Monday, October 02, 2006

Silver Talk October

A year ago silver was in the $8.00 range and by May it was near $15 until we got nuked soundly, falling back to a $10 range in June. Since then silver has climbed to $13 in early Sept only to fall back to about $10.70 mid month with a quick bounce back to $11.60ish today. It appears that each time we get a correction on silver the drop is less dramatic in both time and depth and then the prices start back up again. I believe this is a sign that the market is becoming adjusted to a new normal in silver value. Big investors are still buying and selling for the trade giving us the some volatility but as the trend continues the trading range is narrowing and new support prices are being built. I think these new support levels are a sign we are getting ready for a new upward leg that will likely bring us back into the May range of $14-$15 silver for the end of year.

On the demand side anecdotal evidence shows that the small physical buyer is not cashing in his hoard, the coin stores I frequent seem to have little in stock. At the Scotia Bank metals and currency counter I’ve been told that sales are not as strong as in May but still constant with buyers greatly outnumbering sellers and people on Ebay are over bidding in a bullish sentiment.

Industrially there have been a number of new products being announced in the last few months using silver. These products should add new and growing demand for our shiny friend. Silver is being woven into hospital curtain fabric and will act as anti microbial agent aiding hospitals in controlling the spread of infections. This is in addition to a number of other consumer products like band aids to fight infection and socks that eliminate odour by using silver. Also new, are plastic food storage containers that are impregnated with small silver particles that will keep food fresher longer. These products all use very small amounts of silver but have great potential in increase demand for silver by their pure volume.

Finally and the most bullish for silver is the announcement by Zinc Matrix Power that they have developed a safer, longer lasting, more environmentally friendly rechargeable battery. These new batteries are made of a zinc silver matrix, have no memory, and are claimed to last twice as long as Lithium Ion batteries. Considering the bad press exploding laptops and recalls have given the Lithium Ion technology, I think companies will be beating down the doors to access these batteries. Once scaled up in size Zinc Matrix should also make a big impact on the feasibility of plug in cars or at least plug in hybrid cars. I’ve yet to find out how much silver is used in these batteries but it is certainly more than none and once again the volume of lithium Ion batteries to replace bodes well for silver demand.

Advice for the day, If you can afford some silver today, don’t wait. Buy when you can, especially after a correction, you never know when big move will happen

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