Lets start this off with an intriguing question.

 

The research consultancy CPM tells us that in 1990 above ground stockpiles of silver amounted to over 2 billion ounces, that this had dropped to 1.4 billion ounces just 5 years later, and by the end of 2006 they estimated the stock pile to be only around 300 million ounces.

 
 

Other reports tell us that the current silver bullion supply stands at 367 million ounces of which Berkshire Hathaway holds 130 million (and Mr Warren Buffett almost certainly knows what he’s doing) Comex holds 100 million, Central Fund of Canada 26 million, leaving 111 million ounces floating around the rest of the worlds holders.

 

 

Yet in part 1 of this article when we looked at the iShares silver fund holdings just 5 days ago it stood at nearly 134 million ounces.

 

This begs the question as to the accuracy of so many of the estimates put about concerning not only silver, but in our specialist field of precious metals. Unless of course the rest of the world owns no silver!

 

Incidentally Comex should be of interest to all those considering silver. It is a cartel that imposes a significant influence on the price direction of silver and other metals.

 

Read all about it by entering “Comex” on Google search, it is intriguing stuff.

 

We hope the point is made that all these statistics should be taken with a large pinch of salt and at best can only point to a very general trend.

 

Just to reinforce the point, in part one we mentioned a report that silver demand for jewelry was expected to increase on an annual basis in India when an Indian newspaper has reported that demand is in fact falling.

 

Beware the estimates of vested interests!

 

GFMS of London have come out with an annual small percentage shortfall of around 0.4% between a steadily growing demand and production including recovered scrap, not a large enough figure to be statistically reliable but tends to reinforce a bullish view of the white metal.

 

A further estimate puts current consumption at between 800 and 1000 million ounces annually.

 

As silver is the best conductor of electricity and electricity is an essential in so many of the advances in technology it is reasonable to expect demand to increase and offset the drop in photo usage.

 

That then brings up the question of scrap and the likelihood of annual recovery from all sources remaining at circa 50 %.

 

It is our opinion that recovery from scrap will remain at about the 50% level for the next two or so years, by which time it may be better to assess recycling opportunities from the next level of products using the metal.

 

The stock prices of established silver miners have progressed nicely in the last 18-24 months and as in gold mining, the seniors are wide awake to absorb promising juniors.

 

Mutual Funds and ETFs in the metal sector and bullion storage have annual costs of circa 0.4% to take into consideration.

 

Investing directly into senior miners can generally be expected to reap a greater percentage profit in good times.

 

Picking out a winner from the dangerous junior mining market can be an explosive profit maker but requires great skill in research and evaluation and not a little luck.

 

The factors to consider are given in detail elsewhere on this site.

 

We do not give recommendations in our open to all site but suggest that a couple of companies in the silver sector are worth investigating.

 

Garibaldi Resources (TSX:V:GGI) looks to have acceptable proven silver, and as a bonus, gold resources and Silver Standard Resources (NASDAQ:SSRI, TSX:SSO) has had a nice move up in the last 9 months from $16 to$37 and has institutional interest.

 

For those amongst you that have faith in past performance reflecting future movements there are technical indications that the best is yet to come and amongst the miners that are considered to have bullish charts are our old friend Silver Standard Resources, Coeur d’Alene Mines (NYSE:CDE) and Pan American Silver (NASDAQ:PAAS) but don’t take our word for it.

 

Finally to get more of an insight into the machinations of the commodity markets and precious metals in particular there is a very useful website called Commitment of Traders (www.commitmentoftraders.com).The site can tell you who’s buying and who’s selling in each market, from the Big Dogs, to the Hedge Funds and other large professionals, and then the small speculators. It is free to log in and look at the previous weeks information and for a small monthly fee you get the latest on who’s short and who’s long and by how much.

 

For serious commodity players this site is a must.

 

To conclude it is our opinion that the silver bull run is set to continue for the next 12-18 months but needs watching like a hawk.

 

We repeat that this is a highly speculative market that we believe might be experiencing some manipulation to keep the price from moving upward too quickly, a story that we cannot go into here, but this is likely to only delay the inevitable.

 

It is vital to thoroughly research and, wherever possible, verify all the available information before committing yourself to this (or any other market) so good hunting.