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Silver Shares Leading the Way Again!



-- Posted 4 December, 2003 | | Source: SilverSeek.com

On August 27,

 

with silver at $ 4.97, we wrote: “As we believe that we are at the beginning of a bull-market in precious metals and silver in particular, we also think that price increases of silver shares, despite the spectacular rises, are still at an initial stage.“

 

While the silver price subsequently surged to $ 5.35 in September and to $ 5.41 in November, the silver share price again registered some impressive rises to new, all-time, or at least, multi-year highs.

 

The long-term picture of the silver price

 

The bear market in silver ended in November 2001 when the silver price fell briefly to a USD 4 low, a price not registered since October 1993.

 

From this level, the silver price surged upward and surpassed the USD 5 level by the summer of 2002 only to sharply drop off again. By October, it had fallen to $ 4.25 from where a new up-trend started. The subsequent correction stopped at $ 4.33, thus establishing a higher low from where a sustained up-trend started to unfold.

 

The resistance level of $ 5 has since been left behind and while silver is pushing higher through to the  $ 5- to $ 6-area, the basis has been laid for a much higher valuation in the not too distant future.

 

 

 

The price of silver shares reaches new all-time highs

 

Below, we present the charts of our favorite silver companies.

 

Should you wish to receive our Follow-ups on these companies, you may register at our web site www.pzim.com for a one month free subscription or send us an email to investment@pzim.com.  We shall treat your e-mail address confidentially and will not sell it to third parties.

 

Pan American Silver Corp (TSX:PAA)

 

 

 

“The massive turn-around seems to be drawing to conclusion. Resistance around $ 14.00 has to be overcome, but once it is achieved, the share price will likely move higher quickly as selling dries up.”, we wrote on August 27. In the meantime, the resistance around $ 14 has indeed been overcome and we expect further price advances once the silver price takes off.

 

Coeur d’Alene Mines (NYSE :CDE)

 

 

“We see that the share price has managed to overcome heavy resistance, therefore a move towards higher levels is likely.”, is what we wrote on August 27.  And indeed, an investment in Coeur d’Alene has proved most rewarding.

 

Short-term, the share price may have moved too quickly and needs to consolidate the recent advances. Long-term, prices of $ 15 and more should be possible as the all-time high of $ 35 in 1987 is still a long way off.

 

Western Silver Corp (TSX:WTC)

 

 

The share price of Western Silver started its up-trend channel at the beginning of 2002. The up-trend is well established and, after having surged above the resistance area at $ 4.50, should lead the share-price higher over coming months.

 

Silver Standard Resources  (TSXV:SSO)

 

 

While the share price reached a new all-time high and has shot out of its up-trend channel, the obvious question to ask is whether it would be wise to cash in one’s profits.

While we cannot exclude a reaction down to the $ 10 level, should the silver price fall back to areas of less than $ 5, we would rather stick to our guns in view of the fact that the silver price will likely move substantially higher over coming months and years.

 

Apex Silver Mines  (Amex :SIL)

 

 

“The shares are still trying to overcome resistance around $ 18.00. This will likely be achieved as soon as the silver price embarks in the next leg up.”, is what we last wrote and there is still nothing new to report. Nevertheless, we see that it is once again approaching the $ 18-level, and once this hurdle is overcome, the share price will likely move to levels of $ 20 to 25.

 

Hecla Mining Company  (NYSE:HL)

 

 

From the low of 50 cents in the year 2000, the share price has increased by 1,400% but is still far below the $ 35-high reached in 1980.

 

While we expect consolidations on a smaller scale such as the ones we have seen before, we expect higher prices during the months and years to come and the patient investor will be well rewarded.

 

In spite of strong advances of the prices of silver shares during past weeks, we are confident that more is to come once the silver price starts moving up again, aided by outstandingly strong fundamentals.

 

 

Fundamental Considerations: RISING SILVER DEMAND

 

Demand for silver includes industrial applications, photography, jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In 2000, 378 million ounces of silver were used for industrial applications, while over 230 million ounces of silver were committed to the photographic sector, and 281 million ounces were consumed in the jewelry and silverware markets.

 

Silver is in demand because it has a number of unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light, and the ability to endure extreme temperature ranges. Silver’s unique properties restrict its substitution in most applications. Choose from the following list to learn more about some of the various applications of silver:

 

Electrical and Electronics


Silver is the best electrical conductor of all metals
and is hence used in many electrical applications, particularly in conductors, switches, contacts and fuses. Contacts, a junction between two conductors that can be separated and through which a current can flow, account for the largest proportion of electrical demand. Silver is invaluable in the manufacture of circuit breakers and motor controls.

 

In electronics, silver is also widely used. Uses include silk-screened circuit paths, membrane switches, electrically heated automobile windows, and conductive adhesives. Every time a home owner turns on a microwave oven, dishwasher, clothes washer, or television set, this activates a switch with silver contacts that complete the electrical circuit.
 

