A PROJECT REPORT ON SILVER

Submitted To :

Prof. N.VENKATESAN

Submitted By :

GURVINDER JIT SINGH

10BSP1276

IBS-Gurgaon

SIP-SUMMER INTERNSHIP PROGRAMME

MobileNo:9999823523 E-mail ID : gurvinder_chadha@yahoo.com

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A REPORT ON

FUTURES TRADING IN COMMODITY SILVER AND THE FACTORS AFFECTING IT’S PRICE

SUBMITTED BY:

Gurvinder Jit Singh

10BSP1276

AT

INDIAINFOLINE COMPANY LTD

A report submitted in fulfilment of

the requirements of

PGPM Program of IBS Gurgaon

Date of Submission: 1ST May, 2011

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AUTHORIZATION

This is to certify that this report is submitted in fulfillment of the requirements of PGPMprogram of ICFAI Business School (IBS), Gurgaon.

This report document titled: “STUDY OF TRENDS IN COMMODITY TRADING: SPECIAL REFERENCE TO FUTURES TRADING IN SILVER AS A COMMODITY” is done by Gurvinder Jit Singh as part of the completion of the study at India Infoline (IIFL) during his Internship program under the guidance of Mr. Sachin Jain, Senior Finance Manager IIFL.

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ACKNOWLEDGEMENT

Any attempt at any level can't be satisfactorily completed without the support and

guidance of learned people. I am thankful to my company guide, Mr.SACHIN JAIN

who has rendered his whole hearted support at all times for this project.

I would also like to express my immense gratitude to PROF. N.VENKATESAN for his

constant support and motivation that has encouraged me to come up with this project

named “A PROJECT REPORT ON SILVER”.

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EXECUTIVE SUMMARY

Organization Profile: INDIA INFOLINE LIMITED - Founded in 1995 by Shri Nirmal

Jain, it is recognized as one of the largest retail broking houses in India, providing an

array of financial products and services. They are registered members of the Bombay

Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Multi

Commodity Exchange of India Limited (MCX), National Commodity & Derivatives

Exchange Limited (NCDEX), National Multi Commodity Exchange of India Limited

(NMCE) and MCX Stock Exchange Limited and are also depository participants of

NSDL and CDSL.

Objectives: To provide the company with detailed knowledge of silver in the

commodity market which can help the company to better understand the volatile

commodity market.

Commodity market is a rich and dynamic market and is a relatively new concept in

India. Investors are therefore, cautious to make heavy investment. The details of this

project should work well for the organization and help them find new potential investors.

Methodology: Since it is a report where company invests on behalf of the individual

investors and returns to them only profit so earned. We would rely only on secondary

sources of research i.e. Internet, Books, and Journals.

Primary Sources are not required and would not serve the purpose.

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Findings: While preparing the project what was worth noting was that commodity

market is highly profitable and rich for investments. Not many investors are aware of it,

however, if they chose to play in the commodity market they can make huge profits

given the fact that prices of bullion and metal commodities is on a rise. Silver, for

instance has immense growth potential and it is likely to reap high profits if invested.

Recommendations: Since commodity market is a relatively new domain to invest

in, it is very important to make investors more knowledgeable about the same. It would

also help if non-customers are made potential and then target customers. Silver is

expected to rise multifolds in the coming months and investment in it is less risky

because of the growing number of silver industries and its uses. The company should,

therefore, intelligently invest considerable amount of the investor’s money in silver.

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Description Page No.

1. Company Profile 8-12

2. Theoratical approach 13

3. Derivatives 10-17

4.Currency Exchange 18-19

5.Future ,Forward and Spot 20-24

6.Process of Trading 26

7. Commodity Market Overview 26-38

8. Introduction – Silver 39-43

9. Demand/ Supply 44-54

10. Silver Price/ History/ Present 55-71

11. Investment in Silver 72-76

12. Relationship b/w Dow Jones and precious metals 77-78

13. Factors influencing Price 79-80

14. Investment vehicles 81-84

15. 0Challenges before Indian Bullion Industry 85-87

16. Current Scenario 88-91

17.Spot Prices of Silver 92

18. Comparison of price movement of silver with different commodities

93-102

19. Correlation of Silver with Different Commodities 103

20.Substitue Of Silver 104-107

21.Impact of Inflation on Silver 108-109

22. Bibliography 110

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CONTENTS

About IIFL

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the Indian financial services space. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoI bonds and other small savings instruments. IIFL recently received an in-principle approval for Securities Trading and Clearing memberships from Singapore Exchange (SGX) paving the way for IIFL to become the first Indian brokerage to get a membership of the SGX. IIFL also received membership of the Colombo Stock Exchange becoming the first foreign broker to enter Sri Lanka. IIFL owns and manages the website, www.indiainfoline.com, which is one of India’s leading online destinations for personal finance, stock markets, economy and business.

IIFL has been awarded the ‘Best Broker, India’ by Finance Asia and the ‘Most improved brokerage, India’ in the Asia Money polls. India Infoline was also adjudged as ‘Fastest Growing Equity Broking House - Large firms’ by Dun & Bradstreet. A forerunner in the field of equity research, IIFL’s research is acknowledged by none other than Forbes as ‘Best of the Web’ and ‘…a must read for investors in Asia’. Our research is available not just over the Internet but also on international wire services like Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most read Indian brokers.

A network of over 2,500 business locations spread over more than 500 cities and towns across India facilitates the smooth acquisition and servicing of a large customer base. All our offices are connected with the corporate office in Mumbai with cutting edge networking technology. The group caters to a customer base of about a million customers, over a variety of mediums viz. online, over the phone and at our branches

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INDIA INFOLINE & ITS STRUCTURE

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the Indian financial services space.IIFL’s Background

Year Achievements

1995 Commenced operations as an Equity Research firm

1996 Launched research products of leading Indian companies, key sectors and the economy,Client included leading FIIs, banks and companies

1999 Launched www.indiainfoline.com

2000 Launched online trading through www.5paisa.com,Started distribution of life insurance and mutual fund

2003 Launched proprietary trading platform Trader Terminal for retail customers

2004 Acquired commodities broking license. Launched Portfolio Management Service

2005 Maiden IPO and listed on NSE, BSE

2006 Acquired membership of DGCX. Commenced the lending business

2007 Commenced institutional equities business under IIFL,Formed Singapore subsidiary, IIFL (Asia) Pte Ltd

2008 Launched IIFL Wealth ,Transitioned to insurance broking model

2009 Acquired registration for Housing

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Finance ,SEBI in-principle approval for Mutual Fund ,Obtained Venture Capital license

2010 Received in-principle approval for membership of the Singapore Stock Exchange ,Received membership of the Colombo Stock Exchange

REVENUE FROM EACH SEGMENT

Equities and Commodities Broking     The revenue of this segment was 1870.1 million in the quarter (Dec 2010), up 14.5% quarter on quarter and down 3.1% year on year due to a change in the product mix in favor of futures and options segment, which have a lower yield.  In equities brokerage, average daily turnover during the quarter was around 62 billion, a rise of 34% quarter on quarter and 66% year on year. Market share on the NSE for the quarter under review increased to 4.2%. Average daily volumes in our commodities business stood at 7.8 billion during the quarter ending December 31, 2010, up 79% year on year and 19% quarter on quarter.

Insurance Distribution and Marketing  

During the quarter under review, income from this segment was 471 million, up 29% year on year and down 7% quarter on quarter.The Life Insurance industry has gone through a challenging phase in the last few quarters. The changes made by the regulator has benefited the consumers and strengthened the fundamentals of the industry in the long term.  

Financing and Investment  

The loan portfolio increased to around 30 billion as on December 30, 2010.Loan book largely comprises secured lending with mortgages contributing to 52% and capital market products contributing to 47%. Unsecured loan book has fallen to less than 1% of the total book. NPAs (Non-Payable Accounts )in overall portfolio are less than 1%.

Wealth Management

Wealth Management business continues to grow. Assets under advisory are over 150 bn. During the quarter IIFl received FSA license in London. They also introduced the Family Office platform which is a multi‐manager investment platform offering a complete wealth structuring solution, including inter‐generational transfer, to clients.

Investment Banking

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The Investment Banking business continued to work on mandates which are in various stages of completion.During the quarter IIFL were the book running lead manager for the 1,350 Million QIP* of Tilaknagar Industries and`2,000 million QIP of Vardhman Textiles.

*QIP means qualified institutional placement which can be termed as a capital raising tool by a listed company who can issue equity shares, securities other than warrants, partly and fully convertible debentures which can be converted into equity shares.

Clients Profile:

Retail Investors Non Resident Indians & Persons of Indian origin High Net Worth Individuals and Corporate Clients Indian Financial Institutions & Corporations Foreign Institutional Investors Mutual Funds

Future Objectives:

To Double the market share in retail Equity & Commodity broking market. To Increase the Trading turnover . To Expand the network of our branches . To Target foreign institutional business and achieve significant volume of the

total volume in the industry To provide international commodity trading platform. To Provide high speed hassle free services to clients by using latest technology.

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IIFL (India Infoline Ltd) - Corporate Structure

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THEORETICAL APPROACH

The report will enlighten about each and every fact of metal named Silver, and I am working on same to find the following

Background of silver From where the metal (Silver) get extracted and its characterstics. Which country is the largest consumer and producer of Silver. What are the various uses of this metal. What are the factors the influence the price of this metal. Silver with Respect to INDIA….its consumption and uses.

The main purpose of the study is to evaluate the growth pattern of the silver and to provide the advisory services to INDIA INFOLINE. As this will help them to analyze the Indian Market better and to provide an insight where an opportunity lies.

To make the study more effective and productive, I have taken into account the RELATION of silver commodity with S&P and various crisis that happened in the global market. Example, The tragedy that took place in Japan, Problem prevailing in Libya….and many more.

The lot size in which silver get traded in market is1 kilogram, 5 kilogram and 30 kilogram and get price fluctuation of nearly 1%-2% a day.

Common terms Used:

Commodity market Commodity exchanges are defined as centers where futures trade is organized in a wider sense, it is taken to include any organized market place where trade is routed through one mechanism, allowing effective competition among buyers and among sellers. This would include auction-type exchanges, but not wholesale markets, where trade is localized, but effectively takes place through many non-related individual transactions between different permutations of buyers and sellers.

Derivative contracts These are of different types. The most common ones are forwards, futures, options and swaps. Participants who trade in the derivatives market can be classified under the following three broad categories: hedgers, speculators, and arbitragers.

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TYPES OF DERIVATIVES

1. Forwards - A forward contract or simply a forward is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed today.[1] This is in contrast to a spot contract, which is an agreement to buy or sell an asset today. It costs nothing to enter a forward contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into.

2. Futures - A futures contract is a standardized contract between two parties to buy or sell a specified asset (e.g. oranges, oil, gold) of standardized quantity and quality at a specified future date at a price agreed today (the futures price or the strike price). The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks, bonds, rights or warrants. They are still securities, however, though they are a type of derivative contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position.

3. Options - An option is a derivative financial instrument that establishes a contract between two parties concerning the buying or selling of an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in some specific transaction on the asset, while the seller incurs the obligation to fulfill the transaction if so requested by the buyer. The price of an option derives from the difference between the reference price and the value of the underlying asset (commonly a stock, a bond, a currency or a futures contract) plus a premium based on the time remaining until the expiration of the option. Other types of options exist, and options can in principle be created for any type of valuable asset.

4. Swaps - A swap is a derivative in which counterparties exchange certain benefits of one party's financial instrument for those of the other party's financial instrument. The benefits in question depend on the type of financial instruments involved. For example, in the case of a swap involving two bonds, the benefits in question can be the periodic interest (or coupon) payments associated with the bonds. Specifically, the two counterparties agree to exchange one stream of cash flows against another stream. These streams are called the legs of the swap. The swap agreement defines the dates when the cash flows are to be paid and the way they are calculated. Usually at the time when the contract is initiated at least one of these series of cash flows is determined by a random or uncertain variable such as an interest rate, foreign exchange rate, equity price or commodity price.

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TYPES OF TRADERS IN DERIVATIVES MARKET

1) Hedgers - Hedgers are individuals and firms that make purchases and sales in the futures market solely for the purpose of establishing a known price level--weeks or months in advance--for something they later intend to buy or sell in the cash market (such as at a grain elevator or in the bond market). In this way they attempt to protect themselves against the risk of an unfavorable price change in the interim. Or hedgers may use futures to lock in an acceptable margin between their purchase cost and their selling price. Consider this example:

A jewelry manufacturer will need to buy additional gold from his supplier in six months. Between now and then, however, he fears the price of gold may increase. That could be a problem because he has already published his catalog for a year ahead.

To lock in the price level at which gold is presently being quoted for delivery in six months, he buys a futures contract at a price of, say, $350 an ounce.

If, six months later, the cash market price of gold has risen to $370, he will have to pay his supplier that amount to acquire gold. However, the extra $20 an ounce cost will be offset by a $20 an ounce profit when the futures contract bought at $350 is sold for $370. In effect, the hedge provided insurance against an increase in the price of gold. It locked in a net cost of $350, regardless of what happened to the cash market price of gold. Had the price of gold declined instead of risen, he would have incurred a loss on his futures position but this would have been offset by the lower cost of acquiring gold in the cash market.

2) Speculators - An investor who takes large risks in the hope of making large short-term gains. Speculators often use technical analysis and other tools to make investment decisions on what securities to buy. They tend to buy stocks they believe will soon see a large growth in price and then sell them at the top of the market. Speculators are controversial because some believe that they contribute to the creation of bubbles; however, others believe that they provide liquidity necessary for the market to function. When you make a financial commitment because you believe something will happen in the market where you're trading that will provide a profit, you are acting as a speculator.

For example, you might invest in a bankrupt company because you expect that it will emerge from bankruptcy and its stock price will rise at some point in the future. Or you might purchase futures contracts or buy or sell options because you think the contracts might increase in value.

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3) Arbitrageurs - Arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit at zero cost.

In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it may refer to expected profit, though losses may occur, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation of a currency or derivative). In academic use, an arbitrage involves taking advantage of differences in price of a single asset or identical cash-flows; in common use, it is also used to refer to differences between similar assets (relative value or convergence trades), as in merger arbitrage.

DERIVATIVES TRADING IN INDIA

Derivatives markets have been in existence in India in some form or other for a long time. In the area of commodities, the Bombay Cotton Trade Association started futures trading in 1875 and, by the early 1900s India had one of the world’s largest futures industry. In 1952 the government banned cash settlement and options trading and derivatives trading shifted to informal forwards markets. In recent years, government policy has changed, allowing for an increased role for market-based pricing and less suspicion of derivatives trading. The ban on futures trading of many commodities was lifted starting in the early 2000s, and national electronic commodity exchanges were created. In the equity markets, a system of trading called “badla” involving some elements of forwards trading had been in existence for decades.6 However, the system led to a number of undesirable practices and it was prohibited off and on till the Securities and Exchange Board of India (SEBI) banned it for good in 2001. A series of reforms of the stock market between 1993 and 1996 paved the way for the development of exchange-traded equity derivatives markets in India. In 1993, the government created the NSE in collaboration with state-owned financial institutions. NSE improved the efficiency and transparency of the stock markets by offering a fully automated screen-based trading system and real-time price dissemination. In 1995, a prohibition on trading options was lifted. In 1996, the NSE sent a proposal to SEBI for listing exchange-traded derivatives. The report of the L. C. Gupta Committee, set up by SEBI, recommended a phased introduction of derivative products, and bi-level regulation (i.e., self-regulation by exchanges with SEBI providing a supervisory and advisory role). Another report, by the J. R. Varma Committee in 1998, worked out various operational details such as the margining systems. In 1999, the Securities Contracts (Regulation) Act of 1956, or

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SC(R)A, was amended so that derivatives could be declared “securities.” This allowed the regulatory framework for trading securities to be extended to derivatives. The Act considers derivatives to be legal and valid, but only if they are traded on exchanges. Finally, a 30-year ban on forward trading was also lifted in 1999. The economic liberalization of the early nineties facilitated the introduction of derivatives based on interest rates and foreign exchange. A system of market-determined exchange rates was adopted by India in March 1993. In August 1994, the rupee was made fully convertible on current account. These reforms allowed increased integration between domestic and international markets, and created a need to manage currency risk. Figure 1 shows how the volatility of the exchange rate between the Indian Rupee and the U.S. dollar has increased since 1991.7 The easing of various restrictions on the free movement of interest rates resulted in the need to manage interest rate risk.

NEED FOR DERIVATIVES

The derivatives market performs a number of economic functions:1. They help in transferring risks from risk averse people to risk oriented people2. They help in the discovery of future as well as current prices3. They catalyze entrepreneurial activity4. They increase the volume traded in markets because of participation of risk averse people in greater numbers.5. They increase savings and investment in the long run

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CURRENCY FORWARDS

A forward contract in the forex market that locks in the price at which an entity can buy or sell a currency on a future date. Also known as "outright forward currency transaction", "forward outright" or "FX forward"

QUOTATIONS

An exchange system quotation is given by stating the number of units of "quote currency" (price currency, payment currency) that can be exchanged for one unit of "base currency" (unit currency, transaction currency). For example, in a quotation that says the EUR/USD exchange rate is 1.2290 (1.2290 USD per EUR, also known as EUR/USD; see foreign exchange market), the quote currency is USD and the base currency is EUR.

DIRECT QUOTATION AND INDIRECT QUOTATIONS

Quotes using a country's home currency as the price currency (e.g., EUR 0.735342 = USD 1.00 in the euro zone) are known as direct quotation or price quotation (from that country's perspective)[2] and are used by most countries.

Quotes using a country's home currency as the unit currency (e.g., EUR 1.00 = USD 1.35991 in the euro zone) are known as indirect quotation or quantity quotation and are used in British newspapers and are also common in Australia, New Zealand and the eurozone.

direct quotation: 1 foreign currency unit = x home currency units indirect quotation: 1 home currency unit = x foreign currency units

BID AND OFFER RATE

The 'bid rate' is the rate at which the price-maker is willing to buy the currency being priced. The 'offer rate' is the rate at which the price-maker is willing to sell the currency being priced.

For example, if a bank quotes AUD/USD as 0.5150/0.5155, its bid rate is 0.5150, and its offer rate is 0.5155. The difference between the bid rate and the offer rate (0.0005 in this example) is known as the 'bid-offer spread'.

SPOT MARKET

1. A commodities or securities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective.

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2. A futures transaction for which commodities can be reasonably expected to be delivered in one month or less. Though these goods may be bought and sold at spot prices, the goods in question are traded on a forward physical market.

FORWARD RATE

The amount that it will cost to deliver a currency, commodity, or some other asset some time in the future.

INTEREST RATE PARITY THEORY

Interest rate parity, or sometimes incorrectly known as International Fisher effect, is an economic concept, expressed as a basic algebraic identity that relates interest rates and exchange rates. The identity is theoretical, and usually follows from assumptions imposed in economic models.

