SILVER SHARES LEADING THE WAY
On July 14,
with silver at $4.73, we wrote: "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."
By July 28, the silver price had indeed spiked through the down-trend line to reach a high of $5.22, a price surge of 10%.
While the silver price succumbed to profit taking and has fallen back into what now has to be
considered a strong support area between $4.80 and $5.00, silver shares have reached new recovery highs in recent days, outperforming the 10% jump in the price of silver by a wide margin.
Hecla Mining, as an example, is still up 32% since July 9 and more than 1,000% since it reached a low of $0.50 in October 2000.
While the silver price fell to a multi-year low of $4.03 in November 2001 and has gone up a modest 23% since, the prices of silver shares have literally exploded.
As we believe that we are at the beginning of a bull-market in precious metals and silver in particular, we also think that price increases of silver shares, despite the spectacular rises, are still at an initial stage.
Below, we present the charts of our favorite silver companies.
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Hecla Mining (HL)
Time to sell or time to buy? We can see that the share price has pierced the $6.00 resistance level, which has now become the support level. The share price has the potential to move towards $10.00 in the coming months, provided the silver price manages to hold around $5.00, or moves higher.
Coeur d'Alene Mines (CDE)
We see that the share price has managed to overcome heavy resistance, so a move towards higher levels is likely.
Apex Silver Mines (SIL)
The shares are still trying to overcome resistance around $18.00. It will likely be achieved as soon the silver price embarks in the next leg up.
Pan American Silver (CA:PAA)
The massive turn-around seems to be drawing to conclusion. Resistance around $14.00 has to be overcome, but once it is achieved, the share price will likely move higher quickly as selling dries up.
Silver Standard Resources (CA:SSO)
The massive turn-around seems to be ending. The resistance around $10.00 must be overcome, but once it is achieved, the share price will likely rise in a quick move as selling dries up.
Western Silver (CA:WTC)
The massive turn-around seems to be coming to an end. Resistance around $4.50 has to be
overcome, but once it is achieved, the share price will likely move higher quickly as selling dries up.
The upwards-rising arrow in our charts of course refers to our optimism that these shares will advance sharply over the coming months. Whether this arrow should however look like the one below, only the future will tell!
Nevertheless, let's not forget that the fundamentals for silver remain very strong and that any set-back in the silver price will only be temporary.
Fundamental Considerations: THE RISING SILVER DEMAND
Demand for silver includes industrial applications, photography, jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In 2000, 378 million ounces of silver were used for industrial applications, while over 230 million ounces of silver were committed to the photographic sector, and 281 million ounces were consumed in the jewelry and silverware markets.
Silver is in demand because it has a number of unique properties including its strength,
malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high
reflectance of light and the ability to endure extreme temperature ranges. Silver's unique
properties restrict its substitution in most applications. Choose from the following list to learn more
about some of the various applications of silver:
Electrical and Electronics
Silver is the best electrical conductor of all metals and is hence used in many electrical
applications, particularly in conductors, switches, contacts and fuses. Contacts, a junction between two conductors that can be separated and through which a current can flow, account for the largest proportion of electrical demand. Silver is invaluable in the manufacture of circuit breakers and motor controls.
In electronics, silver is also widely used. Uses include silk-screened circuit paths, membrane switches, electrically heated automobile windows, and conductive adhesives. Every time a home owner turns on a microwave oven, dishwasher, clothes washer, or television set, the action activates a switch with silver contacts that completes the required electrical circuit.
Medical Applications
While silver's importance as a bactericide has been documented only since the late 1800s, its use in purification has been known throughout the ages. Early records indicate that the Phoenicians, for example, used silver vessels to keep water, wine and vinegar pure during their long voyages. In America, pioneers moving west put silver and copper coins in their water barrels to keep it clean.
In fact, "born with a silver spoon in his mouth" is not a reference to wealth, but to health. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.
Silver also has a variety of uses in pharmaceuticals. In fact, silver sulfadiazine is the most powerful compound for burn treatment. It is used by every hospital in North America for burn victims to kill bacteria and allow the body to naturally restore the burn area. It is used world-wide. In another application polyurethane central venus catheters are impregnated with silver sulfadiazine and chlorhexidine to eliminate catheter-related bacteria.
In a world concerned with the spreading of virus and disease, silver is increasingly being tapped for its bactericidal properties and used in treatments for conditions ranging from severe burns to
Legionnaires Disease.
Water Purification
Silver is employed as a bactericide and algaecide in an ever-increasing number of water
purification systems in hospitals, remote communities and, more recently, domestic households.
Silver ions have been used to purify drinking water and swimming pool water for generations. New research into silver compounds is providing physicians with powerful, clinically effective treatments against which bacteria cannot develop resistance.
Photography
When Joseph Nicephore Niepce created the first photographic image obtained through a camera-like device in 1813, it was silver nitrate that made it possible.
Although digital photography is increasing, silver-based photography will retain its pre-eminence due to its superior definition and low cost. An estimated 230 million troy ounces of silver were used worldwide in 2000 for photographic purpose.
William Conrad Roentgen's discovery of x-rays in 1895, led to his discovery that they activate silver halide crystals. This revolutionized medical diagnosis. Radiographic use of silver worldwide consumed 78 million troy ounces in 2000. Medical uses aside, X-ray inspection is essential to ensure the integrity of metallic castings from small truck axles to the huge aircraft-carrier steam valves used to propel airplanes from a flight deck. Of all the inspection techniques, it is the image on a silver halide x-ray film that provides the clearest indication of flaws deep within metallic components.
Batteries
The silver battery provides the higher voltages and long life required for quartz watches. In fact, over 1.4 billion silver oxide-zinc batteries are supplied to world markets yearly, including miniature sized batteries for watches, cameras, and small electronic devices and larger batteries for tools and commercial portable TV cameras.
Coins
23,851,873 ounces of silver were issued in the form of silver coins in 1995.
Bearings
Steel bearings electroplated with high purity silver have greater fatigue strength and load carrying
capacity than any other type and are hence used in various hi-tech and heavy-duty applications.
Jewelry and Silverware
Silver possesses working qualities similar to gold but enjoys greater reflectivity and can achieve the most brilliant polish of any metal. To make it durable for jewelry, however, pure silver (999 fineness) is often alloyed with small quantities of copper. In many countries, Sterling Silver (92.5% silver, 7.5% copper) is the standard for silverware and has been since the 14th century.
The copper toughens the silver and makes it possible to use sterling silver for cutlery, bowls and other decorative items such as picture frames.
Brazing and Soldering
In 2000, 38 million ounces of silver were used for brazing and soldering in industrial and electronics applications.
Catalysts
A worldwide inventory of some 23 million ounces of silver 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 cells. All silicon cells used in space to power satellites utilize silver in the form of evaporated metal to make the electrical contact.
The following recommendations were valid at the time of writing, viz. at
and may no longer be valid at the time of reading.
Peter Zihlmann www.pzim.com, or email to forex@pzim.com
August 27, 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.
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