Medical Applications


While silver's importance as a bactericide has been documented only since the late 1800s
, its use in purification has been known throughout the ages. Early records indicate that the Phoenicians, for example, used silver vessels to keep water, wine and vinegar pure during their long voyages. In America, pioneers moving west put silver and copper coins in their water barrels to keep it clean.

In fact, "born with a silver spoon in his mouth" is not a reference to wealth, but to health. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.

 

Silver also has a variety of uses in pharmaceuticals. In fact, silver sulfadiazine is the most powerful compound for burn treatment. It is used by every hospital in North America for burn victims to kill bacteria and allow the body to naturally restore the burn area. It is used world-wide. In another application, polyurethane central venus catheters are impregnated with silver sulfadiazine and chlorhexidine to eliminate catheter-related bacteria.

 

In a world concerned with the spreading of virus and disease, silver is being increasingly tapped for its bactericidal properties and used in conditions ranging from severe burns to Legionnaires Disease.

Water Purification


Silver is employed as a bactericide and algaecide in an ever-increasing number of water purification systems in hospitals
, remote communities and, more recently, domestic households. Silver ions have been used to purify drinking water and swimming pool water for generations. New research into silver compounds is providing physicians with powerful, clinically effective treatments against which bacteria cannot develop resistance.


Photography


When Joseph Nicephore Niepce created the first photographic image obtained through a camera-like device in 1813, it was silver nitrate that made it possible.

 

Although digital photography is increasing, silver-based photography will retain its pre-eminence due to its superior definition and low cost. An estimated 230 million troy ounces of silver were used worldwide in 2000 for photographic purposes.

 

William Conrad Roentgen's discovery of x-rays in 1895, led to his discovery that they activate silver halide crystals. This revolutionized medical diagnosis. Radiographic use of silver worldwide consumed 78 million troy ounces in 2000. Medical uses aside, X-ray inspection is essential to ensure the integrity of metallic castings from small truck axles to the huge aircraft-carrier steam valves used to propel airplanes from a flight deck. Of all the inspection techniques, it is the image on a silver halide x-ray film that provides the clearest indication of flaws deep within metallic components.
 

Batteries


The silver battery provides the higher voltages and long life required for quartz watches.
In fact, over 1.4 billion silver oxide-zinc batteries are supplied to world markets yearly, including miniature sized batteries for watches, cameras, and small electronic devices and larger batteries for tools and commercial portable TV cameras.
 

Coins


23,851,873 ounces of silver were issued in the form of silver coins in 1995.
 

Bearings


Steel bearings electroplated with high purity silver have greater fatigue strength and load carrying capacity than any other type and are hence used in various hi-tech and heavy-duty applications.
 

Jewelry and Silverware


Silver possesses working qualities similar to gold but enjoys greater reflectivity and can achieve the most brilliant polish of any metal. To make it durable for jewelry, however, pure silver (999 fineness) is often alloyed with small quantities of copper. In many countries, Sterling Silver (92.5% silver, 7.5% copper) is the standard for silverware and has been since the 14th century.
 

The copper toughens the silver and makes it possible to use sterling silver for cutlery, bowls and other decorative items such as picture frames.
 

Brazing and Soldering


In 2000, 38 million ounces of silver were used for brazing and soldering in industrial and electronic applications.
 

Catalysts


A worldwide inventory of some 23 million ounces of silver are in daily use for catalytic oxidation in chemical reactors, principally in the plastic industry.
 

Electroplating


The ease of electrodeposition of silver accounts for silver’s widespread use in coating. The plating thickness of some items, such as fuse caps, is less than one micron. Coatings of two to seven microns are normal for heavy-duty electrical equipment.
 

Solar Energy


Silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common type of solar cells. All silicon cells used in space to power satellites utilize silver in the form of evaporated metal to make the electrical contact.

 

The following recommendations were valid at the time of writing, viz. at

 

and may no longer be valid at the time of reading.

 

Our recommendations for SILVER:  USD 5.34/ounce

 

Long-term (several months)

 

 

GO LONG

 

 

 

 

Medium-term (several weeks)

 

 

GO LONG

 

Peter Zihlmann

 

 

www.pzim.com  

investment@pzim.com

forex@pzim.com

 

December 3, 2003

 

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Disclaimer:  P. ZIHLMANN INVESTMENT MANAGEMENT AG does not accept any liability for any loss or damage whatsoever, that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in the trading recommendations or in any accompanying chart analyses, whether communicated by word, or message, typed or spoken by any of it's employees.

 

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-- Posted 4 December, 2003 | |


 

Last Three Articles by Peter Zihlmann, Zihlmann Investment Management AG


Silver: Buy, Hold Or Sell? Update #22
30 November, 2011

Silver: Buy, Hold Or Sell? Update #20
16 March, 2011

Why Buy Silver? Update #19
18 January, 2008

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