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Tuesday, 31 January 2012

Silver Surges 21% in January - Silver Demand Is “Diminishing A Supply Surplus”

There continues to be no coverage of silver in the non specialist financial media and little coverage of silver in the specialist financial media. However, both the Financial Times and Bloomberg cover silver today which might be a harbinger of short term weakness. The majority of articles on silver are bearish and most bank analysts remain bearish on silver again in 2012 – as they have been in recent years. Prices will average $37.50/ounce in Q4, according to a survey of 13 analysts by Bloomberg. The lack of coverage of silver and consequent “animal spirits” in the silver market is of course bullish from a contrarian perspective. Analysts look set to get the silver market wrong again as recent rocketing industrial demand for silver, from solar panels to batteries to medical applications and growing investor demand for coins, and small & large bars is “diminishing a supply surplus” according to Nicholas Larkin of Bloomberg. This has led to silver’s best January gains in 30 years with silver up over 20% from below $28/oz to nearly $34/oz. Barclay's estimates that manufacturers will need a 2.5% increase of the metric tons used last year and investment demand continues to grow due to risks posed by both inflation and systemic risks. Silver supply shortages are something we and other analysts who are bullish on silver have been warning of for some time. This is because the silver market is small versus the gold market and tiny versus equity, bond, currency and derivative markets. This is why we believe silver should rise to well over its nominal recent and 1980 high of $50/oz in the coming months....more

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