Interest rate parity is a non-arbitrage condition which says that the returns from borrowing in one currency, exchanging that currency for another currency and investing in interest-bearing instruments of the second currency, while simultaneously purchasing futures contracts to convert the currency back at the end of the holding period, should be equal to the returns from purchasing and holding similar interest-bearing instruments of the first currency. If the returns are different, an arbitrage transaction could, in theory, produce a risk-free return.

Looked at differently, interest rate parity says that the spot price and the forward, or futures price, of a currency incorporate any interest rate differentials between the two currencies assuming there are no transaction costs or taxes.

FOREIGN EXCHANGE RISK

1. The risk of an investment's value changing due to changes in currency exchange rates. 2. The risk that an investor will have to close out a long or short position in a foreign currency at a loss due to an adverse movement in exchange rates. Also known as "currency risk" or "exchange-rate risk".

This risk usually affects businesses that export and/or import, but it can also affect

investors making international investments. For example, if money must be converted to

another currency to make a certain investment, then any changes in the currency

exchange rate will cause that investment's value to either decrease or increase when

the investment is sold and converted back into the original currency. 

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FUTUTRE AND FORWARDS

Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell a specific type of asset at a specific time at a given price. 

However, it is in the specific details that these contracts differ. First of all, futures contracts are exchange-traded and, therefore, are standardized contracts. Forward contracts, on the other hand, are private agreements between two parties and are not as rigid in their stated terms and conditions. Because forward contracts are private agreements, there is always a chance that a party may default on its side of the agreement. Futures contracts have clearing houses that guarantee the transactions, which drastically lowers the probability of default to almost never. 

Secondly, the specific details concerning settlement and delivery are quite distinct. For forward contracts, settlement of the contract occurs at the end of the contract. Futures contracts are marked-to-market daily, which means that daily changes are settled day by day until the end of the contract. Furthermore, settlement for futures contracts can occur over a range of dates. Forward contracts, on the other hand, only possess one settlement date.  

Lastly, because futures contracts are quite frequently employed by speculators, who bet on the direction in which an asset's price will move, they are usually closed out prior to maturity and delivery usually never happens. On the other hand, forward contracts are mostly used by hedgers that want to eliminate the volatility of an asset's price, and delivery of the asset or cash settlement will usually take place.  

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Fundamental Differences Between Futures and ForwardsThe fundamental difference between futures and forwards is that futures are traded on exchanges and forwards trade OTC. The difference in trading venues gives rise to notable differences in the two instruments:

Futures are standardized instruments transacted through brokerage firms that hold a "seat" on the exchange that trades that particular contract. The terms of a futures contract - including delivery places and dates, volume, technical specifications, and trading and credit procedures - are standardized for each type of contract. Like an ordinary stock trade, two parties will work through their respective brokers, to transact a futures trade. An investor can only trade in the futures contracts that are supported by each exchange. In contrast, forwards are entirely customized and all the terms of the contract are privately negotiated between parties. They can be keyed to almost any conceivable underlying asset or measure. The settlement date, notional amount of the contract and settlement form (cash or physical) are entirely up to the parties to the contract. 

Forwards entail both market risk and credit risk. Those who engage in futures transactions assume exposure to default by the exchange's clearing house. For OTC derivatives, the exposure is to default by the counterparty who may fail to perform on a forward. The profit or loss on a forward contract is only realized at the time of settlement, so the credit exposure can keep increasing. 

With futures, credit risk mitigation measures, such as regular mark-to-market and margining, are automatically required. The exchanges employ a system whereby counterparties exchange daily payments of profits or losses on the days they occur. Through these margin payments, a futures contract's market value is effectively reset to zero at the end of each trading day. This all but eliminates credit risk.

The daily cash flows associated with margining can skew futures prices, causing them to diverge fromcorresponding forward prices. 

Futures are settled at the settlement price fixed on the last trading date of the contract (i.e. at the end). Forwards are settled at the forward price   agreed on at the trade date (i.e. at the start). 

Futures are generally subject to a single regulatory regime in one jurisdiction, while forwards - although usually transacted by regulated firms - are transacted across jurisdictional boundaries and are primarily governed by the contractual relations between the parties. 

In case of physical delivery, the forward contract specifies to whom the delivery should be made. The counterparty on a futures contract is chosen randomly by the exchange. 

In a forward there are no cash flows until delivery, whereas in futures there are margin requirements and periodic margin calls.

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SPOT PRICE

The spot price or spot rate of a commodity, a security or a currency is the price that is quoted

for immediate (spot) settlement (payment and delivery). Spot settlement is normally one or two

business days from trade date. This is in contrast with the forward price established in a forward

contract or futures contract, where contract terms (price) are set now, but delivery and payment

will occur at a future date. Spot rates are estimated via the bootstrapping method, which uses

prices of the securities currently trading in market, that is, from the cash or coupon curve. The

result is the spot curve, which exists for each of the various classes of securities.

For securities, the synonymous term cash price is more often used.

[edit]Spot prices and future price expectations

Depending on the item being traded, spot prices can indicate market expectations of future price

movements in different ways. For a security or non-perishable commodity (e.g. silver), the spot

price reflects market expectations of future price movements. In theory, the difference in spot

and forward prices should be equal to the finance charges, plus any earnings due to the holder

of the security, according to the cost of carry model. For example, on a share the difference in

price between the spot and forward is usually accounted for almost entirely by

any dividends payable in the period minus the interest payable on the purchase price. Any other

price would yield an arbitrage opportunity and riskless profit (see rational pricing for the

arbitrage mechanics).

In contrast, a perishable or soft commodity does not allow this arbitrage - the cost of storage is

effectively higher than the expected future price of the commodity. As a result, spot prices will

reflect current supply and demand, not future price movements. Spot prices can therefore be

quite volatile and move independently from forward prices. According to the unbiased forward

hypothesis, the difference between these prices will equal the expected price change of the

commodity over the period.

[edit]Examples

A simple example: even if you know tomatoes are cheap in July and will be expensive in

January, you can't buy them in July and take delivery in January, since they will spoil before you

can take advantage of January's high prices. The July price will reflect tomato supply and

demand in July. The forward price for January will reflect the market's expectations of supply

and demand in January. July tomatoes are effectively a different commodity from January

tomatoes (contrast contango and backwardation).

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COMPARISON OF FORWARD, FUTURES, AND OPTIONS:FORWARDS FUTURES OPTIONS

Maturity/Delivery/

ExpirationFixed/ Negotiable;

price move must occur by value date

Fixed by contract specification; price move must occur by delivery

Fixed by contract specification; price move must occur by expiration

To offset Cannot be offset without permission of other side; enter into another offsetting contract, hold 2 positions until value date

Easy offset; long + short = out

Easy offset; long + short = out

Credit risk Other side of contract may default; know your counterparty

None; Exchange Clearinghouse is a party to every trade

None; Exchange Clearinghouses is a party to every trade

Capital requirements

No funds required up front; bank/broker may require margin. Settle up on value date.

Exchange margin required

Long - pay premium in full; short - receive full premium, must post margin

Where traded OTC Exchange only Exchange ( Both SEC and CFTC regulated) and OTC

Who to contact to trade Bank/broker/dealer; no specific licensing requirement

Licensed commodity broker only

Licensed stock or commodity broker, depending on whether the instrument is traded under SEC or CFTC regulation

Instruments traded Any Limited set Limited on exchanges, OTC trading in any instrument in which someone will make a market

Daily price limits None, unregulated Daily limits for most Usually not

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instruments

FORWARDS FUTURES OPTIONS

Contract size Negotiable Standardized Standardized for exchange traded, negotiable for OTC

Are there size limitations

No No, but there are position limits

Position limits on exchange traded (sometimes very restrictive); no position limits for OTC

Loss limitation No No Losses limited to option premium for long positions, no loss limit on short positions

Basis risk None Basis risk due to less than perfect correlation between cash and futures

Futures basis risk in options on futures

Liquidity Same as cash market Good liquidity in most markets

Some instruments have good liquidity; some don't

Trading hours 24 hours limited (see contract specifications), but moving to 24 hours

Limited to exchange hours if exchange traded, 24 hours for OTC

24

Process of trading:

25

COMMODITY MARKET OVERVIEW

INTRODUCTION

Commodity markets cover physical assets such as precious metals, base metals,

energy (oil, electricity), food (wheat, cotton, pork bellies), and weather. Most of the

trading is done using futures (total trading volume around 300 billion dollars for the year

2007). However, over the last few years, an OTC market has also been growing (total

size estimated to several tens of billion dollars for the year 2007), as an increasing

number of market participants are trading in exotic options.

DESCRIPTION OF THE VARIOUS MARKETS

Commodity markets cover the following assets:

_ Energy:_ mainly oil and gas like crude oil, jet fuel, gasoline, fuel oil, heating oil,

natural gas and propane.

_ electricity as well as renewable forms of energies like solar and wind energy

_ weather: weather is obviously not a tradable asset but we include them here because,

over the last years, many derivative products whose underlying is weather

(temperature, wind, precipitation) have been forth and traded.

_ Agricultural:

_ Livestock: live hogs, cattle and pork bellies.

_ Grain: corn, wheat, soybeans, soyoil, sunflower seed and oil.

26

_ Forest products group: lumber and plywood.

_ Textiles: cotton.

_ Foodstuffs: cocoa, coffee, orange juice, rice, cheddar, and sugar.

_ Metals

_ Base metals: aluminium, copper, zinc, nickel, and lead, tin, iron.

_ Precious metals: gold, silver, platinum, rare metals (palladium, titanium).

NAME STANDS FOR COUNTRY

CBOT Chicago Board of Trade US

CME Chicago Mercantile Exchange US

NYCE New York Cotton Exchange US

MCE Mid America Commodity Exchange US

Some Commodity Futures exchanges

Because of the growing interest in commodity products, various institutions have

developed commodity indices, exactly like the stock market index like the Dow Jones 30

index, the Nasdaq 100 or the S&P 500 index. One of the most popular ones has been

the GSCI, Goldman Sachs Commodity Index, measuring the performance of a basket of

commodity products weighted by their world production quantities (as one cannot talk of

market capitalization in the commodities' universe). Because futures markets are the

dominating markets for trading commodity, the index is using futures (which are highly

liquid in energy, e.g.), and more specifically the so-called nearby contracts

27

(nearby: the contract with the closest settlement date), rolling them forward (that is

exchanging them with other futures corresponding to the next maturity date) between

the 5th and 9th business day of each month, at the official close. Half of the index is

comprised of energy commodities as this represents half of the commodity market. The

basis of the GSCI index is 100 on 1-Jan-1970.

MARKETS RATIONAL

Although the primary reason of being of commodity markets was to have efficient

markets for agricultural and energy goods, where producers and consumers can

transact deals, commodity markets have been growing to offer commodity-linked trading

and speculative instruments. Compared to other assets like equity stock or bonds,

commodities exhibit strong seasonality as well as high level of volatility (cf. the spike in

oil prices in 1973, 1979 or the Gulf war), making hedging strategies a true challenge for

the various market participants. The arrival of news (especially ones relating to local

wars or political crises) can have a very high impact on commodity prices, especially oil.

In addition, commodities present negative correlation with stocks and bonds (around –

15% to –30% over the last ten years, if one looks at the correlation between the GSCI

and the SP 500 for instance), making them valuable diversification investment

instruments to other assets like equity stocks and bonds. With the growing volume of

futures contracts, commodity futures contracts have become a very liquid instrument

besides being an easy one to trade.

Evolution of Commodity Exchange:

Most of the commodity exchanges, which exist today, have their origin in the late 19th and earlier 20th century. The first central exchange was established in 1848 in Chicago under the name Chicago Board of Trade. The emergence of the derivatives markets as the effective risk management tools in 1970s and 1980s has resulted in the rapid creation of new commodity exchanges and expansion of the existing ones. At present, there are major commodity exchanges all over the world dealing in different types of commodities.

28

Commodity exchange:

Commodity exchanges are defined as centers where futures trade is organized in a wider sense; it is taken to include any organized market place where trade is routed through one mechanism, allowing effective competition among buyers and among sellers. This would include auction-type exchanges, but not wholesale markets, where trade is localized, but effectively takes place through many non-related individual transactions between different permutations of buyers and sellers.

International Regulatory Framework

In the International regulatory framework there are mainly three bodies. These are London Market Exchange (LME), Shanghai Metal Exchange (SME), New York Mercantile Exchange (NYME). Here we took London Market Exchange.

London Market Exchange:

The London Metal Exchange (LME) is the world's premier non-ferrous metals market. The LME offers futures and options contracts for six primary metals: aluminum, copper, nickel, tin, zinc, and lead. It also offers contracts for two regional aluminum alloy contracts. In 2005, the Exchange launched the world's first futures contracts for plastics. This is really important, because it could create much more growth for the LME.

The London Metal Exchange was established in 1877 and celebrated its 130th anniversary in 2007.  It was originally known as the Royal Exchange.  The Royal Exchange got started in 1571 during the reign of Queen Elizabeth I.  It was in the 1570's that traders who wanted to trade metals and other commodities began to meet at a regular basis.  Unlike today, traders back then dealt in physical metals for the domestic market instead of electronically for the international market.

Functions

One of the most important functions of the LME is to discover what the price of materials will be months and years ahead. This assists the physical industry to plan forward for severe and rapid price movements. These discovered prices are relied upon by the industry throughout the world and are used to create futures contracts.

The second function of the London Metal Exchange is to provide hedging against fluctuations in metal prices. Hedging is an investment that is made in order to reduce risk for another investment. For example if a manufacturer believes the price of copper will rise he/she can buy a future contract for the copper they will need instead of paying a higher spot price when the copper is actually needed.

29

Thirdly, while the LME never deals directly with the metals, they do facilitate delivery. Once a contact is agreed upon the metals must be transferred into a LME approved warehouse until the time of the final transaction. This assures all parties of the safety of the contract and the materials.

30

LEADING COMMODITY MARKETS OF WORLD

Some of the leading exchanges of the world

are: S. No.

Global Commodity Exchanges

1 New York Mercantile Exchange (NYMEX)

2 London Metal Exchange (LME)

3 Chicago Board of Trade (CBOT)

4 New York Board of Trade (NYBOT)

5 Kansas Board of Trade

6 Winnipeg Commodity Exchange, Manitoba

7 Dalian Commodity Exchange, China

8 Bursa Malaysia Derivatives exchange

9 Singapore Commodity Exchange (SICOM)

10 Chicago Mercantile Exchange (CME), US

11 London Metal Exchange

12 Tokyo Commodity Exchange (TOCOM)

13 Shanghai Futures Exchange

14 Sydney Futures Exchange

15 London International Financial Futures and

Options Exchange (LIFFE)

16 National Multi-Commodity Exchange in

India (NMCE), India

17 National Commodity and Derivatives

Exchange (NCDEX), India

18 Multi Commodity Exchange of India Limited

(MCX), India

19 Dubai Gold & Commodity Exchange

(DGCX)

20 Dubai Mercantile Exchange (DME), (joint

venture between Dubai holding and the

New York Mercantile Exchange (NYMEX))

31

Indian Commodity exchanges:

There are more than 20 recognized commodity futures exchanges in India under the purview of the Forward Markets Commission (FMC). The country's commodity futures exchanges are divided majorly into two categories:

National exchanges Regional exchanges

MCX:

Multi Commodity Exchange of India Ltd (MCX) is a state-of-the-art electronic commodity futures exchange. The demutualised Exchange set up by Financial Technologies (India) Ltd (FTIL) has permanent recognition from the Government of India to facilitate online trading, and clearing and settlement operations for commodity futures across the country. 

Having started operations in November 2003, today, MCX holds a market share of over 80% of the Indian commodity futures market, and has more than 2000 registered members operating through over 100,000 trader work stations, across India.

MCX offers more than 40 commodities across various segments such as bullion, ferrous and non-ferrous metals, and a number of agri-commodities on its platform. The Exchange is the world's largest exchange in Silver, the second largest in Gold, Copper and Natural Gas and the third largest in Crude Oil futures, with respect to the number of futures contracts traded.

32

MCX has been certified to three ISO standards including ISO 9001:2000 Quality Management System standard, ISO 14001:2004 Environmental Management System standard and ISO 27001:2005 Information Security Management System standard. The Exchange’s platform enables anonymous trades, leading to efficient price discovery. Moreover, for globally-traded commodities, MCX’s platform enables domestic participants to trade in Indian currency.

NCDEX:

National Commodity & Derivatives Exchange Limited (NCDEX), a national level online multi commodity exchange, commenced its operations on December 15, 2003. The Exchange has received a permanent recognition from the Ministry of Consumer Affairs, Food and Public Distribution, Government of India as a national level exchange.

Structure of NCDEX

NCDEX has been formed with the following objectives:

To create a world class commodity exchange platform for the market participants.

To bring professionalism and transparency into commodity trading. To provide nation wide reach and consistent offering. To bring together the entities that the market can trust.

NCDEX currently offers an array of more than 50 different commodities for futures trading. The commodity segments covered include both agri and non-agri commodities [bullion, energy, metals (ferrous and non-ferrous metals) etc]. Before identifying a commodity for trading, the Exchange conducts a thorough research into the characteristics of the product, its market and potential for futures trading.

NMCE

National Multi Commodity Exchange of India Limited (NMCE) is the first de-mutualized, Electronic Multi-Commodity Exchange to be formed in India. On 25th July, 2001, it was granted approval by the Government of India to organise trading in the edible oil complex. It started operating in the commodity market from November 26, 2002. NMCE is the only Exchange in India to have investment and technical support from commodity relevant institutions like Central Warehousing Corporation Ltd., Gujarat State Agricultural Marketing Board, Neptune Overseas Ltd, National Agricultural Cooperative Marketing Federation of India (NAFED), Gujarat Agro-Industries Corporation Ltd. (GAICL), Gujarat State Agricultural Marketing Board (GSAMB) and the National Institute of Agricultural Marketing (NIAM).

33

LEADING COMMODITY MARKETS OF INDIA

The government has now allowed national commodity exchanges, similar to the BSE &

NSE, to come up and let them deal in commodity derivatives in an electronic trading

environment. These exchanges are expected to offer a nation-wide anonymous, order

driven, screen based trading system for trading. The Forward Markets Commission

(FMC) will regulate these exchanges.

Consequently four commodity

exchanges have been approved to

commence business in this regard.

They are: S.NO.

