-- Posted 9 August, 2004 | | Source: SilverSeek.com
www.timeless-gold.com
SILVER: FOLLOW-UP NO 13
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On April 21,
with silver at $ 7.10, we wrote: “An exaggeration to the up-side is often followed by an exaggeration to the down-side, so a correction down to the $ 6 level cannot be excluded.”
As we now know, on May 10, silver fell to $ 5.43 and thus exceeded even our most pessimistic forecast by a substantial margin. Nevertheless, by the end of May, the silver price was back to the $ 6 level but it tested the low of May 10 twice thereafter, on June 10 and June 30. Each time, no new low was established leading us to believe that a turn-around is in progress and will eventually take the silver price back to the high reached in April and possibly even higher during the remainder of the year.
To put these price movements into perspective, one should not forget that the silver price almost doubled in less than two years and that such a strong move inevitably attracts sellers wanting to cash in a handsome profit. Whether someone has a trader mentality or buys for the long pull is mainly a matter of personal temperament and each market participant has to decide for him or herself into which category he or she belongs. Most long-term investors however feel that they should be traders once they have to sit out a lengthy correction.
But let’s now examine where we stand and what the future may bring:
The long-term picture of the silver price
As we outlined before, “A major break-out is often followed by a period of consolidation and profit-taking.”
While we had a forceful rupture out of the multi-year trading range at the beginning of the year, which was likely fuelled by short-covering, it was evident that such speed could not be maintained and when euphoria turns into fear, nobody can really tell where the correction will end.
The chart below indicates nonetheless that the silver price simply fell back into the long-term up-trend which will likely lead to higher levels in a more orderly fashion.
Fundamentally, the silver price remains well supported as implied net silver disinvestments also continued in 2003.
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 early in April.
We believe that the support around $ 6 has well proven its capacity to absorb any strong selling pressure and we believe therefore that the time to buy silver and silver shares is still propitious.
The prices of silver shares will advance very quickly once confidence returns to the market.
The short-term picture of the silver price
The short-term picture offers excellent insight as to how the silver price has built a base over the past weeks from which the high established at the beginning of April can be seen as first target during the coming months.
“What we see is the correction of an over-bought market and not the end of a trend” we said last time and now we suggest that the correction is likely coming to its inevitable end.
The prices of silver shares in most cases have reached new all-time highs and have since corrected. So let’s look at the individual charts:
Below, we list and present the charts of our favorite silver companies:
(The “% Value Change” reflects the change since the company was first recommended. It does not suggest that those with the smallest increase have more price appreciation potential.)
Western Silver Corp (TSX:WTC)
The shares of this company remain in a solid up-trend.
Silver Standard Resources (TSXV:SSO)
As we stated in our last recommendation, “We view the recent correction down to prices of less than $ 20 as a buying opportunity.” And so we continue to believe.
Pan American Silver Corp (TSX:PAA)
The recent correction offers a buying opportunity.
Apex Silver Mines (Amex :SIL)
Coeur d’Alene Mines (NYSE :CDE)
The take-over battles in which CDE has become involved has unsettled investors for which reason we would refrain from buying for the time being until a clearer strategy evolves.
Hecla Mining Company (NYSE:HL)
The up-trend is still very solid!
Sterling Mining Co. (OTC:SRLM)
One of our recent recommendations which will do well once the silver price starts moving again!
Tumi Resources (TSXV :TM)
Tumi as a premier silver explorer has three projects in Mexico, two of historical significance located near Guadalajara known as Cinco Minas and Gran Cabrera and one in the Zacatecas silver belt known as Jimenez de Teul.
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Also visit the following web site: www.timeless-gold.com for a diversified portfolio of precious metals shares.
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 silver electrodeposition 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 6.52/ounce |
Long-term (several months) | | | BUY |
| | | |
Medium-term (several weeks) | | | BUY |
Peter Zihlmann
www.pzim.com
investment@pzim.com
forex@pzim.com
August 9, 2004
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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 its employees.
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-- Posted 9 August, 2004 | |
Silver Shares Offer An Excellent Buying Opportunity!
