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| Updated: Oct. 18, 2004 |
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October 18, 2004 What do silver and restaurants have in common? Nothing, but in this particular restaurant, I had the pleasure of dining with several producers of silver and gold during a recent meeting in the City of Lights. The best restaurant in Las Vegas is not Emeril's, Wolfgang's or Che Belagio, but it is a gracious, old world classic with plenty of dark hardwood and leather to make a manly man feel right at home. The restaurant was recommended to me by several Vegas residents, and the name is Piero's, located on Convention Center Drive, just off of the famous Strip. Since Las Vegas is in a major drought, we did our part, by consuming spirits to conserve their H2O supply. Virtually everything on the menu is excellent, the service and atmosphere were likewise stellar, and that is about all one can ask of a great restaurant. Which brings me to the point of this article, during the dinner, the conversation was a heavy dose of precious metals and where they might be going in the near future. Considering the fact that I have never met a precious metal producer that was not optimistic, even the one that opened a gold mine with a cash cost of $350/Oz in the late 90's, wagering the price would soon vault back to over $400/oz, on this occasion, their optimism was tempered by the memories of the late 90's-2002 period of brutally low prices for precious metals, and they were not as wildly optimistic as had been during past conversations. For background, some basics should be mentioned, such as the major uses for silver. The largest use for silver is industrial (including electronics and dental amalgam), consuming 43%, followed by jewellery and silverware, 30%, then photography, 23%, and finally, coins which consume a measly 4% of world produced silver. Of these markets, photography is declining between 2-3% a year, with industrial uses and jewellery uses increasing, modestly (3-5%). On the supply side, silver supply is increasing at roughly 0.5%/year. Silver has suffered through a long period of low prices, due in part to a high stockpile of silver acquired during the bull silver market, oh so long ago, and the languishing gold prices of the late 90's to 2002. However gold has perked up quite a lot and silver has likewise slowly rebounded. During the past year, silver peaked in April, 2004 at $8.29/ounce, and today it is $6.96/ounce. Now let's just look at the basics, silver supply is increasing at 0.5% a year, demand is increasing at a mean rate of, lets say around 3%, where is the price going to go? To $15 an ounce, no, not next year, how about $8/ounce, yes, very possibly. My best estimate is silver will rebound in the volatile $6.75 to $8.00/ounce range, and may finally settle over $8/ounce next year. At least until supply exceeds demand, then prices will slide accordingly. One silver producer informed me that they were encouraged by the ever increasing use of silver in medical technology (a use that I had been unaware of other than as dental amalgam). Another stated that silver was used more than any other precious metal, a fact that I did know, since silver is a fraction of the cost of gold. All in all, the producers held to the belief that because of the tight supply, and increasing demand, next year would be good for silver, and hopefully, quite a few after that. I only take one year at a time, myself, so perhaps there will be a silver lining in the markets next year, there certainly was a silver lining in Piero's. I'll save what the gold producers said for another day. |
| But that's just my opinion. Charles Kubach Mine-Engineer.Com |