Commodity Market in India

1 Multi Commodity Exchange (MCX), Mumbai

2 National Commodity and Derivatives

Exchange Ltd (NCDEX), Mumbai

3 National Board of Trade (NBOT), Indore

4 National Multi Commodity Exchange (NMCE),

Ahmadabad

34

TURNOVER OF INDIAN COMMODITY EXCHANGE

35

Indian

Commodity

Futures Market

(Rs Crores)

Exchanges

2005 2006 2007 2008

Multi

Commodity

Exchange

(MCX)

165147 961,633 1,621,803 2,505,206

NCDEX 266,338 1,066,686 944,066 733,479

NMCE(Ahmad

abad)

13,988 18,385 101,731 24,072

NBOT(Indore) 58,463 53,683 57,149 74,582

Others 67,823 54,735 14,591 37,997

All Exchanges 571,759 2,155,122 2,739,340 3,375,336

Turnover in Financial Markets and Commodity Market

(Rs in Crores)

S No. Market

segments

2002-03 2003-04 2004-05 (E)

1 Governm

ent

Securities

Market

1,544,376 (63) 2,518,322 (91.2) 2,827,872 (91)

2 Forex

Market

658,035 (27) 2,318,531 (84) 3,867,936 (124.4)

3 Total

Stock

Market

Turnover

(I+ II)

1,374,405 (56) 3,745,507 (136) 4,160,702 (133.8)

I National

Stock

Exchange

(a+b)

1,057,854 (43) 3,230,002 (117) 3,641,672 (117.1)

a)Cash 617,989 1,099,534 1,147,027

b)Derivatives 439,865 2,130,468 2,494,645

II Bombay

Stock

Exchange

(a+b)

316,551 (13) 515,505 (18.7) 519,030 (16.7)

a)Cash 314,073 503,053 499,503

b)Derivatives 2,478 12,452 19,527

4 Commoditie NA 130,215 (4.7) 500,000 (16.1)

36

s Market

Note: Fig. in bracket represents percentage to GDP at market prices

Source: Sebi bulletin

DIFFERENT TYPES OF COMMODITIES TRADED

World-over one will find that a market exits for almost all the commodities known to us.

These commodities can be broadly classified into the following:

METAL Aluminium, Copper, Lead, Nickel, Sponge

Iron, Steel Long (Bhavnagar), Steel Long

(Govindgarh), Steel Flat, Tin, Zinc

BULLION Gold, Gold HNI, Gold M, i-gold, Silver,

Silver HNI, Silver M

FIBER Cotton L Staple, Cotton M Staple, Cotton

S

Staple, Cotton Yarn, Kapas

ENERGY

Brent Crude Oil, Crude Oil, Furnace Oil,

Natural Gas, M. E. Sour Crude Oil

SPICES

Cardamom, Jeera, Pepper, Red Chilli

PLANTATIONS

Arecanut, Cashew Kernel, Coffee

(Robusta), Rubber

PULSES Chana, Masur, Yellow Peas

37

PETROCHEMICALS HDPE, Polypropylene(PP), PVC

OIL & OIL SEEDS Castor Oil, Castor Seeds, Coconut Cake,

Coconut Oil, Cotton Seed, Crude Palm Oil,

Groundnut Oil, Kapasia Khalli, Mustard

Oil, Mustard Seed (Jaipur), Mustard Seed

(Sirsa), RBD Palmolein, Refined Soy Oil,

Refined Sunflower Oil, Rice Bran DOC,

Rice Bran Refined Oil, Sesame Seed,

Soymeal, Soy Bean, Soy Seeds

CEREALS

Maize

OTHERS Guargum, Guar Seed, Gurchaku, Mentha

Oil, Potato (Agra), Potato (Tarkeshwar),

Sugar M-30, Sugar S-30

38

SILVER

Introduction

Silver was one of the earliest metals known to humans, and it has been considered a precious metal since ancient times. Silver has been used as a form of currency by more people throughout history than any other metal, even gold. Although it is usually found in ores with less rare metals, such as copper, lead, and zinc, silver was apparently discovered in nugget form, called native silver, about 4000 B.C. Silver utensils and ornaments have been found in ancient tombs of Chaldea, Mesopotamia, Egypt, China, Persia, and Greece. In more recent times, the principal uses for silver were coinage and silverware.

In 1993, worldwide production of silver from mines totaled 548.2 million ounces (15.5 billion grams). During that year, Mexico was the world's largest producer of silver, with a total production of 75.7 million ounces (2.1 billion grams). The United States was the second leading producer, followed by Canada, Australia, Spain, Peru, and Russia. The vast majority of the world's silver is used in industrial applications, and the United States is the leading consumer. Other top consumers include Japan, India, and eastern European countries.

39

Silver mining in North America dates back to the eighteenth century. Around 1800, production began in the United States on the east coast and then moved west. The mining of silver was instrumental in the settlement of the state of Nevada. In 1994, Nevada was the largest producer of silver in the United States; Nevada mines produced 22.8 million troy ounces (709 million grams) of silver. Arizona, California, and Nevada are known for large-tonnage, low-grade silver deposits.

Basic Information

Symbol: AgMass: 107.868Density @ 293 K: 10.5 g/cm3Melting Point: 961.93 C (1235.1 K)Boiling Point: 2212 C (2428 K)Classification: Transition MetalCrystal Structure: Face-centred CubicColour: silverCharacteristics: soft, ductile, tarnishes

Physical Characteristics and Uses of Silver

Silver is the whitest metallic element. It is rare, strong, corrosion resistant, and unaffected by moisture, vegetable acids, or alkalis. Silver is also resonant, moldable, malleable, and possesses the highest thermal and electric conductivity of any substance. The chemical symbol for silver is Ag, from the Latin argentum, which means white and shining. Although silver does not react to many chemicals, it does react with sulfur, which is always present in the air, even in trace amounts. The reaction causes silver to tarnish, therefore, it must be polished periodically to retain its luster.

Silver possesses many special physical characteristics and qualities that make it useful in a variety of industries. The photography industry is the biggest user of silver compounds. Silver forms the most light-sensitive salts, or halides, which are essential to developing high-quality photography. Silver has the highest electrical conductivity per unit volume of any metal, including copper, so it is used extensively in electronics. Specialized uses include switch and relay contacts for automobile controls and accessories, automotive window heating, and in electrodes for electrocardiograms.

Silver is one of the strongest oxidants, making it an essential catalyst for the chemical process industry. It is used in the production of adhesives, dinnerware, mylar recording tape, and many other products. Silver is the most reflective of all metals, and is used to coat glass in mirrors. It is also used in x-ray vacuum tubes and as material for bearings. With the highest level of thermal conductivity among metals and resistance to

40

combustion and sparks, silver is a valuable material for a range of other industrial processes. The most common consumer application of silver is its use in jewelry. Pure silver, which would be too soft to be durable, is mixed with 5-20% copper in an alloy known as sterling silver.

Today, a very small percentage of the world's silver is used in coinage, though silver coins were a popular form of currency until the recent past. As industrialized nations began to produce large numbers of silver coins in the twentieth century, silver became less available, and therefore more expensive. The United States Treasury, which until then had been minting 90% silver coins, changed their minting by a 1965 act of Congress. The Johnson Silver Coinage Act completely demonetized silver, and with the exception of bicentennial coins, all newly-minted United States coins are now made of an alloy of copper and nickel.

The Manufacturing Process

Silver was first obtained in sixteenth-century Mexico by a method called the patio process. It involved mixing silver ore, salt, copper sulphide, and water. The resultant silver chloride was then picked up by adding mercury. This inefficient method was superseded by the von Patera process. In this process, ore was heated with rock salt, producing silver chloride, which was leached out with sodium hyposulfite. Today, there are several processes used to extract silver from ores.

A method called the cyanide, or heap leach, process has gained acceptance within the mining industry because it is a low-cost way of processing lower-grade silver ores.

41

However, the ores used in this method must have certain characteristics: the silver particles must be small; the silver must react with cyanide solutions; the silver ores must be relatively free of other mineral contaminants and/or foreign substances that might interfere with the cyanidation process; and the silver must be free from sulfide minerals. The idea for cyanidation actually dates back to the eighteenth century, when Spanish miners percolated acid solutions through large heaps of copper oxide ore. The process developed into its present form during the late nineteenth century. The cyanide process is described here.

Preparing the ore

1. Silver ore is crushed into pieces, usually with 1-1.5 in (2.5-3.75 cm) diameters, to make the material porous. Approximately 3-5 lb (1.4-2.3 kg) of lime per ton of silver ore is added to create an alkaline environment.

The ore must be completely oxidized so the precious metal is not confined in sulfide minerals. Where fines or clays exist, the ore is agglomerated to create a uniform leach pile. This process consists of crushing the ore, adding cement, mixing, adding water or a cyanide solution, and curing in dry air for 24-48 hours.

2. Broken or crushed ore is stacked on impermeable pads to eliminate the loss of the silver cyanide solution. Pad material may be asphalt, plastic, rubber sheeting, and/or clays. These pads are sloped in two directions to facilitate drainage and the collection of the solutions.

3. A solution of water and sodium cyanide is added to the ore. Solutions are delivered to the heaps by sprinkler systems or methods of ponding, including ditches, injection, or seepage from capillaries.

4. Silver is recovered from heap leach solutions in one of several ways. Most common is Merrill-Crowe precipitation, which uses fine zinc dust to precipitate the precious metal

42

from the solution. The silver precipitate is then filtered off, melted, and made into bullion bars.

5. Other methods of recovery are activated carbon absorption, where solutions are pumped through tanks or towers containing activated carbon, and the addition of a sodium sulfide solution, which forms a silver precipitate. In another method, the solution is passed through charged resin materials which attract the silver. The recovery method is generally decided based on economic factors.

Silver is rarely found alone, but mostly in ores which also contain lead, copper, gold, and other metals which may be commercially valuable. Silver emerges as a byproduct of processing these metals. To recover silver from zinc-bearing ores, the Parkes process is used. In this method, the ore is heated until it becomes molten. As the mixture of metals is allowed to cool, a crust of zinc and silver forms on the surface. The crust is removed, and the metals undergo a distillation process to remove the zinc from the silver.

To extract silver from copper-containing ores, an electrolytic refining process is used. The ore is placed in an electrolytic cell, which contains a positive electrode, or anode, and a negative electrode, or cathode, in an electrolyte solution. When electricity is passed through the solution, silver, with other metals, accumulates as a slime at the anode while copper is deposited on the cathode. The slimes are collected, then roasted, leached, and smelted to remove impurities. The metals are formed into blocks which are used as anodes in another round of electrolysis. As electricity is sent through a solution of silver nitrate, pure silver is deposited onto the cathode.

43

Demand

The bulk of the 11.9 percent decrease in 2009’s total fabrication demand was primarily driven by the global financial crises, reflected mostly in a sharp drop in industrial offtake, to its lowest level since 2003. Total fabrication demand totaled 729.8 Moz and industrial demand posted 352.2 Moz in consumption.

Significant inventory cuts in the industrial supply pipeline, combined with a protracted decline in end-user orders, for example from a far weaker automotive industry, were the primary reason for lower industrial demand last year. While demand was noticeably weaker in the first quarter of 2009, it gradually improved as the year progressed. Overall, the losses were concentrated in East Asia, North America and Europe.

World Silver Demand

44

Implied net silver investment increased by a staggering 184 percent to 136.9 Moz last year, recording its highest level in the past 20 years. While overall jewelry demand dipped slightly by only 1.1 percent in 2009 to 156.6 Moz, India and China posted increases in jewelry demand last year, offsetting losses in most other markets. Silverware demand reversed the trend of the last decade rising by a respectable 4.6 percent to 59.5 Moz, largely due to a surge in Indian fabrication.

Supply

Silver mine production rose by 4 percent to 709.6 Moz in 2009. Gains came both from primary silver mines and as a by-product of gold mining. Regionally, the strongest growth stemmed from Latin America, where silver output increased by 8 percent, with the most visible gains recorded in Argentina and Bolivia. Peru was the world’s largest silver producing country in 2009, followed by Mexico, China, Australia and Bolivia. All of these countries saw increases last year except for Australia, where output from the lead/zinc sector declined markedly. Global primary silver supply recorded a 7 percent increase to account for 30 percent of total mine production in 2009.

Top 20 Silver Producing Countries in 2009(millions of ounces)

1. Peru 123.92. Mexico 104.7

45

3. China 89.14. Australia 52.65. Bolivia 42.66. Russia 42.27. Chile 41.88. United States 39.89. Poland 39.210. Kazakhstan 21.711. Canada 19.612. Argentina 17.113. Turkey 14.014. Sweden 8.715. Morocco 8.316. Indonesia 7.717. India 7.318. Guatemala 4.219. Iran 3.520. South Africa 2.6

Top 20 Silver Producing Companies in 2009 (millions of ounces)

CompanyCountry Output

1. BHP Billiton Australia 42.02. KGHM Polska Miedź Poland 38.73. Fresnillo plc¹ Mexico 37.94. Pan American Silver¹ Canada 23.05. Cia. Minera Volcan², ³ Peru 21.26. Hochschild Mining Peru 18.87. Coeur d'Alene Mines Corp.¹ USA 17.78. Sumitomo Corp.³ Bolivia 17.69. JSC Polymetal Russia 17.310. Kazakhmys plc Kazakhstan16.911. Cia. de Minas Buenaventura Peru 16.0

46

12. Kinross Gold Corp.4 Canada 14.013. Southern Copper Corp. USA 13.214. Teck Resources Canada 13.015. Goldcorp Inc. Canada 12.816. Xstrata Zinc Switzerland12.717. Industrias Peñoles Mexico 11.818. Eti Gümüş A.Ş.³ Turkey 11.219. Hecla Mining¹ USA 11.020. Yamana Gold Canada 10.5

1Primary silver producer.² Includes production from minority subsidiaries.³ Estimate4 Reported Sales

47

World's Leading Primary Silver Mines in 2009 (millions of ounces)

RankMine/Country Operating Company Prod.

1. Fresnillo, MexicoFresnillo plc 35.42

2. Cannington¹, Australia BHP Billiton 33.763. Dukat, Russia JSC Polymetal 11.804. Gümüsköy², Turkey Eti Gümüş A.Ş. 11.205. Uchucchacua, Peru Compañia de Minas Buenaventura SA 10.566. Arcata, Peru Hochschild Mining 9.547. Pallancata, Peru Hochschild Mining 8.428. San Bartolomé, Bolivia Coeur d'Alene Mines 7.479. Greens Creek, U.S. Hecla Mining Co 7.4610. Imiter², Morocco Société Métallurgique d'Imiter 6.7511. Alamo Dorado, Mexico Pan American Silver Corp 5.3212. San José, Argentina Hochschild Mining 5.0013. Ying³, China Silvercorp Metals 4.2614. Martha, Argentina Coeur d'Alene Mines 3.7115. Huaron, Peru Pan American Silver Corp 3.56

1Reported payable metal in concrete,2 Estimate, 3Reported Sales

Material and statistics in this section were adapted in part from the Silver Institute's World Silver Survey 2010 publication

Primary silver mine cash costs remained relatively stable year-on-year, rising by less than 1 percent to $5.23/oz.

Net silver supply from above-ground stocks dropped by 86 percent to 20.2 Moz in 2009, driven mostly by the surge in net investment, higher de-hedging, lower government sales and a drop in scrap supply. With respect to scrap supply, 2009 saw a 6 percent decrease over 2008’s figure to a 13-year low of 165.7 Moz. This represented the third consecutive year of losses in the scrap category.

Government stocks of silver are estimated to have fallen by 13.7 Moz over the course of last year, to reach their lowest levels in more than a decade. Russia again accounted for the bulk of government sales, with China and India essentially absent from the market in 2009. Regarding China, GFMS states that after years of heavy sales, its silver stocks have been reduced significantly.

Supply from Above-Ground Stocks

(Million ounces) 2008 2009

BullionImplied Net Disinvestment

-48.2 -136.9

Net Producer Hedging -11.6 -22.3Net Government Sales 27.6 13.7Sub-total Bullion -32.1 -145.5Old Silver Scrap 176.0 165.7Total 143.9 20.2

World Silver Supply and Demand

To document these and other market fundamentals, each year the Silver Institute works with GFMS Limited, of London, a leading research company, to prepare and publish an annual report of worldwide silver supply and demand trends, with special emphasis on

48

key markets and regions. This annual survey also includes current information on prices and leasing rates, mine production, investment and fabrication.

World Silver Supply and Demand(in millions of ounces)

Supply 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Mine Production591.0

606.2

593.9

596.6

613.0

636.8

640.9

664.4

684.7 709.6

Net Government Sales

60.3 63.0 59.2 88.7 61.9 65.9 78.2 42.5 27.6 13.7

Old Silver Scrap180.7

182.7

187.5

183.9

183.7

186.0

188.0

181.8

176.0 165.7

Producer Hedging

-- 18.9 -- -- 9.6 27.6 -- -- -- --

Implied Net Disinvestment

87.1 -- 12.6 -- -- -- -- -- -- --

Total Supply919.1

870.9

853.1

869.3

868.2

916.3

907.2

888.7

888.3 889.0

Demand 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009FabricationIndustrial Applications 374

.2335.6

340.1

350.8

367.6

407.0

427.0

456.1

443.4

352.2

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Photography 218.3

213.1

204.3

192.9

178.8

160.3

142.4

124.8

104.9

82.9

Jewelry 170.6

174.3

168.9

179.2

174.8

173.8

166.3

163.5

158.3

156.6

Silverware 96.4

106.1

83.5

83.9

67.2

67.5

61.0 58.4 56.9 59.5

Coins & Medals 32.1

30.5

31.6

35.7

42.4

40.0

39.8 39.7 65.2 78.7

Total Fabrication 891.7

859.4

828.3

842.4

830.8

848.7

836.4

842.5

828.6

729.8

Producer De-Hedging 27.4

-- 24.8

20.9

-- -- 6.8 24.2 11.6 22.3

Implied Net Investment -- 11.4

-- 6.0 37.4

67.6

64.0 22.0 48.2 136.9

Total Demand 919.1

870.9

853.1

869.3

868.2

916.3

907.2

888.7

888.3

889.0

Silver Price(London US$/oz)

4.953

4.370

4.599

4.879

6.658

7.312

11.549

13.384

14.989

14.674

SOURCE: World Silver Survey 2010

Silver: Declining supply, increasing demand   

In 1900 there were 12 billion ounces of silver in the world. By 1990, the internationally respected commodities research firm CPM Group say that figure had been reduced to around 2.2 billion ounces of silver. Today, that figure has fallen to less than 1 billion ounces in above ground refined silver. It is estimated that more than 90% of all the silver that has ever been mined has been consumed by the global photography, technology, medical, defence and electronics industries.

On current supply/demand trends, the amount of above ground refined silver is projected to shrink to even lower levels in the coming years. Industrial demand has been outstripping mining supply for most of the last 20 years, driving above ground supply to historically low levels. Few in the investment world are aware of this important fact.

Silver production has been flat in recent years while demand has been increasing. This hasn't resulted in significantly higher prices yet because the world has been able to fill the gap from inventories and official government stockpiles.

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However, today the U.S. government's stockpile is all but gone, and sales from other official sources, such as China, Russia and India, are declining, too. The decline in refined silver stocks, from around 2.2 billion ounces in 1990 to around 300 million ounces today means that silver stocks are near an all time low.

Very importantly, silver is very unusual as its supply is inelastic.

