THE SILVER MARKET IN 2011               PHILIP KLAPWIJK          GLOBAL HEAD OF METAL ANALYTICS   The Silver Institute, Ne...
THE SILVER MARKET IN 2011•  SILVER PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
THE SILVER PRICE         60              US$/oz                 Average        Year-on-year   Intra-period         50   20...
US DOLLAR AND EURO PRICES                  60                           Euro/oz          Average          Year-on-year    ...
SILVER, GOLD & BASE METALS PRICES                                 180Index (4th January 2011 = 100)                       ...
QUARTERLY CORRELATION OF DAILY SILVER                             PRICE WITH GOLD & COPPER PRICES                         ...
GOLD/SILVER RATIO 2000 – 2011-TO DATE            (BASIS WEEKLY AVERAGE PRICES)908070                                 Avera...
THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
WORLD SILVER DEMAND                 2010 Actual                               2011 Forecast                            Ind...
WORLD SILVER FABRICATION                       FORECAST ANNUAL CHANGES: 2011 LESS 2010                 30                 ...
DEMAND SUMMARY•    Total fabrication demand forecast to rise by 4% in 2011•    After 2010’s stellar rise, growth in indust...
THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
WORLD SILVER SUPPLY                 2010 Actual                                2011 Forecast                              ...
WORLD SILVER SUPPLY                        FORECAST ANNUAL CHANGES: 2011 LESS 2010                 50                 40  ...
WORLD SILVER MINE PRODUCTION                 900                                               4% increase forecast for 20...
MINE PRODUCTION:                            WINNERS AND LOSERS IN 2011*                 16.0                 12.0         ...
OUTSTANDING DELTA ADJUSTED PRODUCERS           HEDGE POSITION                 140                 120                 100M...
SUPPLY SUMMARY•    Total supply forecast to be marginally higher year-on-year•    Mine production expected to rise by 31Mo...
THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
FROM “DEFICIT” TO “SURPLUS”                 1200                 1100                                                     ...
WORLD SILVER INVESTMENT* AND VALUE                 300                                                                    ...
SILVER ETF HOLDINGS                 700                                                                   577Moz at end-Oc...
INVESTORS’* NET POSITIONS IN COMEX SILVER FUTURES                                         90                              ...
MONTHLY CHANGES IN SILVER INVESTMENT                 150                                                                  ...
INVESTMENT SUMMARY•    Investor activity the main factor behind rally in price to $50/oz in late April     and sharp corre...
THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
PRICE OUTLOOKNegatives:•    Mine production continues to grow (+190Moz in 2002-2011)•    Ongoing secular decline in photog...
DISCLAIMERThe information and opinions contained in this presentation have been obtainedfrom sources believed to be reliab...
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The Silver Market in 2011

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The “World Silver Survey” is the authoritative publication on the silver market. The 2012 edition reports on all aspects of the silver market, including key areas such as demand, supply, investment, and price. Thomson Reuters GFMS produced the “World Silver Survey 2012” on behalf of the Silver Institute, which has been publishing the “Survey” since 1990. Thomson Reuters GFMS is recognized as the world’s leading precious metals markets consultancy.

