A fascinating look at Silver and its characteristics and industrial uses, some of which are quite amazing. Click on the image then click the image again on the next page for a much larger view – Money Talks Editor

Silver has a reputation for being gold’s less desirable sister, but make no mistake, silver may still be a golden opportunity to invest in.

You might be surprised to know that silver plays a part in many everyday things you use, especially electronics. Silver has the highest electrical and thermal conductivity of all metals. The use of silver is very prevalent in the photography, consumer electronics, medical, and high tech industries.

A huge future super consumer of silver will be the green technology sector. The primary technology that converts the energy of light into electricity in solar panels is solar cells, also known as photovoltaic cells. Silver is the primary ingredient used in these cells; depending on the type, up to 90% of the cell may be silver. Future silver consumption by the solar energy industry is estimated to be 100 million ounces by 2015.

Another area silver may be set to gain steam is in batteries. Lithium ion batteries were first commercialized over 20 years ago by Sony, which makes them very old from a tech perspective. Many concerns have also been raised about their safety. Some research is showing that silver oxide and silver-zinc batteries might be a substitute. Imagine if a company such as Tesla switched to using silver as a main component of their batteries. Hint: they just ordered 2 billion automotive-grade lithium ion cells from Panasonic.

Original graphic from: cdn.sbcgold.com

SWOT Analysis: China and India Are Consuming More Gold

Originally published Monday June 09, 2014 11:31

Strengths

• Gold rose $9.77 per ounce on Thursday after the European Central Bank (ECB) cut its deposit rate to 0.1 percent. The ECB became the first major central bank to take one of its main rates negative, as President Mario Draghi unveiled historic measures to fight deflation. By cutting the deposit rate to 0.1 percent, the central bank will effectively charge banks for holding money overnight. The bank also cut its main refinancing rate to 0.15 percent. Dennis Gartman, author of The Gartman Letter, said “the ECB’s policy changes were very expansionary and that on-balance is supportive of gold…I think more is coming.”
• The gold price declined on Friday morning after U.S. employment data was released, but recovered intraday, closing unchanged. U.S. employers added 217,000 jobs in May after a 282,000 gain in April. The median Bloomberg forecast called for a gain of 215,000 jobs in May.
• China and India (Chindia) are consuming more gold than the global production, according to Bloomberg’s Ken Hoffman. His research shows that China is consuming gold at a rate of 5.15 million ounces per month, while India, at the current import-tariff reduced rate, is consuming 2.85 million ounces per month. The total Chindia consumption is 8 million ounces per month, or 560,000 ounces higher than the estimated 7.44 million ounce per month global-mine output. With this deficit in mind, any relaxation of Indian import curbs will likely skew the fundamental supply-demand balance even further into deficit.
• The merger and acquisition (M&A) front got a new hit this week as B2Gold signed a merger-implementation agreement with Mali-focused Papillon Resources. The deal, valued at around $570 million, gives B2Gold one of the better assets in West Africa with 4.2 million ounces in the measured and indicated category, at 2.4 grams per tonne. In other news, Centerra Gold will begin shutting down its Kumtor mine in Kyrgyzstan unless the government grants necessary approvals to continue mining. Kumtor’s revenue represents about 5 percent of the whole Kyrgyz economy. It is positive that this company takes a stand against a government that continuously moves the goal posts for a critical industry.

Weaknesses

• The U.S. Mint’s gold coin sales slumped in May, reaching a total of 35,500 ounces, 7.9 percent lower than the preceding month. The report reinforces the expectations for weak seasonal demand as we head into the summer. On a positive note, the Mint reported silver coin sales rose 12 percent from April and 15 percent from a year earlier.
• PwC, in its latest Mine Report published Thursday, says “2013 was a year that forced the global mining industry to realign expectations in one of the most difficult operating environments for years.” Gold’s greatest decline in three decades, coupled with record impairments of $57 billion last year, saw global mining profits plunged 72 percent to a decade low of $20 billion in 2013. Gold miners lost $110 billion off market capitalization, while gold reserves fell 8 percent in 2013, to 431 million ounces.
• No settlement has been reached in the platinum-sector strike in South Africa, nearing its nineteenth week. The stoppage has cost producers an estimated $1.9 billion in revenue, as the strike becomes the longest and costliest strike in the African nation. As a result, the mining sector contribution to the economy declined the most in 47 years, resulting in the first contraction of GDP since 2009.

Opportunities

• While its commodities analysts bash gold, calling it a “slam-dunk” sell, Goldman Sachs is actually buying gold. The bank has agreed to swap dollars for gold with the government of Ecuador, a total 466,000 ounces (or $580 million), at an estimated price of $1,245 per ounce for a three-year term. Even though the Ecuadorian side denied that the transaction was a sale, it is highly unlikely the South American government will have the means to recover its gold in three years. This is especially possible since Ecuador’s use of the dollar as official currency means it can’t finance its deficits by printing money. Actions speak louder than words, and Goldman is buying gold.
• RBC Capital Markets initiated coverage of Klondex Mines with a $3.00 price target and a buy rating. According to analyst Sam Crittenden, Klondex is uniquely positioned to create value with two high-grade gold deposits in Nevada. Klondex owns the Midas Mill and has very modest capital requirements going forward. Crittenden argues that the shares are not pricing the outstanding 41 gram per tonne grade of the company’s reserves. It also seems that it is not pricing the strategic value of its properties and mill, or the motivated and experienced team.
• Sentry Investments wants Mexico-focused producer Timmins Gold to remake its board of directors, citing displeasure with the current management and board. Sentry, who owns about 17 percent of Timmins, proposed a slate of six directors to the eight-member board as it seeks to draw M&A attention to the miner. In other news, Detour Gold reported high-grade drill results from its regional exploration at Detour Lake, which outlines the potential for blending higher grade ore to its processing facility.