This means that silver production will not ramp up significantly if the silver price goes up.  Supply didn't increase significantly in the 1970s when silver rose more than 35 fold in price - from $1.40/oz in 1971 to a high of nearly $50/oz in 1980. Importantly, silver is a byproduct metal and some 80% of mined silver is a byproduct of base metals. Higher prices for silver will not cause copper, nickel, zinc, lead or other base metal miners to increase their production. In the event of a global stagflationary or deflationary slowdown, demand for base metals would likely fall thus further decreasing the supply of mined silver.

There are only a handful of pure silver mines remaining - many with depleting reserves. This inflexible supply means that we cannot expect significant mine supply to depress the price after silver rises in price. It is extremely rare to find a good, service, commodity or investment that is price inelastic in both supply and demand. This is another powerfully bullish aspect unique to silver.

Increasing Industrial Demand

Industrial applications for silver have always been significant, but they have increased significantly in recent years. Silver is used in film, mirrors, batteries, medical devices, electrical appliances such as fridges, toasters, washing machines and uses have expanded to include cell phones, flat-screen televisions and many other modern high tech devices.

Increasing industrial demand for silver is forecast due to economic growth in China, India, Vietnam, Russia, Brazil and other emerging economies in South America, the Middle East and Asia. Growing middle classes are now demanding the quality of life and standard of living enjoyed by many in the West and thus the demand for silver will likely increase.

Silver is known as the 'healthy metal' and has many and increasing medical applications.

In a world that is showing increasing concern about the spread of diseases and pandemics such as swine flu, silver is being increasingly tapped for its biocidal properties. Research is ongoing on the use of silver and its compounds for therapeutic uses and on its potential use as a disinfectant in hospitals and other medical facilities.

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Increasingly, silver's antimicrobial and antibacterial qualities are seeing it being used in all sorts of medical applications and this looks set to become a very significant source of demand in the coming years.

Silver has many unique properties which make it ideal and indeed essential in global industry - especially in the global photography, technology, medical, defence and electronic industries. Yet, silver is a finite resource and the supply of silver is increasing only very incrementally.

It is important to note that silver, unlike gold, is heavily used in industry and because of gold's much higher value, it gets recycled and all the gold mined in the world ever is still with us but a huge amount of silver has been used in photography, mirrors and other industrial uses in the last 200 years. The low price of silver makes recovery and recycling uneconomic.

Unlike gold, silver is like oil - as it is consumed in these many industrial applications it is gone forever.

Increasing Investment Demand

Investment demand for silver has risen in recent years as investors concerned about the value and safety of property, equities and deposits allocated funds diversify to the finite commodities and currencies of silver and gold. More recently, there have been increasing concerns about the value of paper currencies themselves (voiced by many including Alan Greenspan, John Paulson and George Soros) which is leading to further diversification into hard assets and precious metals.

There has been a marked increase in investment demand for silver in recent years. Some of the reasons why this trend is likely to continue are - the introduction of ETFs that track the price of silver, a new global liquidity bubble, the significant growth in the global money supply, the proliferation of millionaires, ultra high net worth individuals and billionaires, the proliferation of hedge funds and the exponential growth in derivatives.

The Bank for International Settlements has estimated that the total value of derivatives contracts was $592 trillion at the end of 2008 (up exponentially from $260 trillion in June 2006). Thus, dwarfing the GDP of the entire world which was estimated at some $61 trillion at the end of 2008.

There is still a debate as to whether derivatives are a good or a bad thing. Alan Greenspan recently warned they could lead to "cascading cross defaults."  Warren Buffett is similarly concerned and has warned that they could trigger "serious systemic problems."  Buffet said that "the derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. "

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For this reason Buffett presciently called derivatives "financial weapons of mass destruction" in 2003.

Investors in silver bullion coins and bars are hedging themselves against further deflation and falls in property and equity markets. They are further protecting themselves against rising inflation, possible currency devaluations and still very prevalent geopolitical and macroeconomic risks such those posed by the humongous global derivatives market.

Silver is unique in terms of being both a monetary and an industrial metal. Silver is priced at less than $17/oz today. The average nominal price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively. In today's dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60/oz and $44/oz in 1979 and 1980. It is for this reason that we believe silver will be valued at well over $50/oz in the coming years and silver remains the investment opportunity of a lifetime.

Silver Facts

Demand for silver is built on three main pillars: industrial uses, photography and jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption.

Sparkling tableware, shining jewelry, and living spaces brightened by silvered mirrors are the obvious contributions of silver to our daily lives. It is, however, the silver behind the scenes that makes our modern world function more efficiently. Inside switches, silver contacts efficiently and safely turn on and off the powerful electric current that flows into our homes, our lamps and our appliances. It is silver under the keys of computer keyboards, behind automobile dashboards, and behind the control panels of washing machines or microwave ovens that switch on or off at the touch of the finger. And inside the 220-volt line circuit breaker boxes in our homes or inside the 75,000-volt circuit breakers in power stations, silver performs safely and steadily to switch on or off our most dependable servant, electric power, throughout our lives.

Silver has been a multifaceted asset throughout history. It was found as a free metal and easily worked into useful shapes and was widely used by early man. The beauty, weight and lack of corrosion made silver a store of value, and hence one of the earliest of metals to be used as a medium of exchange.

The early discovery that water, wine, milk and vinegar stayed pure longer in silver vessels, led to its desirability as a container for long voyages. Herodotus wrote that Cyrus the Great, King of Persia, a man of vision who established a board of health and a medical dispensary for his citizens, had water drawn from a special stream, "boiled, and very many four wheeled wagons drawn by mules carry it in silver vessels, following the king where so ever he goes at any time."

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In more contemporary times, when the first telegrapher tapped out his code in 1832, silver was the electrical contact that made the current flow. Earlier that century, 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. Finally, when the German obstetrician, Dr. Carl Crede made his medical breakthrough in 1884 to halt the diseases that caused blindness in generations of children at birth, it was silver that killed the viruses.

Today, modern technology has revealed an even more remarkable range of electrical, mechanical, optical, and medicinal properties that have placed silver as the key metal in many applications.

Silver Uses

Demand for silver is built on three main pillars: industrial and decorative uses, photography, and jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In 2007, 455.5 million ounces of silver were used for industrial applications, while over 128 million ounces of silver were committed to the photographic sector, 163.4 million ounces were consumed in the jewelry market, and 58.8 million ounces were used in the silverware market.

Why is this indispensable metal in such demand? The reasons are simple. Silver 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:

Traditional o Coinage o Photography o Silver Jewelry o Silverware and Table Settings

Industrial o Batteries o Bearings o Brazing and Soldering o Catalysts o Electronics

Emerging o Medical Applications o Mirrors & Coatings o Solar Energy o Water Purification

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Price: Background

Silver is a commodity that is traded 24 hours a day in the world’s market centers – London, Zurich, New York, Chicago and Hong Kong.

The London market started trading in the 17th century, and it – like other major markets – provides a vehicle for those who wish to trade in physical silver on a spot basis, or on a forward basis for hedging purposes.

The London market has a "fix" which offers the chance to buy or sell silver at a single price. The fix begins at 12:15 p.m. and is a balancing exercise; the price is fixed at the point at which all the members of the "Fixing" can balance their own, plus clients’, buying and selling orders.

Although London remains the true center of the physical silver trade for most of the world, the most significant paper contracts trading market for silver in the United States is the COMEX division of the New York Mercantile Exchange. Spot prices for silver are determined by levels prevailing at the COMEX; and although there is no equivalent to the London fix, Handy & Harman, a precious metals company, also publishes a price at noon each working day.

A primary factor affecting the price of silver is the available supply versus fabrication demand. In recent years, fabrication demand has greatly outpaced mine production forcing market participants to draw down existing stocks to meet demand. As these available sources continue to decline, silver's fundamentals continue to strengthen. However, since silver is a tangible asset, and is recognized as a store of value, its price can also be affected by changes in things such as inflation (real or perceived), changing values of paper currencies, and fluctuations in deficits and interest rates, to name a few.

Price History: 1950 to 1960

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From the end of World War II until the early 1960s, fabrication demand for silver rose strongly. This period witnessed the rebuilding of Europe and Japan, and a tremendous push worldwide toward electrification, housing construction, and consumer durables. Many electrical appliances, as well as electrical generation and transmission systems, use silver, which was one of the major factors behind this extended boom in industrial silver usage. At least as important was the advent of mass market photographic products, which sharply increased the use of silver in photographic films and papers.

There was another reason why fabricators were eagerly turning to silver during this period. The U.S. Treasury had a silver inventory that, as of 1950, stood at 2 billion ounces. Furthermore, Treasury policy was to buy domestically mined silver at 90.5 cents per ounce and sell silver at 91 cents, effectively putting a cap on the United States market price of silver.

In this way, the U.S. Treasury was the buyer or seller of last resort in the silver market, by virtue of the Silver Purchase Act of 1934 (itself one of a series of such laws extending back to the 1870s). The 1934 law authorized the Treasury to buy silver either until:

the market price reached $1.29 (the monetary value of silver) or the monetary value of Treasury silver stocks reached one-third of the monetary

value of the Treasury’s gold stocks

This purchase program remained in effect, in essence, until 1961. During the intervening 28 years, the Treasury acquired 3.2 billion ounces of silver. About half was acquired in the first four years, from 1934 through 1937, and the other half between 1937 and 1955.

A good portion of this silver was acquired from U.S. mines: 880 million ounces, or nearly all domestic production from 1937 to 1955. About 110 million ounces were purchased during the first three months following passage of this legislation in 1934. The law prohibited Americans from owning non-monetary silver, and directed them to sell it to the Treasury. A great deal of silver was also imported. Between 1934 and 1939, nearly 2 billion ounces of silver came from other countries. Market prices ranged between 25 cents and the ceiling created by the Treasury’s set price of 90.5 cents during these years, but spent most of the time below 75 cents. U.S. fabrication demand (excluding

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coinage), which totaled 1.8 billion ounces from 1935 through 1955, was met by imported silver.

By 1955, the demand for silver was great enough to push market prices above the Treasury’s 90.5 cents purchase price. Since the Treasury was a seller at 91 cents, the price remained around this level for several more years, as the Treasury’s reserves were depleted. While the 1934 law directed the Treasury to buy silver with an eye on boosting the silver price to $1.29, the Treasury’s policy during the late 1950s was designed to keep silver prices below the point at which coins would be melted down, to allow time for the Treasury to extricate itself from the silver market.

Treasury reserves peaked in 1959, when the U.S. Treasury had 2,060,000,000 ounces on hand, and another 1,331,000,000 ounces were outside the Treasury in circulating coinage, for a total of 3,391,000,000 ounces.

In summary, the post-war period saw silver demand rise sharply, while mine production and other supplies were relatively stable. The U.S. Treasury sold tremendous amounts of stockpiled silver during the years after 1955, in order to keep the price of silver below its "monetary value." Additionally, the actual growth of the overall economy increased the need for circulating coinage. One reason for the Treasury’s sales was straightforward: if silver’s market value rose above its monetary value, $1.29 per ounce, holders of U.S. silver certificates, one form of currency in circulation at the time, could trade in these $1, $5, and $10 bills in exchange for silver bullion. Also, there would be an enormous incentive for individuals to melt down the silver coins in circulation.

Had the Treasury not been present as a seller of silver, market supplies from other sources would have been hard pressed to keep pace with the growth of fabrication demand, and the price of silver most likely would have risen sharply during the late 1950s and early 1960s.

Price History: 1960 to 1965

For decades, the Treasury had been a net buyer of silver. By 1960, it had become a net seller. In 1960, the Treasury sold 22 million ounces of silver in bullion form, and used another 46 million ounces in coinage. The next year the Treasury had to sell 63 million ounces of bullion and use another 56 million ounces to replace silver coins that had

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been taken out of circulation by investors. That year, 1961, the Treasury realized that it would run out of silver for use in coinage and as a reserve against silver certificates unless it took drastic measures to begin phasing silver out of currency. In 1961, the Treasury ordered $5 and $10 silver certificates out of circulation, freeing silver reserves held against these bills and reducing the public’s call on Treasury silver. In November 1961 the government also suspended silver bullion sales by the Treasury at the formerly fixed price of 91 cents.

Once the Treasury stopped selling at that price, market quotes for silver quickly rose. In June 1963 the Treasury also replaced the $1 silver certificate with Federal Reserve notes. By 1963, silver prices reached $1.29, the monetary value of silver in coinage. At prices above this level, holders of silver certificates would have been able to redeem them for more valuable silver, under the now-defunct silver certificate legislation. (The other trigger price the Treasury worried about was $1.38, at which level it was profitable to recycle coinage for its silver content.)

During this transition period, the U.S. Treasury still had to keep the silver market well supplied, in order to keep the silver market relatively calm until it had completed the withdrawal of silver form its currency. In late 1963 the Treasury resumed its silver bullion sales, as part of this effort. Over the six years between 1960 and 1965, the Treasury sold a total of 342 million ounces of silver bullion. It used another 814 million ounces of silver in coinage during this same time. In total, the Treasury used 1,156,000,000 ounces of its silver reserves. Much of this silver, especially the bulk of it used in coins, found its way quickly into the hands of investors. Government steps to remove silver from the currency led investors to conclude that the price of silver would rise sharply once the Treasury no longer was supplying the market with such large volumes of the metal.

Fabrication demand continued to rise sharply. Industrial use, excluding coinage, rose at a 9 percent per annum pace, from 212.9 million ounces in 1959 to 355.8 million ounces in 1965. Including coinage, which grew rapidly during this same time due to the investor run on coins, total fabrication demand rose 16% per annum. Mine production, in contrast rose only 1.9% per year from 195.6 million ounces in 1959 to 218.4 million ounces in 1965.

Secondary recovery of silver was starting to expand, in part spurred by the realization that with the passing of Treasury silver sales and coinage programs the market would need to recover increasing amounts of silver from scrapped items. It was clear to market participants that silver prices had been restrained by the Treasury’s willingness to fill the gap between market supplies and industrial demand, and that once the Treasury’s silver was gone, additional supplies would have to be found elsewhere. Coin melt rose from 10 million ounces in 1960 to 30 million ounces in 1965. Silver recycling from other items rose from 40 million ounces in 1960 to 57 million ounces in 1965.

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Price History: 1966 to 1970

By 1966 the Treasury’s program of eliminating silver from coinage was in place. The Treasury continued to use some silver in coins from then until 1969, but the annual average during these four years was 38.5 million ounces, down from 178 million ounces per year on average during the previous four years. Austria, France, and West Germany continued to use silver in some circulating coins until the late 1970s.

The U.S. government also continued to sell silver bullion. From 1966 through November 1970, 674 million ounces of bullion were sold. (In 1967 the bullion sales program was transferred from the Treasury to the General Services Administration. Ownership of the bulk of the remaining silver were transferred from the Treasury stocks to the National Defense Stockpile.)

Industrial demand meanwhile remained strong, although there was a period of weakness in the mid-1960s. The higher silver prices had some limiting effect on use, although the major factor was slowing overall economic growth and a shift in the economy away from the manufacture of goods that used silver. Industrial use peaked in 1966 at 414.9 million ounces. It declined 10 percent over the next two years, before stabilizing between 372 and 387 million ounces on an annual basis in the late 1960s and early 1970s.

Investors remained keenly interested in silver, absorbing around 620.5 million ounces of silver from 1964 through 1970. Interestingly, the price of silver rose from $1.29 to a peak of $2.57 in 1968, before falling back. The rise and fall in silver prices was coincidental with the volume of these investor purchases: As investor demand decreased over the next three years, prices softened commensurately.

The weighted average price paid in these investor acquisitions, using annual average prices, was $1.88 per ounce. This figure will be important in understanding the next phase of the silver market, from 1971 into 1979, when the new supply of silver fell short of industrial requirements and the resulting deficit was accommodated by investor selling.

While investor demand was strong and industrial demand remained at healthy levels, Mine production rose at a 3.4 percent per annum rate, from 218.4 million ounces in

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1965 to 258.5 million ounces in 1970. (Actually, mine output of silver was not as vibrant as these figures suggest, since 1965 was a year of stable output and 1970 represented a cyclical peak in silver production. Output fell back the following year, and did not regain its 1970 level until 1977.) Secondary supply also continued to expand, in part due to the rise in silver prices, which made recycling much more attractive. Bloated by continued U.S. government sales, total supply remained high throughout this period.

Price History: 1971 to 1978

By 1971 U.S. government stocks had fallen from their 1959 peak of 2.1 billion ounces to around 170 million ounces. The U.S. government had removed silver entirely from its currency, and ceased to intervene in the silver market. Total silver supplies had reached a record 747.4 million ounces in 1965, of which 54 percent, or 400 million ounces, came from the U.S. Treasury. From that point onward, the Treasury was backing out of the silver market, and total supply declined steadily, and never has approached that 1965 record again.

Total silver supplies had declined to 381.3 million ounces by 1971, their lowest level since 1960. New mine production accounted for 65 percent of this total, or 247.3 million ounces. Secondary and other supplies totaled 134.0 million ounces. Throughout the 1970s, mine production remained rather static, fluctuating between 236.6 million ounces in 1974 and 272.0 million ounces in 1979. Secondary supply rose from 1972 to 1974, in line with silver prices, and then fell back to 152.0 million ounces in 1978.

Fabricating demand rose sharply in the early 1970s, from 414.4 million ounces in 1971 to 545.0 million ounces in 1973. Demand then dropped for two years, as a worldwide recession reduced consumer demand for silver-using end products and as higher silver prices led to some reductions in silver use. Demand fell to 497.9 million ounces in 1974 and 437.9 million ounces in 1975. Use rebounded the next year, to 511.0 million ounces, before stabilizing between 488.6 million ounces and 491.3 million ounces in 1977 and 1978.

Total new silver supplies fell far short of meeting these requirements. From 1971 through 1978 there was a cumulative deficit of new supply over demand of 415.8 million ounces. The silver that filled this gap came from the 620.5 million ounces of silver

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inventories – many held by investors – built up during the previous seven years. By becoming net sellers of silver, investors replaced the U.S. Treasury as the source of silver to make up for a major, ongoing shortage of silver. The difference was that in the early 1960s the U.S. Treasury had sold at a fixed price because it was acting to restrain silver prices. In contrast, investors wanted increasingly higher prices for this service. The weighted average price of the investor silver sales from 1971 through 1978 was $3.21, 71 percent higher than the price they had paid for this metal in the late 1960s. The average price of silver was $1.55 in 1971. The average price rose to $4.71 in 1974, and then spent the next four years between $4.35 and $5.40.

Price History: 1979 to 1980

By 1979, investors and other market participants had come to the strong conviction that the silver market was facing a severe shortage of metal, and that prices were likely to rise sharply at some point. The market had been living off of investor selling for seven years. Prices had risen from the beginning of the decade, but there were serious questions as to how much longer investors would be willing and able to continue supplying silver to fabricators, at least at the prices seen in the mid-1970s.

