We now that by June 11, the silver price had briefly spiked downwards to 4.41, a point from where it recovered quickly.

In fact, the price fell precisely to the minimum signalled on the up-trend line.

As we are currently approaching the down-trend line shown above, and read so many positive opinions on silver (which would be a bit scary if the major newspapers did not write against owning precious metals) we think it is time once gain to analyse what the future course may be.

The long-term picture

Most likely, you are aware of the fact that silver fundamentals have been improving over a long period as shown by Estimated Total Silver Bullion Inventories and Government Silver Inventories as shown below.

Under these favorable developments, many wonder why the silver price has remained stuck at such an historically low level and conclude that some powerful forces are attempting, so far successfully, to keep the silver price low.

Technically speaking, the wedge is undeniable, and the silver price will have to beak out, sooner or later, be it on the down-side or on the up-side.

In our opinion , the break-out will be upwards given that silver fundamentals continue to improve.

As we approach the major resistance zone as marked by the down-trend line and the previous peaks, we realize that the area between $ 4.50 and $ 5.10 needs to be overcome. This can happen if the price slowly spirals higher or a "catalyst" catapults the price out of this resistance zone as, e.g., short positions need suddenly to be covered.

(read about catalysts at www.financialsense.com/stormwatch/oldupdates/2003/0702.htm)

We still think that 2003 may well be the watershed year for silver!

The medium-term picture

The silver price has been contained between a support and resistance line forming a wedge out of which the price has to break eventually. We favor the break-out to the up-side, as silver fundamentals also indicate this course.

It is indeed quite intriguing to see how the last correction down from $ 4.88 ended right on the support line as if magic actually tended a helping hand. Will the resistance line have the same power? We do not know. However we do now that it will eventually give way.

The short-term picture

Over the short-term, the trend is up and approaching major resistance. Whether the silver price will move right through the resistance zone and establish itself in a higher trading range, we simply do not know.

Nevertheless, we believe that it matters little in the long run whether you bought at $ 4.50 or 4.70

THE RISING SILVER DEMAND

Demand for silver is used for industrial applications, decoration, photography, jewelry & silverware.

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

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

Electrical and Electronics

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

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

Medical Applications

While silver's importance as a bactericide has been documented only since the late 1800s, its use in purification has been known throughout the ages. Early records indicate that the Phoenicians, for example, used silver vessels to keep water, wine and vinegar pure during their long voyages. In America, pioneers moving west put silver and copper coins in their water barrels to keep it clean. In fact, "born with a silver spoon in his mouth" is not a reference to wealth, but to health. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.

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

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

Water Purification

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

Photography

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

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

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

Batteries

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

Coins

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

Bearings

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

Jewelry and Silverware

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

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

Brazing and Soldering

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

Catalysts

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

Electroplating

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

Solar Energy

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

HOW TO PARTICIPATE IN THE UNFOLDING BULL-MARKET IN SILVER:

To receive updates on the above companies, register at www.pzim.com or write to gold@pzim.com

Fundamental Considerations

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

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

Peter Zihlmann, www.pzim.com, or email to forex@pzim.com
July 14, 2003

Disclosure: The author has not been paid to write this article, nor has he received any other inducement to do so. The author is a shareholder in the company and will benefit from any increase in the company's share price. Disclaimer: The author's objective in writing this article is to invoke an interest on the part of potential investors in this stock to the point where they are encouraged to conduct their own further diligent research. Neither the information, nor the opinions expressed should be construed as a solicitation to buy or sell this stock. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions in the stock.