All that Glitters can be SILVER

Outlook on Silver for coming months

February 22, 2013
Silver is a commodity which follows other precious metals, however unlike plays an important role. These days demand in silver for investment has increased compared to its industrial use. Investors have started buying silver backed ETFs and physical silver for investments. Ishares Silver Trust Holdings- Ishares Silver Trust, the world's largest silver ETFs silver holdings have been consistently rising. In January 2012, the funds holdings were at 9606 tonnes which was increased to 9686 tonnes in 6 months to June. In the quarter ended, September, holdings were up by 2.62% at 9940 tonnes. In the last quarter also, holdings were up by almost 1.50%. For the whole year 2012, the funds holdings rose by 5% and stood at 10,084 tonnes. The fund has significantly increased its holdings in 2013 as well, within 2 months it has gone up by 4.33% and is currently at 10,522 tonnes. These ETF's are backed by physical silver which indicates that the physical demand of silver has also gone up. And the rising trend in ETF holdings along with the industrial demand for silver is likely to support silver prices. Demand and Supply- Even if you look at the global physical demand & supply for Silver, the net implied investments have been growing tremendously within a year. In 2011 the implied investments have gone from 152.2 tonnes to approx 231 tonnes in 2012. This jump is majorly due to several events in 2012 such as QE3, Greece bailout etc. Similarly even 2013 is lined up with several events. One major event which came was Fiscal Cliff, followed by Sequester and many more to come. We will see the impact of these events on Silver directly in a positive manner, just like gold even silver has a safe haven appeal, people are rushing more towards silver these days as gold prices have been hovering around on its all time high. Silver v/s Gold- The silver market is much smaller than the gold market, so a
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new dollar invested in silver has a much greater affect on the price. That makes silver more volatile than gold, looking at the ratio of gold and silver we can see that on an average one percent move in Gold can show 2% move in silver as the coefficient correlation between both is 0.5(1:2). The demand for silver can be seen higher in coming days as recent duty hike in gold has lackluster its demand. Indian rupee will also form a crucial part in determining the price of Silver. As upcoming budget can show some positivity in Indian economy and also for Indian rupee, the prices of Silver can be down initially but physical demand in domestic and international market will drive the prices higher in later weeks.

Emkay Commotrade Limited

Silver Special Report

gold, silver is also used in industrial purpose so demand and supply for it

Why Silver has outperformed Gold

Both silver and gold are monetary metals. In times of uncertainty and high inflation, investors rush not only towards gold, but also to silver, especially in America. Silver is also extensively used for fabrication of silverware and jewellery, photographic, and other industrial uses. Increase in the iShares Silver ETF holdings in recent years has also led to a sharp rally in silver. In 2012, iShares Silver ETF holdings was up by 13.15% whereas SPDR Gold holdings were up only by 7.67%. The silver market is much smaller than the gold market, so a new dollar invested in silver has a much greater affect on the price. That makes silver more volatile than gold. The most important indicator for the physical market is silver World Silver Demand and Supply (in millions of ounces) Supply 2010 2011 sales at the U.S. Mint. In mid December 2012, they shut down the sales of American Eagles for about 3 weeks due to shortage of coins Gold demand from Chinese jewelry manufacturers was down by 9% in 2012. Household demand in India has also slowed down and the Indian government has been clamping down on gold imports to curb the current account deficit. The Total Supply Demand Fabrication 1,075 1,041 duty has been raised twice from 2% to 6%. Together, these two countries account for nearly half of worldwide demand, and weak demand there spells significant weakness for gold demand as a whole Gold demand from all central banks was at 536 tonnes, up 17% from 2011. However, it accounts for less than a third of total demand from China and India combined. In the mean time, gold supply has been stable. Global gold

Mine Production Net Government Sales Old Silver Scrap Producer Hedging Implied Net Disinvestment

751.4 44.2 228.7 50.4

761.6 11.5 256.7 10.7

Industrial Applications Photography Jewelry Silverware Coins & Medals Total Fabrication Producer De-Hedging Implied Net Investment
Total Demand Silver Price(London US$/oz)

500 72.1 167.4 51.2 99.4 890.1 184.6

1,075 20.19

486.5 66.1 159.8 46 118.2 876.6 164

1,041 35.12

mining supply hit a new annual record in 2012. China is the engine that has been driving world industrial growth. Positive outlook for China is likely to boost the demand for silver more than gold.

Strategy
Emkay Commotrade Limited 22 February 2013

International Spot Silver Weekly Chart :

Technical Outlook: Above is the International Spot Silver Weekly Chart. International Spot Silver has strong support at $26 (INR 51000). The 161.8% Fibonacci projection support lies at $25. Therefore one can Buy International silver at $27.00 (INR 52000) for the target of $31.00 (INR 56000) followed by $33.5 (INR 58500). Our view will change if price close below $25 on weekly basis.

Emkay Commotrade Limited

22 February 2013

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Emkay Commotrade Limited

22 February 2013