World economic and political events also were coming to bear on the silver market, most notably in the form of a major cyclical upward surge in inflation throughout the industrialized world. Sensing that silver prices should be adjusting upward to compensate for these inflationary trends, many investors decided that silver prices between $4.00 and $5.50, which had prevailed during most of the late 1970s, were too low. Investors ceased selling their old silver holdings, and instead began adding to their holdings. This added further upward pressure to the price of silver. Simplistic retrospectives of the silver market in late 1979 tend to focus on the high-profile purchases of large amounts of silver and silver futures by various wealthy individuals; in reality, there was a tremendously broad-based rush to buy silver by investors worldwide at the time.

By the final quarter of 1979, silver prices had risen to levels between $15.00 and $25.00 per ounce. At these levels several physical market forces combined to act against higher prices. Additionally, the two major U.S. futures exchanges that traded silver at

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the time took steps to force those with margined long positions to liquidate their positions.

As silver prices rose above $15.00 in September 1979, fabrication demand began to be affected. On an annual average basis, industrial silver use fell a relatively mild 0.9 percent to 445.1 million ounces in 1979. Demand had held up reasonably well during the first three quarters of the year. However, a sharp cut-back in demand in the fourth quarter led to overall annual decreases in silver use. By some estimates, industrial use of silver was 40 percent lower in the last quarter of 1979 than it had been in the first quarter of that year.

When silver prices rose sharply in 1973-1974, manufacturers began searching for ways to reduce their need to use silver. Several substitutes for silver and methods to reduce per-unit silver use were developed, but they were too expensive to implement as long as silver was around $5.00 per ounce. When silver rose to $15.00 and more however, fabricators were able to introduce these measures rapidly. Demand also quickly declined for jewelry and sterlingware.

Investors began to sell large amounts of silver especially old coins from the 1960s. Other sold large amounts of sterlingware and jewelry for its silver content.

A host of political events, including the continuous U.S. hostage crisis in Iran and the Soviet invasion of Afghanistan, motivated investment demand, helping keep silver prices high and volatile through 1980. High inflation, high nominal interest rates, and negative real interest rates further stimulated investor interest in silver and other tangible assets. Prices dropped as low as $10.80 in March, but rose back to $25.00 in September, as the Iran-Iraq war erupted. By the end of 1980 silver prices had subsided once more to around $16.00.

These high silver prices meanwhile were having a dramatic effect on the physical silver market conditions. Total supply rose form 434.8 million ounces in 1978 to 505.0 million ounces in 1979, and then to 584.6 million ounces in 1980. The bulk of this increase occurred in secondary recovery. Total secondary recycling of silver doubled, from 152.0 million ounces in 1978 to 302.0 million ounces in 1980. The recovery of silver from old coins, those holdings taken in by investors during the 1960s, increased from 21 million ounces in 1978 to 45 million ounces the next year, and then to 94 million ounces in 1980. Refiners faced substantial backlogs, sometimes of 6-12 months in processing these materials.

Mine production remained almost unchanged during this time, and actually was lower in 1980, at 264.6 million ounces, than it had been in 1978. (A U.S. copper industry strike, along with a strike at a major U.S. silver mine, were major factors behind the low output.) Mine developments have long lead times, and the increases in output that came about in response to the 1979-1980 jump in silver prices did not appear until the mid-1980s.

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Prices also were having a dramatic effect on fabrication demand, compounded in 1980 by the onset of the deepest post-war recession. Industrial silver use fell from 449.1 million ounces in 1978 to 362.5 million ounces in 1980, a level fully 25 percent below the 1976 cyclical peak of 481.0 million ounces. The last countries using silver in circulating coinage, Austria, France and West Germany, withdrew from that activity, reducing silver use in coinage on a worldwide basis from 39.5 million ounces in 1978 to 15.0 million ounces in 1980.

The combination of higher secondary recovery and lower fabrication demand brought an abrupt end to the eight years of silver market supply deficits. In 1978 new supply had fallen 53.8 million ounces short of fabrication requirements. In 1979 there was a 28.9 million ounce surplus.

In 1980 this surplus reached 207.1 million ounces, nearly as high as the 228.9 million ounce surplus that had resulted from the 1968 run-up in silver prices and the Treasury’s sales programs. The increase in the recovery of silver from old coins accounted for nearly half of the surplus.

Price History: 1981 to 1990

By the beginning of 1981 the silver market was starting to adjust after the traumatic events of 1980. Industrial silver demand was declining, both because of the worldwide recession that had set in, and in reaction to high silver prices. Investment demand for silver also fell sharply. Investors were aware of the reduced fabrication demand for silver, and of the amount of silver backed up at refineries Other investors had lost money in 1979-1980, and were wary of returning to the market. Still others were distracted from silver by more attractive financial markets.

Supply also fell, as the surge of old scrap and coin melt subsided. Total supply dropped 101.1 million ounces from 1980's level to 483.5 million ounces.

The worldwide recession persisted until late 1982, continuing to restrain fabrication demand and discourage investment absorption. Silver mine production, meanwhile, had begun to rise, as some mines developed in reaction to the higher prices since 1979 came onstream. Much mine output of silver remained profitable even as silver prices

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subsided to around $8.00 in the early 1980s, so that expanding existing operations and developing new mines remained an attractive proposition for many miners. Secondary recovery of silver, meanwhile, continued to decline.

Silver prices reached a cyclical nadir of $4.98 in June 1982, 10% of the $48 peak just 30 months earlier. June 1982 also proved to be the trough of the recession in the United States. During 1982 serious problems erupted in the international debt market, in particular relating to the debt repayment problems of certain countries in Eastern Europe and Latin America.

In late 1982 investor interest in silver was rekindled by several forces, all of which emerged at roughly the same time. The international financial market panic led some investors to turn to silver. Others were attracted by what they saw as unsustainably low prices. Investment demand also was encouraged by a rapid easing of credit market conditions by monetary authorities in most industrialized nations; this easing led to an immediate revival of inflation fears. As a result of all of these forces coming to bear at once, investment demand picked up during the second half of 1982 and the first quarter of 1983. This influx of investor buying helped take silver prices from the June 1982 low of $4.98 to a peak of $14.72 in March 1983.

In March 1983, several trends came into play reversing the rise in silver prices. First, the price had nearly tripled in nine months. Such a fast ascent led to profit-taking by investors; it also constricted industrial use. On the supply side, secondary recovery of silver from scrap and coinage increased in response to the higher prices. OPEC lowered its official benchmark oil price, for the first time in the cartel's history. The sudden decline in petroleum prices quickly reduced inflation expectations. Silver prices had averaged $13.96 in February 1983. In March they averaged $10.62.

Prices recovered slightly during the summer months, but from 1983 until 1986 the trend in prices was downward. This downward trend served an important purpose in the physical market, in that it discouraged new developments of primary silver mines, except where high ore grades or other factors made for extremely efficient plants. It also served to reduce secondary recovery of silver. On the demand side of the market, relatively low silver prices removed the incentives to using less silver or substituting away from silver in products.

Total fabrication demand fell sharply at the beginning of the 1980s, in response to higher silver prices, and worldwide recession. Longer term demographic and technological trends had been pointing to a decline in use, which the price rise and recession accelerated.

For example, silver use in sterlingware in the United States actually had peaked in the early 1970s, and was clearly going through a secular loss of markets due to changing demographics and consumer tastes. By 1979 U.S. sterlingware use of silver had fallen 55% from its 1973 peak of 29.3 million ounces. The decline that followed 1979 was a

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continuation of this longer term trend, exacerbated by the rise in silver prices and the economic recession.

Other industries, including the important photographic and electronics uses for silver, were able to reduce their per-unit silver requirements in some instances, and in other cases to substitute other materials for silver. As silver prices subsided later in the 1980s, some of these trends reversed. In the color film photographic market, for example, competition for higher film speeds led to an increase in per-unit silver use, to levels higher than those seen in the late 1970s.

Fabrication demand, including coinage, reached a low of 363.1 million ounces in 1981, the lowest level since 1960. During the early 1980s, fabrication demand remained weak, but in 1984 it began rising once more, stimulated by low silver prices and strong growth in industrial activity.

Silver supply followed a more erratic pattern during the 1980s, which partly reflected the high degree of price responsiveness of secondary recovery. Total supply fell 101.1 million ounces from 1980 to 1981. This decline was entirely a function of the scaling back of secondary recovery, after the rush of material in late 1979 and 1980. Total supply continued to slump in 1982, falling to 455.1 million ounces. While this was happening, in late 1982, silver prices staged a rally from $4.98 to nearly $15.00. This surge in prices brought out significant quantities of scrap in 1983, which boosted total supply to 531.1 million ounces. As prices decreased from early 1983 into 1986, total supply once more fell back, to 449.7 million ounces in 1986. Mine production was restricted by the low prices at this time, with silver reaching a low for this period of $4.85 in May 1986. Secondary recovery also was constricted by these low prices. Since 1986 total supply rose once again, reaching 514.0 million ounces in 1990.

Since 1979 there was a surplus of total silver supply over fabrication demand every year. On a cumulative basis, this surplus totaled 927 million ounces from 1979 through 1990.

It appears that most of this surplus was bought by bona fide investors, individuals who have accumulated these silver positions in the expectation of being able to liquidate them at some later date at a profit. Minor surpluses and deficits can be accounted for by changes in reported market inventories and investor coin purchases. Most of the silver coins produced in this decade were bullion coins, designed for investors and collectors and not intended by their mints for use as circulating currencies. Silver coinage since 1979 totaled 241.6 million ounces.

Accounting for these factors, it still seems that investors acquired around a billion ounces of silver since the late 1970s, one quarter of this in coins. The period of heaviest silver purchases occurred in 1980 and 1981. Simple logic bears this out: Strong investment demand was keeping prices high at this time. As investor buying waned later in the decade, prices slipped down. The weighted average acquisition cost of the silver added to investor inventories during this past past decade was $11.25 per ounce.

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Price History: 1990 to 1999

Throughout the 1990's, the main question for the silver market was the rate at which above-ground stocks of bullion and coins were being consumed by the widening gap between fabrication demand and conventional supply, and when this erosion of stocks might begin to significantly impact the price of the metal. Mine production of new silver rose by only 4 percent from 1990 to 1999, while total fabrication demand increased by 22 percent during the same period.

While the fundamentals for silver strengthened during the past decade, the price of silver slowly climbed from an average price of $4.83 in 1990 to an average price of $5.22 in 1999.

In 1999, silver's price performance was subdued following an eventful 1998, and was off 5.8 percent from the previous year, but it did finish the year up 6.7 percent from its starting level (ending the year at $5.33 having begun it at $4.99). It traded in a narrow range between $4.88 and $5.79.

Substantial flows of silver out of China helped to keep the price in check in 1999, and had similar impacts in the early 2000s.

The gold/silver ratio (the number of ounces of silver it takes to buy one ounce of gold) is another market indicator some analysts watch. This ratio has at times been a closely followed indicator of the relative trends in the two markets and in the past has been used by investors as signals for buying, selling, or exchanging gold and silver. The ratio for 1999 was 53.37, versus 53.08 in 1998. The average for the period 1968-1999 is 50.18.

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Price History: 2000 to 2009

Silver prices remained under pressure for most of 2000, averaging $4.95 per troy ounce. The trading range did manage to increase marginally year-on-year, recording a high of $5.45 in February of 2000 and a low of $4.57 in December. The silver price softened throughout the year, largely because of continued Chinese government sales and ongoing private disinvestment.

In 2001, silver prices averaged $4.37 per troy ounce. The metal ended the year on a much-brighter note, with silver fixing at $4.52 on December 31, only 7 cents down from the year's first trading day.

In the face of an enduring global economic slowdown, the silver price demonstrated resilience in 2002. With an average price of $4.60 per ounce in 2002, silver recorded a 5-percent year-on-year increase over 2001. Silver retained its characteristics as a precious metal, rising in value during periods of crisis last year.

The average silver price in 2003 was $4.85 per ounce - a 5.4-percent increase over 2002. Much stronger investment interest and the improved fabrication demand scenario, which picked up strongly from the third-quarter onwards, propelled the silver price to $5.97 per ounce at year's end.

The silver price in 2004 staged a dramatic rally, rising a robust 36 percent to average $6.66 per ounce. This compared to an average price of $4.85 in 2003. This stunning price performance reflects fundamental changes in silver's supply/demand balance. Last year also saw a boom in investor activity, mainly driven by funds operating on futures exchanges and considerable buy side interest from high net-worth individuals.

In 2005, the silver price experienced a 10 percent increase over the average 2004 price of $6.65 per ounce, to an average of $7.31 per ounce.

In 2006, the silver price experienced a 58 percent increase over the average 2005 price of $7.31 per ounce. The silver price reached levels not seen in 26 years and was the

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leader when compared with gold (36 percent increase) and platinum (27 percent increase). The primary factor driving the stronger silver price was the continued strength of investment demand, which returned in earnest in 2005, was sustained in 2006. Much of the investment demand can be attributed to the successful launch of Barclays' Global Investors iShares Silver Trust Exchange Traded Fund (ETF), which was introduced in late April 2006.

The annual silver price, led by continued strong investor and industrial applications demand, averaged an impressive US$13.38 in 2007. This result represented a 16 percent price increase over 2006, and on a percentage basis was stronger than that enjoyed by gold, platinum and palladium last year. When looking at the 2007 silver price, the white metal posted a very solid performance to averages not seen since 1980. A key development in silver’s recent fortune has been the pronounced shift in investor behavior, witnessed by the continued presence of investors on the demand side of the equation since 2004.

During the first half of 2008, investors drove the silver price up above the US$20/oz mark (a high of US$20.92 oz was recorded in March) against a backdrop of generally firm fabrication demand. The second half of 2008 was a different story as the economic outlook deteriorated rapidly, and silver, as well as other metal prices, slumped. However, silver’s price in the first third of 2009 recovered a good part of the lost ground.

In 2008, a record inflow of over 93.1 Moz into the three main silver ETFs was instrumental in the high price average, as investors propelled silver to multidecade highs, in not only daily price terms but also in the annual average.

Coins and medals fabrication jumped by an astonishing 63 percent to a record of 64.9 Moz in 2008. The main reason for this was a surge in investment-related purchases of bullion coins, both in the United States and Europe. Notably, fabrication of the U.S. Silver Eagle bullion coin achieved a record 19.6 Moz last year, approximately double the 2007 figure, and would have been higher if the U.S. Mint had sufficient blanks to produce coins to meet demand. In 2009, physical silver investment demand has continued to increase, as the U.S. Mint has already achieved a nearly 70 percent year-on-year rise in the first quarter.

Silver posted an average price of $14.67 in 2009, the second highest average since the high reached in 1980. Strong gains in investment and a recovery in demand later in the year, were the prime reasons for the 53 percent intra-year rise.

Much of 2009’s strength in investment can be attributed to soaring demand for silver exchange traded funds (ETFs) as well as physical retail investment. This occurred on the heels of 2008’s previous record ETF inflow of 265.3 million ounces (Moz) of silver. Total ETF holdings rose by 132.5 Moz over the course of 2009, ending the year at an impressive 397.8 Moz as new funds entered the marketplace from Australia and the United States.

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In 2009, coins and medals fabrication rose by an impressive 21 percent to post a new record of 78.7 Moz, driven by a jump in retail demand, principally in the United States, although western European demand was also stronger in 2009. In the United States, the increase in its bullion coin sales was also accompanied by a surge in bar demand. Of note, demand for the U.S. Silver Eagle bullion coin reached record highs in 2009, with over 28 million Eagles sold. To put last year’s performance into context, over the 1986-2008 period, U.S. Eagle minting averaged 7.7 Moz per year.

SILVER IN 2010

1.Booming silver investment was the primary source of the astounding 78 percent intra-year increase in silver prices in 2010. A sturdy rebound in total fabrication demand, led by the industrial sector, was also significant, Silver posted an average price of $20.19 in 2010, a level only surpassed in 1980, and a marked increase over the $14.67 average price in 2009.

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2.The sharp jump in silver prices during 2010 was the result of big increases in both investment and industrial-fabrication demand, according to the World Silver Survey 2011 released by the Silver Institute Thursday.

Global silver investment rose by 40% last year to 279.3 million troy ounces, said the report, for which data was compiled by the consultancy GFMS. This resulted in a net flow into silver of $5.6 billion, almost double the amount from 2009.

Meanwhile, total fabrication demand rose 12.8% to a 10-year high of 878.8 million ounces in 2010, led by industrial uses, said the report.

“The strength of these two areas of demand is clearly illustrated in their ability to brush aside a quite marked increase in supply,” said the report.

Silver posted an average price of $20.19 per ounce in 2010, a level surpassed only in 1980 and well up from the $14.67 average of 2009, said the report. The strength has continued so far into 2011, with the London silver fixing price averaging $31.86 through the end of the first quarter.

In the Silver Survey, GFMS described itself as “positive” on the outlook for silver prices, but “cautiously so.” The consultancy said the economic backdrop for investment remains supportive since monetary policy is unlikely to be tightened “that much” in 2011 and inflation and sovereign-debt concerns will grow. This will encourage investment demand for silver and gold alike, and ongoing gains in industrial demand should be “solid,” GFMS said.

“We are, however, somewhat concerned by the extent to which the white metal has lately powered ahead of gold,” GFMS said. “We are skeptical, for instance, that there is a ‘new paradigm’ at work that justifies a move even lower in the gold:silver ratio. Moreover, we are conscious of the fact that a fair proportion of the recent investment in silver is from more speculative money that could exit the market rapidly if conditions were to change.”

As a result, GFMS said, “we would be wary of any signs that industrial demand is faltering, as this could be a trigger for a major short-term correction in silver prices that would probably bring silver’s path more into line with that of gold.”

In an interview with Kitco News, GFMS Executive Chairman Philip Klapwijk said he looks for a wide range in silver yet this year from marginally below $30 an ounce to marginally above $50. “It’s really dependent upon the investment flow being sustained or growing, or whether that investment flow for whatever reason diminishes,” he said.

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ETF, Retail Investment Climb During 2010

The report said much of the silver-investment demand last year came via exchange-traded funds, which trade like a stock but track the price of the commodity. Metal is put into storage to back ETF shares, creating physical demand.

Global ETF holdings hit 582.6 million ounces last year, an increase of 114.9 million from 2009, said the Silver Survey. The iShares Silver Trust accounted for almost 40% of the increase, with notable gains also achieved by Zurcher Kantonalbank, ETF Securities and Sprott Physical Silver Trust.

There was also a jump in retail investment demand during 2010. Physical bullion bars accounted for 55.6 million ounces of new investment last year. Meanwhile, coins and medals fabrication rose 28% to a record of 101.3 million ounces.

In the U.S., over 34.6 million U.S. Silver Eagle coins were minted, well above the previous record of almost 29 million in 2009. Additionally, the Australian Kookaburra, Austrian Philharmoniker and Canadian Maple Leaf all posted record highs in 2010.

“Implied” net silver investment (which does not include coins) recorded an all-time high last year of 178 million ounces, an increase of 47% and the highest level in GFMS’s 21-year data series. Much of this was due to ETFs, the over-the-counter market and investment in physical bars.

