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Silver
 
Introduction
  • Silver (Chemical symbol-Ag) is a brilliant grey-white metal that is soft and malleable.
  • Silver’s unique properties include its strength, malleability, ductility, electrical and thermal conductivity, sensitivity, high reflectance of light, and reactivity.
  • The main source of silver is lead ore, although it can also be found associated with copper, zinc and gold and produced as a by-product of base metal mining activities.
  • Secondary silver sources include coin melt, scrap recovery, and dis-hoarding from countries where export is restricted. Secondary sources are price sensitive.
 
Demand and Supply
  • In 2011, the worldwide silver fabrication demand was 876.6 million ounces (Moz)—down by 1.5% from the value in 2010, but still reaching its second highest level since 2000.
  • Globally, in 2011, the physical silver bar investment grew by 67% to 95.7 Moz, while fabrication of coins and medals rose by almost 19% to an all-time high of 118.2 Moz.
  • In 2011, silverware offtake dropped by 10.2% to 46.0 Moz from the previous year, as a result of lower demand in India. Higher prices coupled with ongoing structural decline in the western markets caused a fall in the Indian silverware demand. Part of this fall was offset by some gains in China.
  • The world silver mine production increased by 1.4% to a new record level of 761.6 Moz in 2011, as compared with the previous year.
  • In 2011, scrap supply rose by 12% over the previous fiscal to a second straight record of 256.7 Moz, driven by gains in jewellery and silverware recycling on higher prices.
  • Government sales fell by a massive 74 per cent to a 14-year low of 11.5 Moz in 2011.The drastic decline was entirely due to a collapse in sales from Russia, where disposals dropped by nearly 90%.
  • Notable production losses were observed in Australia, Peru, the United States and Turkey in 2011, amounting to 20.3 Moz.
 
Global Scenario
  • Silver is predominantly traded on the London Bullion Market Association (LBMA) and COMEX in New York.
  • LBMA, the global hub of over-the-counter (OTC) trading in silver, is the metal’s main physical market. Comex is a futures and options exchange, where most funds’ activities are focused.
  • Silver is invariably quoted in US Dollars per troy ounce.
 
Indian Scenario
  • The average annual demand for silver in India is about 2500 Metric tonnes (MT) per year. In 2011, the country’s production was around 342.13 MT.
  • Nearly 60% of India's silver demand comes from farmers and rural India, who store their savings in the form of silver bangles and coins.
 
Factors Influencing the Market
  • Economic events such as India’s industrial growth, the global financial crisis, recession and inflation affect metal prices.
  • Commodity-specific events such as the construction of new production facilities or processes, unexpected mine or plant closures, or industry restructuring affect the market.
  • Governments set trade policy (implementation or suspension of taxes, penalties, and quotas) that affect supply by regulating (restricting or encouraging) the material flow.
  • Geopolitical events involving governments or economic paradigms and armed conflict can cause major changes.
  • A faster growth in demand against supply often leads to a drop in stocks with the government and investors.
  • Silver demand is underpinned by the demand from jewellery and silverware, industrial applications, and overall industrial growth.
  • In India, the real industrial demand occupies a small share in the total industrial demand for silver. This is in sharp contrast to most developed economies.
  • In India, silver demand is also determined to a large extent by its price level and volatility.
 
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Web sources on
 www.silverinstitute.org
 www.lbma.org.uk
 www.nymex.com
 www.tocom.or.jp
 www.gfms.co.uk
 www.kitco.com
 
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