Silver prices are back in action. The international silver prices have recovered from a low of $4.86 per ounce last month to the current level of $5.56 per ounce. Following this, the domestic prices have also improved from Rs 7,600 per kg to Rs 8,150. The question, however, is: Will the recovery continue?From the technical point of view, the current rally faces resistence around the $5.60 per ounce. This resistence has been formed by the falling trendline. While this level can be considered as a short-term hurdle, in the medium term, this does not cuase a major problem. This is mainly due to the fact that the 21-day Relative Strength Index (RSI) has peneterated the falling trendline. This increases the chance for a fresh break-out.
Another factor which favours silver prices is the fact that it has a strong support at around $4.80. The price is unlikely to go below this level. As such, while in the immediate future prices may decline, the medium term outlook for the silver appears bright.
Fundamentalfactors too favour a positive outlook. According to the World Silver Survey 1998, for the ninth consecutive year, the conventional supply failed to keep pace with fabrication demand. Silver demand exceeded supply from mine production and the recycling of scrap by 198 million ounces in 1997.
Strong demand from India and surging industrial demand in the United States resulted in record silver offtakes last year, totalling 863.4 million ounces. Increase in the mine supply and scrap recycling were insufficient to meet the rise in fabrication demand last year. Between 1990 and 1997, cumulative silver fabrication demand far exceeded mine productions by 2,226 million ounces. The gap has been bridged by recycled silver scrap.
With an import of 112.4 million ounces in 1997, the Indian subcontinent remained a dominant player in the global market. During 1996, it has imported 113.5 million ounces. A 6.1 per cent increase (or 49 million ounces) in fabrication demand last year raised the total silver offtake to 863.4million ounce. This increase was primarily due to developments in the industrialised world, with offtake up 4.5 per cent in Europe, 7.7 per cent in North America and 13.5 per cent in Japan. North American demand was almost 194 million ounces, with United States consuming 167 million ounces of that total. According to the survey, the largest world growth came from the Industrial sector, up 7.4 per cent for a total offtake of 323.4 million ounces.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