Klapwijk said silver “clearly benefited from investors looking for hard assets which they perceived to be safe havens against the potential for higher inflation in the future.” Furthermore, investors have turned to silver due to currency weakness in general and a lack of trust in major currencies, Klapwijk said.

“Also, the fact that interest rates are low makes putting money on deposit not particularly attractive, and the ‘cost of carry’ of having positions in precious metals is pretty trivial,” he said.

Industrial Demand Climbs 20.7%, Nearly Back To 2007-2008 Levels

Industrial demand accounted for much of the 12.8% rise in total fabrication demand during 2010, the report said. Silver’s use in industrial applications alone grew by 20.7% to 487.4 million ounces. This brought industrial demand nearly back to the levels of 491.1 million in 2007 and 492.7 million in 2008, before it slumped to 403.8 million in 2009 during the global economic slowdown in many Western nations.

“There is restocking and replenishment after the declines suffered in 2009,” Klapwijk said. “There was an element of inventory rebuild going on in the industrial space. Not only that, there was a more sustainable pick-up in industrial production and demand for products that contain silver in one form or another.”

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Further, there are secular trends already occurring that means more use of silver in certain applications, including photovoltaic technology (such as solar cells) and electronics, Klapwijk said.

The strong industrial demand continued into the first quarter of this year. Assuming the economy does not tank, GFMS sees this hitting a record in 2011. “I wouldn’t be too surprised if we get above 500 million ounces in industrial demand this year,” Klapwijk said.

Jewelry demand rose 5.1% to 167 million ounces, which the Silver Survey said was the first substantial rise since 2003. This was tied to strong economic growth in emerging-market nations and the improving economic picture in the industrialized world.

The use of silver in photography fell by 6.6 million ounces, which was the smallest loss in nine years as medical centers deferred conversion to digital systems, said the report. Silverware demand fell to 50.3 million ounces from 58.2 million ounces in 2009, mainly due to lower demand in India.

Investing in Silver: Which Investment Is For You?

Should you and your financial advisor decide that silver will be part of your investment portfolio, the next step is to learn about silver investment vehicles.

To help you, here is a summary of silver investment choices:

Bullion: Silver in the form of bars that are at least 99.5 percent pure. Official Coins: Silver coins issued by a government mint. Medallions (Rounds): A round piece of silver resembling a coin but not

considered legal tender. Medallions may be issued by governments or private mints.

Certificates or Storage Accounts: Silver is kept in storage but the investor can take possession within a few days if desired.

Accumulation Plans: This approach enables investors to accumulate silver on an average basis, similar to dollar cost averaging. The investor does not own the physical silver.

Futures and/or or Forward Contracts: An agreement made on an exchange to take or make delivery of silver at a set date in the future.

Options: The right, but not the obligation, to buy or sell a silver or a financial security linked to silver on a specified date in the future.

Exchange Traded Fund: A basket of equities linked to silver, i.e. the physical metal, producers, refiners, etc. ETFs are traded on exchanges throughout the trading day.

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Mutual Funds: An open-ended fund that holds a basket of silver-related equities that are priced once daily.

After you and your financial advisor have decided that you should have a certain percent of your investment portfolio in silver, you should choose the silver investment vehicle that is in accord with your own preferences and investment philosophy.

As with any investment, you should judge the merits of your silver investments as they relate to your investment needs. To help you, we have included the following digest of some of the advantages and disadvantages of particular silver investments.

EXCHANGE TRADED FUNDS

Exchange - Traded Funds (ETFs)

Advantages:For investors who seek exposure to the physical silver market, but have no desire to possess the metal or pay direct insurance, assay, and storage costs, ETFs offer an alternative. They have major exchange listings and trade like equities. Investors can buy shares in a trust that owns the silver bullion.

Disadvantages:Because the ETFs are created to reflect the price of the silver, the market price can be as unpredictable as the price of silver on any given trading day.

Silver Bullion Bars of Approved Refiners

Advantages:Usually the least expensive Convertible into cash...Internationally negotiable...Price is widely quoted.

Disadvantages:Must be stored securely...Possible need for assay at time of sale...Yields no interest.

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Silver Mining Stocks

Advantages:Offers capital appreciation opportunities...Dependent on the company's management and operating strength...May yield a dividend.

Disadvantages:May require greater investment than small physical bullion purchases...Requires knowledge of equity market.

Silver Mutual Funds

Advantages:Many mutual funds offer investment programs in silver and precious metals...Diversified holdings among

dozens of companies.

Disadvantages:May require greater investment than small physical bullion purchases...Requires knowledge of equity market.

Silver Bullion Coins

Advantages:Relatively inexpensive, some less than US$10.00...Small and easy to store...Instant convertibility into cash...Easy to transport...Internationally negotiable...Prices quoted widely.

Disadvantages:Must be stored securely...Yields no interest...Premium over bullion bar prices.

Silver Medallions

Advantages:Prices can range from least expensive to most expensive...Small and easy to store...Easy to transport.

Disadvantages:Similar to coins, but not always easily convertible to cash unless they bear the mark of a reputable refiner.

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Silver Certificates or Storage Accounts

Advantages:High liquidity...But at competitive prices...No storage risk...No sales tax...Prices widely quoted...Invest by dollar amount.

Disadvantages:Several days' delay in delivery of silver...Silver not in physical possession of owner.

Silver Accumulation Plans

Advantages:Invest as little as $100...Discounted commission rates...Highly liquid...No sales tax...Offers dollar cost averaging...No storage fees.

Disadvantages:Silver not in physical possession of owner although some firms will deliver the metal if requested.

Silver Futures Contracts

Advantages:Speculative appeal...Leverage reduces capital tie-up...Liquidity...Contracts widely quoted...No storage risk.

Disadvantages:Many trading limitations...High risk factors...Unlimited loss potential...Requires market expertise.

Silver Options

Advantages:Speculative appeal...Leverage reduces capital tie-up...No storage risk...clearly defined risk.

Disadvantages:Trading limitations...Highest risk...Less negotiable and less liquid...Investor must be willing to sustain the loss of their entire investment in a commodity option...High degree of knowledge required.

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The Relationship Between Dow Jones and Precious Metals like Gold coins, Platinum, and Sliver

SILVER

In 1980 silver peaked at around $52.50 an ounce. Silver is, therefore, trading at 4.24 times less than it was trading for in 1980. It is one of the only items on the planet that seems to be cheaper than gold. However, over the years there has been much speculation as to whether or not that price was artificially manipulated by the Hunt Brothers, who, you may remember, tried to corner the silver market in the late ‘70s and into early 1980.

Also, as with platinum, silver is considered to be an industrialized metal, not a source of real money. Under serious economic circumstances silver is less likely to fair as well as gold. That being said, you should keep in mind that the above-ground supply of silver has been severely depleted, and there is a shortage, therefore, I still think it is an excellent buy today.

Looking at the Dow/Silver Ratio graph is equally fascinating. 

1)     The Dow Jones outperformed the price of silver from about 1980 until about July of 2001.  We shaded this Dow Jones advance in red. 

 2)     Silver did not start to advance quicker than the Dow Jones until about two

years after gold did.  However, once this advance started, it appears to be more aggressive as the black line drops very quickly.  Notice the falling wedge outlined with dotted lines on the chart above and how the price of silver bearishly broke to the down side of this massive five year forming wedge. 

 3)     Once again, the Silver/Dow ratio has a similar support line that existed in the

Gold/Dow ratio.  This twenty seven year line has stalled this advance as should be expected; but once this major support line is broken we expect a significant advance in the precious metals markets.

 

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Factors influencing the price

1. Large traders or investors

The large spike in 1980 was a result of the Hunt brothers failure to corner the market

The silver market is much smaller in value than the gold market. The London silver bullion market turns over 18 times less money than gold.[12] With physical demand estimated at only $15.2 billion per year, it is possible for a large trader or investor to influence the market. For example:

From 1973 the Hunt brothers began cornering the market in silver, helping to cause a spike in 1980 of $49.45 per troy ounce and a reduction of the gold/silver ratio down to 1:17.0 (gold also peaked in 1980, at $850 per troy ounce).[13] In the last nine months of 1979, the brothers were estimated to be holding over 100 million troy ounces of silver and several large silver futures contracts.[14] However, a combination of changed trading rules on the New York Mercantile Exchange (NYMEX) and the intervention of the Federal Reserve put an end to the game.

In 1997, Warren Buffett purchased 130 million troy ounces (4,000 metric tons) of silver at approximately $4.50 per troy ounce (total value $585 million). On May 6, 2006, Buffett announced to shareholders that his company no longer held any silver.

In April 2006, iShares launched a silver exchange-traded fund, called the iShares Silver Trust (NYSE: SLV), which as of November 2010 held 344 million troy ounces of silver as reserves.[15]

In April 2007, Commitments of Traders Report showed that four or fewer traders held 90% of all short silver futures contracts totalling 245 million troy ounces, which is equivalent to 140 days of production. According to Ted Butler, one of these banks with

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large silver shorts, JPMorgan Chase, is also the custodian of the SLV silver ETF. Some silver analysis have pointed to a potential conflict of interest, as close scrutiny of Comex documents reveals that ETF shares may be used to "cover" Comex physical metal deliveries. This led analysts to speculate that some stores of silver have multiple claims upon them. On 25 September 2008 the CFTC relented and probed the silver market after persistent complaints of foul play.[16] On September 1, 2010, Bloomberg reported that JPMorgan Chase will be closing their Proprietary Trading Desk.[17]

2. Industrial, commercial and consumer demand

The traditional use of silver in photographic development has been dropping since 2000 due to the growth of digital photography.[18] However, silver is also used in electrical appliances (silver is the highest known conductor of electricity), photovoltaics (one of the highest reflectors of light), clothing and medical uses (silver has antibacterial properties). Other new applications for silver include RFID tags, wood preservatives, water purification and food hygiene.[19] The Silver Institute have seen a noticeable increase in silver-based biocide products coming onto the market, as they explain:

Currently we’re seeing a surge of applications for silver-based biocides in all areas: industrial, commercial and consumer. New products are being introduced almost daily. Established companies are incorporating silver based products in current lines - clothing, refrigerators, mobile phones, computers, washing machines, vacuum clearers, keyboards, countertops, furniture handles and more. The newest trend is the use of nano-silver particles to deliver silver ions.[20]

The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products may also contribute to a long-term rise in industrial and jewellery usage.[21]

3.Hedge against financial stress

Silver, like all precious metals, may be used as a hedge against inflation, deflation or currency devaluation. As Joe Foster, portfolio manager of the New York-based Van Eck International Gold Fund, explained in September 2010:

The currencies of all the major countries, including ours, are under severe pressure because of massive government deficits. The more money that is pumped into these economies – the printing of money basically – then the less valuable the currencies become.[22]

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Investment vehicles

1. Bars

A traditional way of investing in silver is by buying actual bullion bars. In some countries, like Switzerland and Liechtenstein, bullion bars can be bought or sold over the counter at major banks.

Physical silver, such as bars or coins, may be stored in a home safe, a safe deposit box at a bank, or placed in allocated (also known as non-fungible) or unallocated (fungible or pooled) storage with a bank or dealer. Silver is traded in the spot market with the code "XAG". When settled in USD, the code is "XAGUSD".

Various sizes of silver bars:

1000 oz troy bars – These bars weigh about 68 pounds avoirdupois (31 kg) and vary about 10% as to weight, as bars range from 900 ozt to about 1,100 ozt (28 to 34 kg). These are COMEX and LBMA good delivery bars.

100 ozt bars – These bars weigh 6.8 pounds (3.11 kg) and are among the most popular with retail investors. Popular brands are Engelhard and Johnson Matthey. Those brands cost a bit more, usually about 40 cents to 2.00 dollars per troy ounce above the spot price, but that price may vary with market conditions.

Odd weight retail bars – These bars cost less and generally have a wider spread, due to the extra work it takes to calculate their value and the extra risk due to the lack of a good brand name.

1 kilogram bars (32.15 ozt) 10 ozt bars and 1 ozt bars (311 and 31.1 g)

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2.Coins and rounds

American Silver Eagle bullion coin.

Buying silver coins is another popular method of physically holding silver. One example is the 99.99% pure Canadian Silver Maple Leaf. Coins may be minted as either fine silver or junk silver, the latter being older coins with a smaller percentage of silver. U.S. coins 1964 and older (half dollars, dimes, and quarters) are 25 grams per dollar of face value and 90% silver (22½ g silver per dollar). All 1965-1970 and one half of the 1975-1976 Bicentennial San Francisco proof and mint set Kennedy half dollars are "clad" in a silver alloy and contain just under one half of the silver in the pre-1965 issues.

Junk-silver coins are also available as sterling silver coins, which were officially minted until 1919 in the United Kingdom and Canada and 1945 in Australia. These coins are 92.5% silver and are in the form of (in decreasing weight) Crowns, Half-crowns, Florins, Shillings, Sixpences, and threepence. The tiny threepence weighs 1.41 grams, and the Crowns are 28.27 grams (1.54 grams heavier than a US $1). Canada produced silver coins with 80% silver content from 1920 to 1967.

Other hard money enthusiasts use .999 fine silver rounds as a store of value. A cross between bars and coins, silver rounds are produced by a huge array of mints, generally contain a troy ounce of silver in the shape of a coin, but have no status as legal tender. Rounds can be ordered with a custom design stamped on the faces or in assorted batches.

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3.Exchange-traded products

Silver exchange-traded products represent a quick and easy way for an investor to gain exposure to the silver price, without the inconvenience of storing physical bars. Silver ETPs include:

iShares Silver Trust (NYSE: SLV) launched by iShares is the largest silver ETF on the market with over 340 million troy ounces of silver in storage.[23]

ETFS Physical Silver (LSE: PHAG) and ETFS Silver Trust (NYSE: SIVR) launched by ETF Securities.

4.Certificates

U.S. $5 Silver Certificate.

A silver certificate of ownership can be held by investors instead of storing the actual silver bullion. Silver certificates allow investors to buy and sell the security without the difficulties associated with the transfer of actual physical silver. The Perth Mint Certificate Program (PMCP) is the only government-guaranteed silver-certificate program in the world.

The U.S. dollar has been issued as silver certificates in the past, each one represented one silver dollar payable to the bearer on demand. The notes were issued in denominations of $10, $5, and $1 and can no longer be redeemed for silver.

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5. Accounts

Most Swiss banks offer silver accounts where silver can be instantly bought or sold just like any foreign currency. Unlike physical silver, the customer does not own the actual metal but rather has a claim against the bank for a certain quantity of metal. Digital gold currency providers, such as GoldMoney, and internet bullion exchanges, such as BullionVault, offer silver as an alternative to gold.

6. Derivatives, CFDs and spread betting

Derivatives, such as silver futures and options, currently trade on various exchanges around the world. In the U.S., silver futures are primarily traded on COMEX (Commodity Exchange), which is a subsidiary of the New York Mercantile Exchange. In November 2006, the National Commodity and Derivatives Exchange (NCDEX) in India introduced 5 kg silver futures.[24]

Firms such as Cantor Index, CMC Markets, IG Index and City Index, all from the UK, provide contract for difference (CFD) or spread bets on the price of silver.

7. Mining companies

These do not represent silver at all, but rather are shares in silver mining companies. Companies rarely mine silver alone, as normally silver is found within, or alongside, ore containing other metals, such as tin, lead, zinc or copper. Therefore shares are also a base metal investment, rather than solely a silver investment. As with all mining shares, there are many other factors to take into account when evaluating the share price, other than simply the commodity price. Instead of personally selecting individual companies, some investors prefer spreading their risk by investing in precious metal mining mutual funds.

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The Bulls and the Bears

There are both bullish and bearish forces at work in the silver market right now. The interesting thing is that the bearish forces seem to be at work in the paper (futures) market, and the bullish forces are at work in the physical market.

Let’s sum up some of those forces …

Bearish Forces …

1) Fear of a global slowdown. Silver is an industrial metal as well as a precious metal. And while the global economy was hot, silver demand soared. Last year, industrial demand for silver jumped 7.2% to a record of 455.3 million ounces.

But the global economy is slowing into recession, and that slowdown could last well into next year. The International Monetary Fund forecasts a reduction in global growth to 3% in 2009 from 5% in 2007.

If there is any single force that can send the price of silver lower, an economic slowdown is probably the one.

2) Mine production. Before the global economy started to slump, global silver production was expected to grow by 6.5% in 2008, faster than last year’s increase of between 3.6% and 4.1%.

But that was then. Now, thanks to the slowing global economy, mines are closing. You see, two-thirds of the world’s silver is produced as a byproduct of other metals. For example, Oz Minerals is cutting zinc production at its Golden Grove Mine Australia by 35%. But that mine also produced over 3.1 million ounces of silver in 2007.

So, if the global economy worsens, we’re likely to see silver production go down, and perhaps sharply lower.

3) Selling by big funds. As the global markets careen into the mother of all financial crises, hedge funds have been imploding one after another like overheated Christmas bulbs. And it’s not just hedge funds — whole trading desks have disappeared. This has removed a lot of the paper demand for silver.

And liquidation in silver futures has been a drag on prices. On the bright side, hedge fund liquidation won’t go on forever. Silver will find a new base, and use that to head higher.

Now let’s look at some bullish forces …

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Bullish Forces

1) Supply/Demand Squeeze. Did I say there was an increase in silver mine supply? Well, that’s true. But there’s also an increase in demand. Goldfields Mineral Services recently estimated that current world silver bullion stocks of coins and silverware stand at a mere 400 million ounces. That’s down from more than 2 billion ounces in the late 1980s.

2) Investor Demand is accelerating. The iShares Silver Trust has already seen a massive increase of silver accumulation since 2006 — over 220 million ounces. Take a look at this chart …

This and other silver ETFs in London and Zurich have made it easy for investors to move in and out of silver.

3) Silver is cheap compared to gold. The price of gold recently traded at 82 times the price of silver. This is about 36% higher than the ratio over the past eight years, and looking back over history, the ratio is closer to 20 to 1. If we return closer to historical ratio, the price of gold would have to go way down, or silver would have to go way, way up.

Why is the gold-silver ratio out of historical whack? It goes back to silver as an industrial metal: Investors are terrified that a global economic slowdown will dampen demand for silver in batteries, superconductors and other electronic components, so they’ve dumped silver futures overboard.

But that conflicts with silver as a precious metal — the global economic crisis is causing more investors (like me) to buy physical silver as a refuge of safety.

After all, Central Banks around the world are flooding the financial system with trillions of dollars — a money deluge worthy of Noah — to try and

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douse the four-alarm financial fire that is the credit crisis. Give them their due; they’ve actually blunted the worst of the immediate threat. The problem is this threat is ongoing, and it could get much worse from here. And that makes physical gold AND silver look even better to me.

These two worlds — the paper world and the physical world — are going to collide. While I think the shortage of physical silver coins and bars will ease down the road, I think the most bullish forces in silver are yet to come. I think the physical world will win out over the paper world … and silver could go much higher.

