THE SILVER MARKET IN 2011

Transcription

1 THE SILVER MARKET IN 2011 PHILIP KLAPWIJK GLOBAL HEAD OF METAL ANALYTICS The Silver Institute, New York, 16 th November 2011

2 THE SILVER MARKET IN 2011 SILVER PRICES DEMAND SUPPLY INVESTMENT PRICE OUTLOOK

3 THE SILVER PRICE US$/oz Average Year-on-year Intra-period % 78.4% 1 Jan - 15 Nov % 10.9% US$/oz Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

4 US DOLLAR AND EURO PRICES 60 Euro/oz Average Year-on-year Intra-period % 96.6% US$ and Euro/oz Jan-15 Nov % 9.1% US $ Euro 10 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

5 SILVER, GOLD & BASE METALS PRICES 180 Index (4th January 2011 = 100) Lead Silver Zinc Gold Copper 60 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11

6 QUARTERLY CORRELATION OF DAILY SILVER PRICE WITH GOLD & COPPER PRICES 1.2 Correlation Coefficient Gold Copper Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11

7 GOLD/SILVER RATIO TO DATE (BASIS WEEKLY AVERAGE PRICES) Average st Jan-15th Nov 2011 =

8 THE SILVER MARKET IN 2011 PRICES DEMAND SUPPLY INVESTMENT PRICE OUTLOOK

9 WORLD SILVER DEMAND 2010 Actual 2011 Forecast Investment 27% Industrial 46% Investment 26% Industrial 48% Jewellery & Silverware 20% Jewellery & Silverware 20% Photography 7% Photography 6%

10 WORLD SILVER FABRICATION FORECAST ANNUAL CHANGES: 2011 LESS Million ounces Industrial Coins Jewellery & Silverware Photographic

11 DEMAND SUMMARY Total fabrication demand forecast to rise by 4% in 2011 After 2010 s stellar rise, growth in industrial offtake has slowed, on the back of the tragedy in Japan, the end of stock replenishment and, more recently, slower economic growth Despite higher prices, jewellery up a little in 2011, due to ongoing market penetration in the youth demographic and substitution at the expense of gold Both silverware and photographic demand maintain their long term trend of decline, with this exacerbated by high prices Coin demand will rise to a new record level this year, reflecting strong investor interest.

12 THE SILVER MARKET IN 2011 PRICES DEMAND SUPPLY INVESTMENT PRICE OUTLOOK

13 WORLD SILVER SUPPLY 2010 Actual 2011 Forecast Scrap 20% Scrap 22% Producer Hedging 5% Government Sales 4% Producer Hedging 3% Government Sales 1% Mine production 71% Mine production 74%

14 WORLD SILVER SUPPLY FORECAST ANNUAL CHANGES: 2011 LESS Million ounces Mine production Net Government Sales Net producer hedging Scrap

15 WORLD SILVER MINE PRODUCTION Growth of almost 190Moz in F 4% increase forecast for 2011 Million ounces By-product Primary F

16 MINE PRODUCTION: WINNERS AND LOSERS IN 2011* Million ounces Mexico China Russia United States Peru Australia * Figures represent year-on-year change, i.e less 2010

17 OUTSTANDING DELTA ADJUSTED PRODUCERS HEDGE POSITION Million ounces F

18 SUPPLY SUMMARY Total supply forecast to be marginally higher year-on-year Mine production expected to rise by 31Moz or 4% in 2011, driven by a strong project pipeline, much higher precious metal prices and a healthy performance by the base metals sector Producer hedging will remain an important source of supply in 2011, albeit slightly lower year-on-year Scrap supply forecast to rise by 20Moz or 9% in 2011, despite ongoing declines from the photographic sector Government sales largely unpredictable but estimated to have fallen sharply in 2011 to-date.

19 THE SILVER MARKET IN 2011 PRICES DEMAND SUPPLY INVESTMENT PRICE OUTLOOK

20 FROM DEFICIT TO SURPLUS SUPPLY (mine production + scrap) Million ounces DEMAND (fabrication excluding coins) F

21 WORLD SILVER INVESTMENT* AND VALUE Investment Value Million ounces US$ Billions F 0 *World Investment is the sum of implied net investment and coins & medals

22 SILVER ETF HOLDINGS Million ounces ishare ZKB ETF Securities* Other** 577Moz at end-october 2011, down by 23Moz from end *Includes ETFS London, Australia, NYSE, Glitter and WITE ** Includes Julius Baer, Mitsubishi, Sprott, Claymore, Central Fund of Canada, Silver Bullion Trust, DB Physical Silver, ishare ETC, Source: Respective issuers

23 INVESTORS * NET POSITIONS IN COMEX SILVER FUTURES Net positions (contracts, thousand) Comex Settlement Price Cents/oz * non-commercial & non-reportable net positions in futures taken as proxy for investors positions; Source: CFTC

24 MONTHLY CHANGES IN SILVER INVESTMENT Coins* 50 Million ounces ETFs Comex Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 *Excludes medals & some coins

25 INVESTMENT SUMMARY Investor activity the main factor behind rally in price to $50/oz in late April and sharp corrections in early May and late September Silver benefits from gains in gold, with similar precious metal motivations at work, namely the sovereign debt crisis, inflation fears, loose monetary policies, weak US dollar etc. Copper also an influence, with silver often regarded as an industrial metal ; lately therefore the white metal facing downside pressure, given increasingly bearish economic outlook For some, silver is a more economical alternative to gold (~45 x lower unit price) Silver s greater volatility and trading range than gold makes it attractive to certain investors.

26 THE SILVER MARKET IN 2011 PRICES DEMAND SUPPLY INVESTMENT PRICE OUTLOOK

27 PRICE OUTLOOK Negatives: Mine production continues to grow (+190Moz in ) Ongoing secular decline in photography (though mainly offset by lower photo scrap) and silverware Sovereign debt concerns and liquidity constraints could hit real economy and industrial demand Large and growing fundamental market surplus (+/- 230 Moz forecast for 2011) Positives: Investor interest remains strong due to favourable financial backdrop and in spite of two major sell-offs this year Underlying secular growth in industrial demand continues, with much of this relatively price-insensitive, particularly in the short-run Little threat to prices from higher government sales or even gains in scrap supply Price forecasts: We now forecast an average price of $35.66 in 2011 (1 st Jan - 15th Nov average $35.70). Our short-term forecast is that through to year-end silver will trade between $31-$38.and.

28 DISCLAIMER The information and opinions contained in this presentation have been obtained from sources believed to be reliable, but no representation, guarantee, condition or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Accordingly, Reuters Ltd accepts no liability whatsoever to the people or organizations attending this presentation, or to any third party, in connection with the information contained in, or any opinion set out or inferred or implied in, this presentation. This presentation does not purport to make any recommendation or provide investment advice to the effect that any gold related transaction is appropriate for all investment objectives, financial situations or particular needs. Prior to making any investment decisions investors should seek advice from their advisers on whether any part of this presentation is appropriate to their specific circumstances. This presentation is not, and should not be construed as, an offer or solicitation to buy or sell gold or any gold related products. Expressions of opinion are those of Reuters Ltd only and are subject to change without notice.