Many of the ETFs buy actual silver reserves as backing to the fund. As a result, ETFs make up about 50% of the world's silver market.
- iShares Silver Trust (NYSE: SLV): This is an ETF that has silver reserves of over 180M oz.
- Central Fund of Canada (AMEX: CEF)(TSX: CEF.A)(TSX: CEF.U): This ETF has about 45% of its reserves in silver while the remaining 55% is in gold.
- ETFS Silver Trust (NYSE: SIVR): This ETF tracks the DJ-AIG Silver Sub Index.
- ETFS Physical Silver (LSE: PHAG): This ETF is backed by silver bullion.
- ZKB Silver ETF (OTC: ZSILF): This is a silver ETF entirely backed by physical silver. This ETF is not open to US investors.
- ProShares Ultra Silver (NYSE: AGQ): This is an ETF that obtains twice (200%) of silver's gains or losses.
- ETFS Physical White Metals Basket Share (NYSE: WITE) precious metals basket: silver, platinum and palladium bullion, inception date December 3, 2010.
- ETFS Physical PM Basket (NYSE: GLTR) precious metals basket: gold, silver, platinum and palladium bullion, inception date October 22, 2010.
Companies Hurt by Rising Silver Prices
- Signet Jewelers (NYSE: SIG): Affordable jewelry companies like Signet are more vulnerable than higher-end competitors to rising silver prices, because they are less able to raise prices due to their lower-income client base.
- Tiffany & Co. (NYSE: TIF): About 30% of Tiffany's revenue comes from non-gemstone silver jewelry.
- Eastman Kodak Company (NYSE: EK): Kodak increased prices 20% in May 2008 largely due to rising silver prices. Silver nitrates and halides react with light and are used in photographic film.
- FUJIFILM Holdings (OTC: FUJIY)(OTC: FUJIF): Fuji increased prices 20% in May 2008 largely due to rising silver prices. Silver nitrates and halides react with light and are used in photographic film.
Factors that Influence Silver Prices
The Effect of Silver Stockpiling
Silver is one the best conductors of energy which makes it an important component in most electrical devices. It is also a very good reflector of light making it valuable to producers of mirrors, windows, and other glass products. When silver prices rise, large companies that are dependent on the metal tend to horde it. This can further drive up demand, as was the case with palladium. In 2000, the Russian supply of palladium was disrupted causing prices to rise. In response, companies who used palladium in their products began to stockpile the metal. This drove prices up to $1,100/oz from $330/oz previously.
Silver is a Byproduct Metal
About 80% of mined silver is gathered as a byproduct of other metals, such as copper, nickel, zinc, and lead. Most of this metal comes from mines outside of the U.S. When the dollar falls against other currencies, the cost for importing these metals rise and demand falls, driving down silver production.
On the Commodity Exchange (COMEX), the silver short position is very large. In fact, silver is the world's only commodity that has a short position which is larger than both its global production and inventories. The extent of this position has been created by naked short selling, which means shares are sold without an arrangement or promise of a borrower. This large short position helps to keep silver prices lower than they may be otherwise.
Countries Buying and Selling Silver
When countries sell their reserves of silver in the market they increase the supply of silver available. However, in 2007, sales from countries dropped 46% because China and India did not sell as much silver as they did in the past.
Although the majority of silver is produced as a byproduct of other metals, 20% comes from actual silver deposits. Mine production grew only 4% in 2007 to 670.6M oz and additional silver deposits are becoming increasingly difficult to find.
Silver Supply and Demand
In 1980 the price of silver climbed to $50/oz from only $5/oz two years earlier. The reason for this was a massive discrepancy between supply and demand. Previous to 1980 the US government tried to keep silver prices low by periodically loaning out silver from the 2 billion ounce silver inventory that it kept in the U.S. Strategic Stockpile. They loaned out the silver in return for silver certificates, essentially an IOU. By the time the contracts were up, there was a demand of 4 billion ounces of silver, but in reality, there was only 2 billion ounces of silver in the market. As a result prices skyrocketed to make up for the gap between supply and demand.
Today, the majority of silver demand is from industrial applications. Industrial application demand has risen every year since 2001 and now makes up 54% of silver demand with 455.3M ounces. At the same time, above ground supply of silver decreased 8% and government sales (more government sales means more supply) decreased 46% in 2007, primarily because China and India did not sell much silver that year. In addition, silver mining is struggling to find new silver sites and keep up with demand (silver mining grew 4% in 2007).
This table gives an overview on global supply by producers and demand by industry sectors from 1999 to 2008.
More at: wikinvest.com
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