CURRENT SCENARIO OF SILVER

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1.Investors purchased fewer American Eagle Silver bullion coins in March 2011, but

the investment grade issues still managed to tally up never-before-seen quarterly sales.

2,767,000 of the 99.9% pure silver coins were ordered last month from the United

States Mint, according to the bureau’s most recent coin sales.

While the total is not insignificant and it must take into account US Mint coin rationing, it

pales in comparison to recent monthly sales in which records have been shattered.

Take for example the previous month of February when 3,240,000 of the Silver Eagles

were purchased. The level marked their best February ever. It also ranked as the

seventh best month on record, dating back to the series launch in 1986.

Even that, however, falls short of the astonishing 6,422,000 which flew off US Mint

shelves in January 2011. That single month now ranks at the top for Silver Eagles,

pulverizing the prior monthly sales record by over 50%.

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Combined, the first three months of this year attained the best ever quarter for the

eagles, owing in large part to those January sales. January, February and March 2011

bullion coin sales totaled 12,429,000. This leveled the previous record set by October,

November and December of 2010 by 3,247,000, or an increase of more than 35%.

Part of the sales drop last month is more of an indicator of just how well the bullion

coins have performed in the last few years. Only one of the top 15 months for Silver

Eagle bullion coin sales can be linked to a year other than 2009, 2010 or 2011.

2.Silver prices shot up by Rs 200 to a record level of Rs 58,600 a kg in the national capital on Thursday(7th april) on sustained buying by stockists driven by a firm global trend while gold declined on reduced off take at existing higher levels.

Silver is on a record making spree since last five sessions after the metal in overseas markets climbed to a 31-year-high by adding 0.60 per cent to $39.79 dollar an ounce on a weak dollar.

However, gold turned bearish as it declined in Asia on the back of speculators booking profits after it rose to a record yesterday.

Reduced offtake by retail customers at existing higher levels further fuelled the trend.

Gold in global markets, which normally sets the price trend on the domestic front, fell by 0.4 per cent to $1,454.35 an ounce, after rising to a record level of $1,463.70 an ounce yesterday.

On the domestic front, silver ready shot up by Rs 200 to an all—time high of Rs 58,600 a kg, while weekly-based delivery gained Rs 35 to Rs 57,850 a kg. Silver coins continued to be asked at their last level of Rs 64,500 for buying and Rs 65,000 for selling of 100 pieces.

On the other hand, gold of 99.9 and 99.5 per cent purity declined by Rs 35 each to Rs 21,265 and Rs 21,145 per 10 grams, respectively. Sovereign held steady at Rs 17,550 per piece of eight grams.

India silver rises on Libya unrest

89

The spot silver has gained more than a percent from its prior day’s closing to settle at $37.47 levels. The same has been observed in futures in the COMEX and MCX division. COMEX Silver May future lost due to favourable data releases from the US.

Global equities remained in positive. Asian equities closed green while DJIA and FTSE gained moderate. This has backed the metal to soar up. The dollar index closed by losing 0.017% to provide support.

The I-share silver holdings is counted to its current holdings of 11139.52tons as on 29th March.

Outlook:

The COMEX May future is currently quoting $37.68, up by 0.45% from the previous closing. The Asian equities are trading mostly in positive although the Japan’s data containing the manufacturing index aftermath the catastrophe led NIKKEI down.

As discussed in gold’s outlook, from the economic data front it is likely to have a mixed impact upon the precious metals. But the concern of the Europe’s stress testing result may keep investors to a safer side.

The metal’s price gain with a rise in volume and open interest is also indicating a bullish trend for the metal. However, an improving US jobless claim data might impact adversely on the metal.

So, we may expect a positive directional move in the Asian session while a pull back is expected as and when US opens.

Commodities prices plummet on Japan's crisis

Commodities prices plummeted Tuesday as the nuclear crisis in Japan raised more questions about the nation's ongoing demand for grains, metals and oil.

The steepest price declines included wheat, corn, soybeans, gasoline and palladium, a metal used in automobile catalytic converters. Even prices for gold and silver, typically considered safe-haven holdings, dropped.

Potentially dangerous levels of radiation leaked from a crippled nuclear plant in Japan days after a deadly earthquake and tsunami hit the country.

90

Traders are awaiting more clarity about what lies ahead for Japan because it is a huge importer of raw materials. They are concerned that demand will decline as Japan focuses on containing the nuclear crisis and recovering from the disaster that killed thousands.

Many are selling commodities in favor of assets considered relatively safe, such as U.S. Treasurys and the dollar.

"Everything is getting clobbered," LaSalle Futures Group analyst Matt Zeman said. "I think investors are starting to get their arms around the economic and financial impact that this crisis is going to have."

He expects commodities contracts to continue to sell off in the coming weeks until more details surface about the impact of the disaster.

In 2009, Japan was the world's third-largest importer of agricultural products and was the fourth-largest market for U.S. agricultural products, the U.S. Agriculture Department said. It ranks among the top three markets for U.S. exports of wheat, corn and hogs.

Japan also is the world's third-largest importer of oil, consuming about 4.4 million barrels per day.

In agriculture contracts for May delivery, wheat fell 53 cents, or 7.4 percent, to settle at $6.6775 a bushel, corn dropped 30 cents, or 4.5 percent, to settle at $6.36 a bushel and soybeans lost 70 cents, or 5.2 percent, to settle at $12.70 a bushel.

In metals contracts for April, gold fell $32.10 to settle at $1,392.80 an ounce and platinum lost $46.70 to settle at $1,705.60 an ounce.

March copper lost 4.85 cents to settle at $4.1250 a pound, May silver fell $1.723 to settle at $34.117 an ounce and June palladium gave up $43.30, or 5.8 percent, to settle at $704.90 an ounce.

Benchmark oil for April delivery fell $4.01, or 4 percent, to settle at $97.18 on the New York Mercantile Exchange.

In other Nymex trading for April contracts, heating oil dropped 11 cents, or 3.6 percent, to settle at $2.9538 a gallon and gasoline fell 15.74 cents, or 5.3 percent, to settle at $2.8029 a gallon.Natural gas added 2.7 cents to settle at $3.941 per 1,000 cubic feet. while there is little impact of japan crisis on silver.

SPOT PRICES OF SILVER FROM 2/14/2011 TO 3/24/2011

Head Commodity Symbol UnitSpot Price

Rs.Price Date Price Time Market

Bullion Silver SILVER   1 KGS 55950.00 24-Mar-2011 16:03 AHMEDABAD

91

Bullion Silver SILVER   1 KGS 54200.00 23-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 53735.00 22-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 53650.00 21-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 52753.00 19-Mar-2011 12:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 52434.00 18-Mar-2011 17:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 51750.00 17-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 51685.00 16-Mar-2011 17:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 52450.00 15-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 53500.00 14-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 53620.00 12-Mar-2011 13:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 52090.00 11-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 53500.00 10-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 53800.00 09-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 54000.00 08-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 54080.00 07-Mar-2011 17:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 52410.00 05-Mar-2011 13:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 50750.00 04-Mar-2011 17:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 50915.00 03-Mar-2011 16:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 50025.00 01-Mar-2011 17:03 AHMEDABAD

Bullion Silver SILVER   1 KGS 49600.00 28-Feb-2011 17:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 49608.00 26-Feb-2011 13:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 49100.00 25-Feb-2011 16:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 49630.00 24-Feb-2011 17:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 49000.00 23-Feb-2011 16:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 48850.00 22-Feb-2011 16:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 49400.00 21-Feb-2011 16:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 48115.00 19-Feb-2011 13:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 47400.00 18-Feb-2011 16:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 46000.00 17-Feb-2011 18:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 46100.00 16-Feb-2011 17:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 46050.00 15-Feb-2011 16:02 AHMEDABAD

Bullion Silver SILVER   1 KGS 45400.00 14-Feb-2011 16:02 AHMEDABAD

PRICES OF SILVER FROM 2/14/2011-3/25/2011

92

Date Symbol

Expiry Month

Open(Rs)

High(Rs)

Low(Rs)

Close(Rs) Volume(In Lots)

Value(In Lakhs)

diff High-low average- diff

2/14/2011 SILVER 5-Jul-11 47000 47169

46012 47021 183 2559.92 1157 -53

2/15/2011 SILVER 5-Jul-11 47290 47549

46802 47317 348 4945.69 747 357

2/16/2011 SILVER 5-Jul-11 47240 47505

46800 47179 359 5082.53 705 399

2/17/2011 SILVER 5-Jul-11 47299 48099

46976 48027 306 4366.07 1123 -19

2/18/2011 SILVER 5-Jul-11 48015 49788

48011 49258 783

11442.71 1777 -673

2/19/2011 SILVER 5-Jul-11 49403 49505

49360 49478 137 2032.7 145 959

2/21/2011 SILVER 5-Jul-11 50001 51583

50001 51488 926 14152.3 1582 -478

2/22/2011 SILVER 5-Jul-11 51264 51394

49959 50502 813

12361.42 1435 -331

2/23/2011 SILVER 5-Jul-11 50594 51426

50050 51160 435 6626.9 1376 -272

2/24/2011 SILVER 5-Jul-11 51200 51830

51000 51248 657

10125.47 830 274

2/25/2011 SILVER 5-Jul-11 50424 51000

50420 50764 690

10488.82 580 524

2/26/2011 SILVER 5-Jul-11 51999 52397

51010 51238 206 3166.23 1387 -283

2/28/2011 SILVER 5-Jul-11 51551 51873

51080 51553 1549

23925.72 793 311

3/1/2011 SILVER 5-Jul-11 51383 523205138

3 52211 219034139.9

7 937 167

3/2/2011 SILVER 5-Jul-11 52353 529555235

0 52786 136621608.8

8 605 499

3/3/2011 SILVER 5-Jul-11 52265 531005190

1 52054 346554477.5

1 1199 -95

3/4/2011 SILVER 5-Jul-11 52300 535855221

1 53488 2803 44515.9 1374 -270

3/5/2011 SILVER 5-Jul-11 53799 541925365

0 54152 465 7544.72 542 562

3/7/2011 SILVER 5-Jul-11 54200 555455420

0 54699 562593014.4

3 1345 -241

3/8/2011 SILVER 5-Jul-11 54528 555115400

0 54436 387563649.3

5 1511 -407

3/9/2011 SILVER 5-Jul-11 54534 553515437

3 54844 313751621.1

5 978 126

3/10/2011 SILVER 5-Jul-11 54889 55212

53494 53830 4452

72415.55 1718 -614

3/11/2011 SILVER 5-Jul-11 53893 54950

52621 54810 6503

104567.9 2329 -1225

3/12/2011 SILVER 5-Jul-11 55100 55150

54654 54832 238 3912.27 496 608

3/14/2011 SILVER 5-Jul-11 54800 55140

54400 54767 2853

46863.65 740 364

3/15/2011 SILVER 5-Jul-11 54480 54480

52164 52850 6510

103924.3 2316 -1212

93

3/16/2011 SILVER 5-Jul-11 52622 53650

52216 52947 3222

51308.66 1434 -330

3/17/2011 SILVER 5-Jul-11 52901 52995

52295 52564 3595

56791.89 700 404

3/18/2011 SILVER 5-Jul-11 52680 53929

52680 53430 3204

51357.42 1249 -145

3/19/2011 SILVER 5-Jul-11 53595 53694

53588 53671 155 2494.79 106 998

3/21/2011 SILVER 5-Jul-11 53930 54830

53930 54700 2501 40911.3 900 204

3/22/2011 SILVER 5-Jul-11 54930 55114

54350 54888 2794

45892.66 764 340

3/23/2011 SILVER 5-Jul-11 54772 56147

54755 56101 3384

56267.37 1392 -288

3/24/2011 SILVER 5-Jul-11 56006 57200

55990 56178 4445

75428.05 1210 -106

3/25/2011 SILVER 5-Jul-11 56278 56780

55620 55973 3633

61362.69 1160 -56

1104.057143

-0.057142857

2/14/2

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011

2/18/2

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011

2/22/2

011

2/24/2

011

2/26/2

011

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3/24/2

011420004400046000480005000052000540005600058000

SILVER CLOSE (Rs)

SILVER CLOSE

DATE

CLO

SE P

RICE

US DOLLAR FROM 2/14/2011-3/25/2011

94

Date: Exchange rate:

2/14/2011

45.5

2/15/2011

45.52036

2/16/2011

45.52036

2/17/2011

45.34513

2/18/2011

45.19997

2/21/2011

44.98756

2/22/2011

45.26524

2/23/2011

45.13218

2/24/2011

45.46794

2/25/2011

45.32481

2/28/2011

45.27252

3/1/2011

44.94973

3/2/2011

44.94967

3/3/2011

45.0426

3/4/2011

44.98746

3/7/2011

45.05275

3/8/2011

45.0885

3/9/2011

45.00503

3/10/2011

45.18275

3/11/2011

45.23996

3/14/2011

45.0603

3/15/2011

45.24633

3/16/2011

45.1172

3/17/2011

45.15139

3/18/2011

45.03645

3/21/2011

45.00986

95

3/22/2011

44.95532

3/23/2011

44.84508

3/24/2011

44.75014

3/25/2011

44.67517

45.12939

2/14/2

011

2/16/2

011

2/18/2

011

2/20/2

011

2/22/2

011

2/24/2

011

2/26/2

011

2/28/2

011

3/2/2

011

3/4/2

011

3/6/2

011

3/8/2

011

3/10/2

011

3/12/2

011

3/14/2

011

3/16/2

011

3/18/2

011

3/20/2

011

3/22/2

011

3/24/2

01144.2

44.4

44.6

44.8

45

45.2

45.4

45.6

USD CLOSE (Rs)