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The Silver Market in 2011

  1. 1. THE SILVER MARKET IN 2011 PHILIP KLAPWIJK GLOBAL HEAD OF METAL ANALYTICS The Silver Institute, New York, 16th November 2011
  2. 2. THE SILVER MARKET IN 2011•  SILVER PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
  3. 3. THE SILVER PRICE 60 US$/oz Average Year-on-year Intra-period 50 2010 20.19 37.6% 78.4% 1 Jan - 15 Nov 35.70 87.9% 10.9% 40US$/oz 30 20 10 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Source: Thomson Reuters GFMS
  4. 4. US DOLLAR AND EURO PRICES 60 Euro/oz Average Year-on-year Intra-period 50 2010 15.17 44.7% 96.6% 1 Jan-15 Nov 25.45 77.5% 9.1% 40US$ and Euro/oz 30 US $ 20 Euro 10 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Source: Thomson Reuters GFMS
  5. 5. SILVER, GOLD & BASE METALS PRICES 180Index (4th January 2011 = 100) 160 Silver 140 Gold 120 Lead 100 80 Zinc Copper 60 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Source: Thomson Reuters GFMS
  6. 6. QUARTERLY CORRELATION OF DAILY SILVER PRICE WITH GOLD & COPPER PRICES 1.2 1 GoldCorrelation Coefficient 0.8 0.6 0.4 0.2 Copper 0 -0.2 -0.4 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Source: Thomson Reuters GFMS
  7. 7. GOLD/SILVER RATIO 2000 – 2011-TO DATE (BASIS WEEKLY AVERAGE PRICES)908070 Average 60.560504030 1st Jan-15th Nov 2011 = 44.120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Thomson Reuters GFMS
  8. 8. THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
  9. 9. WORLD SILVER DEMAND 2010 Actual 2011 Forecast Industrial 46% Investment Industrial Investment 26% 48% 27% Jewellery &Jewellery & SilverwareSilverware 20% 20% Photography Photography 7% 6% Source: Thomson Reuters GFMS
  10. 10. WORLD SILVER FABRICATION FORECAST ANNUAL CHANGES: 2011 LESS 2010 30 25 20Million ounces 15 10 5 0 -5 -10 Industrial Coins Jewellery & Photographic Silverware Source: Thomson Reuters GFMS
  11. 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. 12. THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
  13. 13. WORLD SILVER SUPPLY 2010 Actual 2011 Forecast Scrap Scrap 22% 20% Producer Producer Hedging Hedging 5% 3%Government Government Sales Sales 4% 1% Mine Mine production production 74% 71% Source: Thomson Reuters GFMS
  14. 14. WORLD SILVER SUPPLY FORECAST ANNUAL CHANGES: 2011 LESS 2010 50 40 30 20Million ounces 10 0 -10 -20 -30 -40 -50 Mine production Net Government Net producer Scrap Sales hedging Source: Thomson Reuters GFMS
  15. 15. WORLD SILVER MINE PRODUCTION 900 4% increase forecast for 2011 Growth of almost 190Moz in 2002-2011F 800 700Million ounces 600 500 400 By-product 300 200 100 Primary 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F Source: Thomson Reuters GFMS
  16. 16. MINE PRODUCTION: WINNERS AND LOSERS IN 2011* 16.0 12.0 8.0Million ounces 4.0 United States Peru Australia 0.0 Mexico China Russia -4.0 -8.0 -12.0 * Figures represent year-on-year change, i.e. 2011 less 2010 Source: Thomson Reuters GFMS
  17. 17. OUTSTANDING DELTA ADJUSTED PRODUCERS HEDGE POSITION 140 120 100Million ounces 80 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F Source: Thomson Reuters GFMS
  18. 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. 19. THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
  20. 20. FROM “DEFICIT” TO “SURPLUS” 1200 1100 SUPPLY (mine production + scrap) 1000Million ounces 900 800 700 DEMAND (fabrication excluding coins) 600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F Source: Thomson Reuters GFMS
  21. 21. WORLD SILVER INVESTMENT* AND VALUE 300 12 Investment Value 250 10 200 8 US$ BillionsMillion ounces 150 6 100 4 50 2 - 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F *World Investment is the sum of implied net investment and coins & medals Source: Thomson Reuters GFMS
  22. 22. SILVER ETF HOLDINGS 700 577Moz at end-October 2011, down by iShare 23Moz from end-2010 600 ZKB ETF Securities* 500Million ounces Other** 400 300 200 100 0 2006 2007 2008 2009 2010 2011 *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. 23. INVESTORS’* NET POSITIONS IN COMEX SILVER FUTURES 90 5000 Comex Settlement PriceNet positions (contracts, thousand) 80 4000 70 60 3000 Cents/oz 50 2000 40 30 1000 20 10 0 2005 2006 2007 2008 2009 2010 2011 * non-commercial & non-reportable net positions in futures taken as proxy for investors’ positions; Source: CFTC
  24. 24. MONTHLY CHANGES IN SILVER INVESTMENT 150 Coins* 100 50Million ounces 0 ETFs -50 -100 Comex -150 -200 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 Source: Thomson Reuters GFMS
  25. 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. 26. THE SILVER MARKET IN 2011•  PRICES•  DEMAND•  SUPPLY•  INVESTMENT•  PRICE OUTLOOK
  27. 27. PRICE OUTLOOKNegatives:•  Mine production continues to grow (+190Moz in 2002-2011)•  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 supplyPrice forecasts:•  We now forecast an average price of $35.66 in 2011 (1st Jan - 15th Nov average $35.70). Our short-term forecast is that through to year-end silver will trade between $31-$38.and.
  28. 28. DISCLAIMERThe information and opinions contained in this presentation have been obtainedfrom sources believed to be reliable, but no representation, guarantee, conditionor warranty, express or implied, is made that such information is accurate orcomplete and it should not be relied upon as such. Accordingly, Reuters Ltdaccepts no liability whatsoever to the people or organizations attending thispresentation, 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 presentationdoes not purport to make any recommendation or provide investment advice tothe effect that any gold related transaction is appropriate for all investmentobjectives, financial situations or particular needs. Prior to making any investmentdecisions investors should seek advice from their advisers on whether any part ofthis presentation is appropriate to their specific circumstances. This presentationis not, and should not be construed as, an offer or solicitation to buy or sell gold orany gold related products. Expressions of opinion are those of Reuters Ltd onlyand are subject to change without notice.
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