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-- Posted 21 April, 2004 | | Source: SilverSeek.com
On January 5, with silver at $ 5.96, we wrote: “It may take some time before the silver price clears this hurdle ($ 6) for good. Nevertheless, we think that there may still be substantial short positions to be covered. When this happens, the silver price could quickly move considerably higher before a more substantial consolidation has to materialize”. As we now know, on April 2, silver touched a high of $ 8.44 for a jump of 42% from the year-end close of $ 5.96. While the fundamental arguments for a rising silver price have been known for years, it may still have taken many by surprise that the price could double in only twelve months. Short-sellers may have helped to push up the price up to over 8 dollars, as they had to cover losing short positions. Whatever the reason, as of the 8-dollar level, buying dried up and short-sellers got another chance to make some money during the thin post-Easter-holiday trading. What started on Easter Monday, accelerated during the following days and by April 14, the silver price had fallen to $ 6.80 or by 20%. The prices of silver shares followed much the same pattern as the silver price. Pan American Silver also surged 40% since year-end and has given up 20% since reaching its high simultaneously with the silver price. Other silver shares, such as Western Silver, jumped 75% and have given up 18%, still leaving a handsome gain for the year. The long-term picture of the silver price “Looking at the chart below, one thing becomes evident, namely that the silver price is at a major resistance level, dating back to 1989 when it fell below the level $ 6 after hitting a high at almost $ 10,” we wrote on January 5 when the silver price stood at $ 5.96. A major break-out is often followed by a period of consolidation and profit-taking. On the other side, the fundamental arguments in favor of higher silver prices remain valid and will not change rapidly as supply is unlikely to increase substantially. At the same time, silver stocks will be further reduced, and which may happen even more rapidly at these prices, which augurs well in favor of higher silver prices. 
The medium-term picture of the silver price 
The above chart wonderfully depicts the base building period between 2001 and 2004, from where silver broke out last autumn and moved into an up-trend which kept accelerating until it reached a first peak at the beginning of April. An exaggeration to the up-side is often followed by an exaggeration to the down-side for which reason a correction down to the $ 6 level cannot be excluded. Nevertheless, those who want to buy at the lowest level often miss out when prices suddenly start moving up again, for whatever reason. We would therefore not wait for the worst to happen, but rather try to benefit from the present sell-off. The short-term picture of the silver price 
While many an investor may have suffered a trauma during the recent sell-off, one should not lose perspective and miss out on such occasions when they are presented. One should not forget at the same time that it is wishful thinking to nail down profits at the top to buy back at the bottom. What we see is the correction of an over-bought market and not the end of a trend. The prices of silver shares in most cases have reached new all-time highs and have corrected since. So let’s look at the individual charts: Below, we list and present the charts of our favorite silver companies: 
Western Silver Corp (TSX:WTC) 
The shares of this company remain in a solid up-trend. Silver Standard Resources (TSXV:SSO)
We view the recent correction down to prices of less than $ 20 as a buying opportunity. “The share price of course looks overextended in the short-term. A short-term minded speculator may well wish to cash in some profits”, we said on January 5. It would in fact have been possible to sell in January and buy back lower in February. But the risk of missing the surge which followed from $ 14 to 22 was very tricky.
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 stated on November 30 and on January 5. In the meantime, the resistance around $ 14 has indeed been overcome and we expect further price advances once the silver price takes off again. What we said before is still true. The recent correction is a buying opportunity.
Coeur d’Alene Mines (NYSE :CDE)
We are confident that the recent correction presents an excellent opportunity to increase your positions. $ 15 and more should be possible as the all-time high of $ 35 in 1987 is still a long way off.
Apex Silver Mines (Amex :SIL) 
In the case of SIL also, we are of the opinion that this is a good buying opportunity.
Hecla Mining Company (NYSE:HL) 
The up-trend is still very solid!
Tumi Resources (TSXV :TM) 
Months of consolidation often precede sharp movements to higher levels. The shares of Tumi should be accumulated after the correction of recent days. Silvercrest Mines (TSXV :SVL) 
The share price of Silvercrest has been going back and forth for some months, and quite a bit of resistance is evident at the level of $ 1.75. Once the share price manages to cross the level, an important upwards movement could unfold. *******************************************************************************************************************Should you wish to receive our Follow-ups on these companies, you may register at our web site www.pzim.com for 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. Fundamental Considerations: THE 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, the action activates a switch with silver contacts that completes the required 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 increasingly being tapped for its bactericidal properties and used in treatments for 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 purpose. 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 electronics applications.
Catalysts
A worldwide inventory of some 23 million ounces of silver is 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 5.96/ounce | Long-term (several months) | | | BUY | | | | | Medium-term (several weeks) | | | BUY |
Peter Zihlmann
www.pzim.com investment@pzim.com forex@pzim.com April 21, 2004 **************************************************************************************************************** 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 its employees. *****************************************************************************************************************************
-- Posted 21 April, 2004 | |
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Last Three Articles by Peter Zihlmann, Zihlmann Investment Management AG
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Silver Shares Correcting After Reaching New Highs!