USD CLOSE

DATE

CLO

SE P

RICE

DOWJONES FROM 2/14/2011-3/30/2011

Date Open High Low Close VolumeAdj

Close*diff high -low

average- diff

14-Feb-1112,266.8

312,327.0

012,185.2

112,268.1

93,567,040,00

012,268.1

9 141.79 59.21

96

15-Feb-1112,266.7

512,293.4

712,146.2

712,226.6

43,926,860,00

012,226.6

4 147.20 53.80

16-Feb-1112,219.7

912,338.4

312,195.5

412,288.1

71,966,450,00

012,288.1

7 142.89 58.11

17-Feb-1112,287.7

912,357.5

012,216.8

012,318.1

41,966,450,00

012,318.1

4 140.70 60.30

18-Feb-1112,318.6

012,417.9

712,265.1

612,391.2

51,966,450,00

012,391.2

5 152.81 48.19

22-Feb-1112,389.7

412,394.7

012,142.9

712,212.7

91,322,780,00

012,212.7

9 251.73 -50.73

23-Feb-1112,211.8

112,289.8

412,007.3

912,105.7

81,330,340,00

012,105.7

8 282.45 -81.45

24-Feb-1112,104.6

412,202.6

911,960.6

212,068.5

01,222,900,00

012,068.5

0 242.07 -41.07

25-Feb-1112,060.9

312,202.2

012,043.8

312,130.4

53,836,030,00

012,130.4

5 158.37 42.63

28-Feb-1112,130.2

212,293.4

712,112.2

812,226.3

41,252,850,00

012,226.3

4 181.19 19.81

1-Mar-1112,226.5

712,304.0

312,036.0

012,058.0

21,180,420,00

012,058.0

2 268.03 -67.03

2-Mar-1112,057.3

412,154.9

711,970.0

812,066.8

01,025,000,00

012,066.8

0 184.89 16.11

3-Mar-1112,068.0

112,317.8

412,068.0

112,258.2

04,340,470,00

012,258.2

0 249.83 -48.83

4-Mar-1112,258.8

812,306.2

612,056.8

112,169.8

84,223,740,00

012,169.8

8 249.45 -48.45

7-Mar-1112,171.0

912,268.8

712,025.5

112,090.0

33,964,730,00

012,090.0

3 243.36 -42.36

8-Mar-1112,085.8

012,276.3

712,039.0

212,214.3

84,531,420,00

012,214.3

8 237.35 -36.35

9-Mar-1112,211.1

612,293.7

412,106.6

812,213.0

93,709,520,00

012,213.0

9 187.06 13.94

10-Mar-1112,211.4

312,211.4

311,924.4

811,984.6

14,723,020,00

011,984.6

1 286.95 -85.95

11-Mar-1111,976.9

612,087.0

111,936.3

212,044.4

03,740,400,00

012,044.4

0 150.69 50.31

14-Mar-1112,042.1

312,058.4

411,873.4

311,993.1

64,050,370,00

011,993.1

6 185.01 15.99

15-Mar-1111,988.6

911,988.6

911,648.5

011,855.4

25,201,400,00

011,855.4

2 340.19 -139.19

16-Mar-1111,854.1

311,862.0

811,548.1

411,613.3

05,833,000,00

011,613.3

0 313.94 -112.94

17-Mar-1111,614.8

211,842.5

511,614.8

211,774.5

94,134,950,00

011,774.5

9 227.73 -26.73

18-Mar-1111,777.2

311,971.1

411,777.2

311,858.5

24,685,500,00

011,858.5

2 193.91 7.09

21-Mar-1111,860.1

112,117.8

811,860.1

112,036.5

34,223,730,00

012,036.5

3 257.77 -56.77

22-Mar-1112,036.3

712,096.0

111,965.3

812,018.6

33,576,550,00

012,018.6

3 130.63 70.37

23-Mar-1112,018.4

012,131.8

911,936.7

012,086.0

23,842,350,00

012,086.0

2 195.19 5.81

24-Mar-1112,087.5

412,221.0

812,064.6

012,170.5

64,223,740,00

012,170.5

6 156.48 44.52

25-Mar-11 12,170.7 12,290.2 12,143.6 12,220.5 4,223,740,00 12,220.5 146.67 54.33

97

1 9 2 9 0 9

28-Mar-1112,221.1

912,272.9

212,197.8

812,197.8

83,215,170,00

012,197.8

8 75.04 125.96

29-Mar-1112,193.8

712,310.3

512,141.6

512,279.0

13,482,580,00

012,279.0

1 168.70 32.30

30-Mar-1112,280.0

712,413.4

312,271.5

212,350.6

13,809,570,00

012,350.6

1 141.91 59.09

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-1500

-1000

-500

0

500

1000

1500

Average Movement in Silver and Dow Jones in a Day

SILVERDOWJONES

Date

Pric

e M

ovem

ent

CRUDE OIL PRICES FROM 2/14/2011-3/25/2011

Date SymbolExpiry Month Open(Rs) High(Rs) Low(Rs) Close(Rs) Volume(I

n Lots)Value(In

Lakhs) diff high- lowaverage- diff

2/14/2011 CRUDEOIL 20-Jun-11 4445 4450 4419 4439 10 44.39 31 61

98

2/15/2011 CRUDEOIL 20-Jun-11 4440 4440 4375 4419 8 35.35 65 27

2/16/2011 CRUDEOIL 20-Jun-11 4391 4391 4363 4379 14 61.29 28 64

2/17/2011 CRUDEOIL 20-Jun-11 4357 4363 4341 4350 6 26.1 22 70

2/18/2011 CRUDEOIL 20-Jun-11 4340 4385 4316 4359 20 86.88 69 23

2/19/2011 CRUDEOIL 20-Jun-11 4373 4376 4365 4370 10 43.7 11 81

2/21/2011 CRUDEOIL 20-Jun-11 4407 4525 4407 4513 38 169.79 118 -26

2/22/2011 CRUDEOIL 20-Jun-11 4600 4665 4494 4515 140 643.9 171 -79

2/23/2011 CRUDEOIL 20-Jun-11 4537 4725 4530 4714 73 337.69 195 -103

2/24/2011 CRUDEOIL 20-Jun-11 4707 4877 4686 4745 75 359.59 191 -99

2/25/2011 CRUDEOIL 20-Jun-11 4662 4767 4600 4627 55 255.84 167 -75

2/26/2011 CRUDEOIL 20-Jun-11 4665 4667 4660 4664 8 37.31 7 85

2/28/2011 CRUDEOIL 20-Jun-11 4764 4764 4622 4636 49 229.06 142 -50

3/1/2011 CRUDEOIL 20-Jun-11 4620 4685 4603 4675 38 176.11 82 10

3/2/2011 CRUDEOIL 20-Jun-11 4714 4800 4701 4779 54 256.32 99 -7

3/3/2011 CRUDEOIL 20-Jun-11 4800 4811 4721 4749 43 204.82 90 2

3/4/2011 CRUDEOIL 20-Jun-11 4775 4875 4770 4865 44 212.46 105 -13

3/5/2011 CRUDEOIL 20-Jun-11 4906 4914 4865 4893 28 137.21 49 43

3/7/2011 CRUDEOIL 20-Jun-11 5006 5010 4912 4946 90 447.37 98 -6

3/8/2011 CRUDEOIL 20-Jun-11 4921 4952 4864 4911 30 147.32 88 4

3/9/2011 CRUDEOIL 20-Jun-11 4850 4926 4850 4903 153 747.87 76 16

3/10/2011 CRUDEOIL 20-Jun-11 4921 4938 4707 4785 95 458.69 231 -139

3/11/2011 CRUDEOIL 20-Jun-11 4821 4821 4696 4758 108 513.26 125 -33

3/12/2011 CRUDEOIL 20-Jun-11 4733 4735 4730 4732 10 47.32 5 87

3/14/2011 CRUDEOIL 20-Jun-11 4680 4753 4664 4732 63 296.36 89 3

3/15/2011 CRUDEOIL 20-Jun-11 4680 4703 4598 4636 97 451.25 105 -13

3/16/2011 CRUDEOIL 20-Jun-11 4575 4654 4561 4609 58 267.39 93 -1

3/17/2011 CRUDEOIL 20-Jun-11 4636 4763 4634 4731 50 234.22 129 -37

99

3/18/2011 CRUDEOIL 20-Jun-11 4778 4833 4681 4703 106 505.55 152 -60

3/19/2011 CRUDEOIL 20-Jun-11 4728 4734 4715 4729 34 160.6 19 73

3/21/2011 CRUDEOIL 20-Jun-11 4801 4824 4756 4761 176 844.32 68 24

3/22/2011 CRUDEOIL 20-Jun-11 4761 4836 4723 4820 123 587.04 113 -21

3/23/2011 CRUDEOIL 20-Jun-11 4829 4885 4818 4868 194 941.1 67 25

3/24/2011 CRUDEOIL 20-Jun-11 4842 4891 4808 4825 109 528.82 83 9

3/25/2011 CRUDEOIL 20-Jun-11 4842 4855 4802 4836 81 391.65 53 3992.45714286

2/14/2

011

2/16/2

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011

2/20/2

011

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500

1000

1500

Average Price Movement of Silver and Crude Oil in a Day

SILVERCRUDE OIL

Date

Pric

e M

ovem

ent

PRICES OF GOLD FROM 2/14/2011-3/25/2011

Date SymbolContract/Expiry Month Open(Rs) High(Rs) Low(Rs

)Close(Rs) PCP

(Rs)Volume(In

Lots)Volume(In

000's)Value(In

Lakhs)OI(In Lots)

2/14/2011 GOLD 4-Jun-11 20547 20641 20514 20604 20573 543543.000

GRMS 11167.57 1618

100

2/15/2011 GOLD 4-Jun-11 20580 20771 20580 20734 20604 713713.000

GRMS 14761.05 1578

2/16/2011 GOLD 4-Jun-11 20740 20800 20655 20736 20734 638638.000

GRMS 13227.97 1603

2/17/2011 GOLD 4-Jun-11 20670 20785 20670 20753 20736 463463.000

GRMS 9604.61 1551

2/18/2011 GOLD 4-Jun-11 20770 20863 20735 20825 20753 20482048.000

GRMS 42606.4 1631

2/19/2011 GOLD 4-Jun-11 20879 20879 20800 20832 20825 135135.000

GRMS 2811.13 1631

2/21/2011 GOLD 4-Jun-11 20913 21350 20884 21057 20832 28652865.000

GRMS 60245.83 1823

2/22/2011 GOLD 4-Jun-11 21099 21142 20988 21106 21057 12731273.000

GRMS 26823.35 1633

2/23/2011 GOLD 4-Jun-11 21107 21329 21012 21301 21106 690690.000

GRMS 14590.65 1657

2/24/2011 GOLD 4-Jun-11 21257 21466 21247 21400 21301 961961.000

GRMS 20544.01 1754

2/25/2011 GOLD 4-Jun-11 21300 21300 21139 21229 21400 755755.000

GRMS 16015.68 1763

2/26/2011 GOLD 4-Jun-11 21256 21280 21255 21270 21229 6565.000 GRMS 1382.39 1760

2/28/2011 GOLD 4-Jun-11 21334 21461 21165 21227 21270 18191819.000

GRMS 38798.11 2143

3/1/2011 GOLD 4-Jun-11 21217 21379 21158 21348 21227 823823.000

GRMS 17513.9 2132

3/2/2011 GOLD 4-Jun-11 21406 21462 21377 21431 21348 643643.000

GRMS 13771.56 2056

3/3/2011 GOLD 4-Jun-11 21410 21470 21137 21153 21431 16291629.000

GRMS 34696.09 2090

3/4/2011 GOLD 4-Jun-11 21206 21370 21155 21352 21153 22272227.000

GRMS 47285.41 2109

3/5/2011 GOLD 4-Jun-11 21374 21409 21360 21398 21352 130130.000

GRMS 2781.38 2067

3/7/2011 GOLD 4-Jun-11 21469 21570 21380 21434 21398 11961196.000

GRMS 25698.18 2154

3/8/2011 GOLD 4-Jun-11 21400 21490 21304 21332 21434 841841.000

GRMS 17981.89 2268

3/9/2011 GOLD 4-Jun-11 21300 21421 21268 21345 21332 825825.000

GRMS 17601.27 2361

3/10/2011 GOLD 4-Jun-11 21372 21410 21090 21143 21345 15161516.000

GRMS 32194.13 2552

3/11/2011 GOLD 4-Jun-11 21273 21292 21080 21254 21143 26502650.000

GRMS 56161.96 2538

3/12/2011 GOLD 4-Jun-11 21240 21278 21237 21274 21254 124124.000

GRMS 2636.61 2547

3/14/2011 GOLD 4-Jun-11 21301 21368 21249 21299 21274 10851085.000

GRMS 23113.96 2619

3/15/2011 GOLD 4-Jun-11 21240 21243 20800 20907 21299 27432743.000

GRMS 57711.03 2971

3/16/2011 GOLD 4-Jun-11 20962 21022 20885 20945 20907 20982098.000

GRMS 43986.33 2933

3/17/2011 GOLD 4-Jun-11 20904 21030 20850 21013 20945 13601360.000

GRMS 28487.72 3111

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3/18/2011 GOLD 4-Jun-11 21044 21237 21044 21103 21013 16861686.000

GRMS 35635.76 3216

3/19/2011 GOLD 4-Jun-11 21136 21141 21105 21123 21103 245245.000

GRMS 5175.98 3251

3/21/2011 GOLD 4-Jun-11 21230 21315 21208 21228 21123 19691969.000

GRMS 41862.64 3298

3/22/2011 GOLD 4-Jun-11 21240 21264 21115 21182 21228 18611861.000

GRMS 39422.43 3531

3/23/2011 GOLD 4-Jun-11 21190 21308 21171 21283 21182 22952295.000

GRMS 48734.62 3667

3/24/2011 GOLD 4-Jun-11 21272 21315 21105 21130 21283 27942794.000

GRMS 59316.32 4008

3/25/2011 GOLD 4-Jun-11 21126 21190 21005 21072 21130 36093609.000

GRMS 76211.92 4418

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1500 Average Price Movement in Silver and Gold in a Day

SILVERGOLD

Date

Pric

e M

ovem

ent

CORRELATION BETWEEN SILVER AND OTHER COMMODITIES

CORRELATION BETWEEN SILVER AND CRUDE OIL

102

= .338169

This means a 100Rs change in silver leads to 33Rs change in prices of crude oil.This also means that there is a positive relationship between silver and crude oil prices which means as the prices of silver goes up, prices of crude oil also goes up.

CORRELATION BETWEEN SILVER AND GOLD

=.557127

This means a 100Rs change in silver leads to 55.127Rs change in prices of gold.This also means that there is a positive relationship between silver and gold prices which means as the prices of silver goes up, prices of gold also goes up.

CORRELATION BETWEEN SILVER AND COPPER

=.280808

This means a 100Rs change in silver leads to 28.08Rs change in prices of copper.This also means that there is a positive relationship between silver and copper prices which means as the prices of silver goes up, prices of copper also goes up.

103

SUBSTITUTES OF SILVER Alternatives to Silver Inks

NanoMarkets predicts that by 2015, 184.5 million ouncesof silver will be used by the

electronicsindustry (see report, Silver Inks and Pastes for Printable Electronics: 2008-

2015). This isn’tsurprising, given that silver ismore conductive than copper, gold or

any other element; even itsoxide is conductive. Unfortunately, silver prices often

reflect demands completely unrelated toavailability, causing squeamishness among

industrial users. Even without the drama of the HuntBrothers infamous 1980 attempt to

manipulate the market, it is prudent to consider lower-costalternatives to silver. These

could be in any form from other minerals to silver alloys and evennovel production

methods.

Alternatives -- Materials

In some applications, such as medical implants, silver can be replaced with substitute

materialssuch as titanium or biocompatible polymers. But in industrial applications

where conductivity isimportant, the first alternative that comes to mind is usually

copper.

Pure Copper

Initially, copper may seem like an ideal substitute for silver. While it has 95 percent

of silver’s

conductivity, it’s only one percent of its price. What’s not to like? Plenty, as it turns

out.

Copper oxide, the verdigris that makes the Statue of Liberty green, is non-conducting.

While itdoes protect the underlying metal from oxidizing further, the challenge of

oxidation remains atany scale, if there is a chance of exposure to air. Worse, at a small

enough size, copper powder isso reactive, it can ignite. This may be fun in high school

chem lab, but a disaster for large-scalemanufacturing.

Formulationshavebeen created that reduce the chances of oxidation, but they add to

the price.Silver-plated copper inks remain a potential option for printed RFID tags,

especially in situationswhere economics dictate that they can barely be priced above

paper barcodes (such asinventory-tracking of inexpensive parts and goods).

One solution is the creation of copper nanoparticles. According to Vivek Subramanian,

associateprofessor of electrical engineering and computer sciences at the University

of California,Berkeley, copper nanoparticles are as conductive as silver, but suffer

from the oxidationproblem, and therefore require sintering in nitrogen or formalin gas.

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Subramanian’s teamstudies the metallic, semiconductor, and insulating

nanoparticles for use in printable ink Alloys

As Cecil Adams once wrote in his Straight Dope column, one of the more infamous

copper-silveralloys was the mixture in Tyco Brahe’s artificial nose. Supposedly, Brahe’s

purpose was to get amore flesh-like color, but lower cost may have been a factor too, as

it often is with silver alloys.Carbon-silver inks, for example, were developed in response

to the 1980spricehikes, and arestill in use today. They are a balance of trade-offs:While

they are lower cost, they are also lessconductivethan silver alone. In addition, the R&D

cost to createthe perfect admixtureisnotinconsiderable.

Carbon/Graphite

The allotropes of carbon have such contrasting identities, the element could almost

star as ascience fiction superhero. Carbon itself is non-conductive, as is its best-

known form, diamond;but asgraphite, it is conductive enough to be placed high on

the list of silver alternatives.According to Michigan State Chemical Engineering

professor Lawrence Drzal, graphites have thepotential to be competitors to traditional

conductive additives likecopper and silver. His lab hasfashioned xGnP Exfoliated

Graphite NanoPlatelets, which as monolayer coatings have aconductivity similar to

that of ITO. They are currently being commercialized by XG Sciences, Inc.

Carbon Nanotubes

Carbon nanotubes may prove to be the ultimate in good news/bad news. IBM Fellow

PhaedonAvouris and Columbia University professor Tony Heinz just won the Julius

Springer Prize forApplied Physics for demonstrating the possibilities of nanotubes as

transistors and logic circuits,along with their optical properties, which open up new

realms for nanophotonics. But whilecarbon nanotubesmay thrillphysicists and

chemists, the medical community is considerably lessimpressed. Last May, Ken

Donaldson of the University of Edinburgh published areport in NatureNanotechnology

[1] that showed mice exposed to carbon nanotubes exhibited tissue damagesimilar to

the effectsof asbestos inhalation. Theresearch suggests thatfar from being

benignconfigurations, carbon nanotubes may be potential cancer agents. Calls for

regulation arealready being promulgated, what this will ultimately mean for large-scale

manufacturing is yetunknown, but it does reduce some of the brave new world

optimism.

Alternatives -- Methods

105

Another approach makes perfect sense in a world becoming ever more conscious

of limited

natural resources: simply use less silver, as in smaller particles.

Silver and other Nanoparticles

Nano-sized silver and other conductive inks can be ink-jetted, without the risk of

cloggingnozzles, thus saving both material costs and production runs. According to

silver ink supplierCabot, the cost savingsof ink-jet over screen printing could

be considerable, given the potentialreduction in thickness of the ink jet layer. In

Cabot’s example, the company compared an 8

micron screen-printed layer to an 0.4micron ink jet printed layer, to calculate it would

only cost

0.76 for ink jet printing versus $15.12 for screen printing.

Nanoparticle-sized inks also can be cured at much lower temperatures, thus opening

up a widerrange of substrates, including lower-cost plastics. For example, last year

Bayer Materials Science(BMS) introduced BayInk, which the company touts as having

a cure temperature compatiblewith plastics. BMS also suggeststhat BayInk would be

ideal for RFID, which is no coincidencesince this is the major new market for

conductive inks.

Inks can also be sintered. In thisprocess, particles arebonded together at just below

the meltingpoint. The great advantage is that they are joined, rather than merely

touching, greatlyincreasing the inter-particle contacts.

This isone of the ways that using smaller particles improves “conductivity

efficiency.”Remember that in essence, inkjet printing isdepositing dots. But current

can only flow betweendots where they touch. As with polka dots, larger do ts are

surrounded by proportionately more“white space,” where current cannot flow. With

nanoparticles, there aremany more, smallerdots, closer together, and thus more

dots coming into contact with more surface area of otherdots—for the same, or less,

volume of silver, you get greater conductivity.

Still, Drzal cautions, while the intrinsic conductive properties of individual particles can

be veryhigh, once they are assembled into a composite, the contact resistance—

where the particlescome together—can become high as well. As a result, conductivity

requirements of the bulkmaterials can be lower.

Unfortunately, there are also human health and environmental concerns with

nanosilverparticles, sincethey are small enough to be inhaled and could also

possibly penetrate humanskin. While their toxicity to bacteria is more welcome, it is

106

still aconcern, since it is possiblenanosilvers could also kill beneficial bacteria.

Worse, surviving generations of bacteria couldpotentially grow resistant. Given

these concerns, regulatory agencies in many countries willlikely examine the useof

nanosilvers, which could affectboth the cost, and even the possibilitiesfor

manufacturing nanosilver-based products.

While there are many silver alternatives already in the marketplace, they are not

withoutconcerns. Fortunately, the price of silver will continue to drive innovative

solutions forreplacements. At the moment, however, the quest for a material that is

cheaper than silver, asor nearly as conductive, and doesn’t oxidize leaves you, in

the words of Drzal, “Without toomany choices.”

107

IMPACT OF INFLATION ON SILVER

The dollar’s downward spiral and concerns about inflation pushed gold and silver higher this week as investors clamoured for an alternative store of value.

Gold notched a record high above $1,569 per troy ounce, rising 4.1 per cent on the week.

Silver climbed 3.9 per cent on the week, touching a 31-year peak above $49 per ounce that was just shy of the $50 nominal record reached during a notorious market squeeze in 1980.

Oil also rose, with benchmark ICE June Brent closing at $125.89 per barrel and Nymex June West Texas Intermediate settling at $113.93 per barrel.

The gains came as the dollar fell 1.5 per cent against a basket of leading currencies to its weakest level since July 2008, when crude oil prices peaked above $145 per barrel.

The US Federal Reserve raised its inflation forecast for this year and signalled its policy of ultralow interest rates would persist. “The dragon of inflation may not be fully awake in the world but the people who slumber around his body are beginning to worry he’s stirring,” said Sean Corrigan, chief investment strategist at Diapason Commodities Management in Lausanne, Switzerland.

Silver prices have gained 160 per cent in the past year as people buy coins and funds on fears of weakening paper currencies.

The $17bn iShares Silver Trust, a US exchange-traded fund backed by 355m ounces of bullion, had trading volumes that exceeded the largest equity ETF’s volumes early in the week.

Silver futures on New York’s Comex exchange had record volumes on Monday, and in April were triple the levels of a year ago.

James Steel, precious metals analyst at HSBC in New York, said: “The dollar is on the defensive. There’s concern about US fiscal profligacy. There are euro sovereign risk issues. There’s strong underlying retail investor demand for both silver and gold but particularly silver.”

A weakening dollar tends to buttress the value of dollar-denominated commodities. US crude futures reached their highest levels since mid-2008.

“There is underlying demand strength,” said Jan Stuart, global oil economist at Macquarie in New York. “You can see that from refining margins. The flat price tends to get a lift from a weakening dollar.”

108

Broad commodity indices such as the S&P GSCI and Dow Jones-UBS ended the week unchanged, however.

They were constrained by agricultural markets where a rally has cooled amid uncertainty over demand. ICE May cotton futures plunged 7.7 per cent to $1.7228 per pound as China, the biggest importer of the fibre, cancelled imports and traders reported rising stockpiles of unsold ya

109

BIBLIOGRAPHY

www.silverinstitute.com

www.google.co.in/silver

www.investmentscore.com

www.articlesbase.com

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