Threats

• Gold prices are set to decline below $1,000 per ounce by 2016, according to a recent report by Societe Generale. The French bank believes the Federal Reserve is likely to hike rates at a much faster pace than currently discounted by the market. As such, bullion prices will trade below $1,200 next year and below $1,000 in 2016. In addition to selling gold, the bank also recommends selling silver due to high physical ETF holdings, as well as copper due to the Chinese slowdown.
• The Philippines government expects to double its annual returns from mining under a new revenue-sharing scheme approved this week. The scheme aims to retain as much as 55 percent of the industry’s net revenues, or 10 percent of gross revenue, whichever is higher. In a similar move, the Tanzanian government, Africa’s fourth-largest gold producer, is reviewing mining contracts to ensure the government earns a larger share of revenues.
• Newmont Mining has stopped output at its Batu Hijau mine in Indonesia, stating that its concentrate storage facilities are now full following the raw minerals export ban introduced by the Asian nation earlier in the year. The company will continue to sell copper concentrate from storage to PT Smelting, Indonesia’s only copper smelter. However, the smelter does not have enough capacity to buy all of Batu Hijau’s production.

Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

I wrote a post focusing on Silver’s technical price action and sentiment almost a month ago, titled Decision Time For Silver. Interestingly enough, there has been no decision yet. Markets are quite ironic at times, but the pressure continues to build. Therefore, I thought it was prudent to update traders on recent developments as I have a feeling the action is about to start!

Here is an interest fact. When it comes to the price itself, there has been no change over the 12 month and 6 month time frames. Consider the fact that Silver traded at around $19 in June 2013 and it also traded around $19 in December 2013. As I write this post, Silver is trading at… yeap you guessed it… $19 per ounce.

Chart 1: Silver is still at a decision point between support & downtrend 

…continue reading & view 2 more charts HERE

After successfully shorting the Gold & Silver markets in the most recent decline from $1400, this analyst outlines the opportunities he sees below. Definitely worth reading – Money Talks Editor

Briefly: In our opinion no speculative positions in gold, silver and mining stocks are justified from the risk/reward perspective.

The precious metals market moved higher yesterday, which was in tune with what we’ve been expecting. The key question is if gold, silver and mining stocks have completed their rally or are they still likely to move higher before turning south again.

Before jumping into charts, we would like to point out that the reasons for which we think the medium-term move is down were covered in the previous Monday’s alert, and if you haven’t had the chance to read it, we encourage you to do so today. Having said that, let’s move to charts 

Larger Image Click on Chart 

Gold moved higher, but hasn’t reached the levels that we thought were likely to stop the rally.

Quoting our previous alert:

How high will gold rally before turning south again? There are no sure bets, but our best guess is that it will correct to the previously broken 61.8% or 50% Fibonacci retracement levels – which means a move to (or very close to) $122 or $124.50 or so in case of the GLD ETF and $1,260 or $1,290 in case of spot gold. We will be looking for bearish confirmations (signals from indicators, ratios, other markets, etc.) around these levels and we’ll probably re-enter short positions once we see them.

We saw the GLD ETF close at $121.39, so it’s still below the lowest of the above-mentioned resistance levels and thus it seems that the rally will continue for at least a while.

What’s even more interesting, is the fact that gold managed to rally despite a rally in the USD Index.

How high will gold rally before turning south again? There are no sure bets, but our best guess is that it will correct to the previously broken 61.8% or 50% Fibonacci retracement levels – which means a move to (or very close to) $122 or $124.50 or so in case of the GLD ETF and $1,260 or $1,290 in case of spot gold. We will be looking for bearish confirmations (signals from indicators, ratios, other markets, etc.) around these levels and we’ll probably re-enter short positions once we see them.

We saw the GLD ETF close at $121.39, so it’s still below the lowest of the above-mentioned resistance levels and thus it seems that the rally will continue for at least a while.

What’s even more interesting, is the fact that gold managed to rally despite a rally in the USD Index.

At this point it’s worth quoting what we wrote in the previous alert:

When a given market refuses to react in a certain way in spite of a visible factor for such a move, it usually means that a move in the opposite direction is likely. At this time, precious metals refused to decline given the move higher in the USD Index, which means that they “don’t want to” move lower and that they are not done rallying.

During yesterday’s session gold has not only not-declined – it actually managed to rally despite USD gains and the short-term implications for the precious metals market are bullish in the short term. There are none in the medium term as metals’ reaction to dollar’s strength can – and likely is – delayed once again.

The situation on the silver market remains rather unclear so we will once again seek confirmations in the mining stock sector.

The situation in mining stocks is even more bullish for the short term than it is the case with gold. Before commenting on yesterday’s price/volume action we would like to quote our previous comments as they remain up-to-date:

Mining stocks declined on Monday, but moved lower on low volume, which suggests that this might not have been the true direction of the move. The move lower was relatively small – compared to the size of the upswing in the USD Index, so the overall implications are overall bullish. (…)

In case of the GDX ETF, the price targets are relatively close as well. The first one is slightly below the $23 level, at the declining resistance line, and the second one is at the 61.8% Fibonacci retracement. The third one is at the 50% Fibonacci retracement slightly above the $24 level. Either way, the upside is rather limited and we don’t think that the GDX will move and stay above $24 for long – if it gets there, that is.

If gold is to double its recent move higher, then we could expect mining stocks to move at least to their 61.8% Fibonacci retracement, slightly above $23.

Miners moved above their initial target level – we saw a breakout above the declining resistance line. The move above it was rather insignificant, so it’s not necessarily really meaningful. The volume accompanying the breakout was not small, but it was not really huge either – we don’t think it was big enough to confirm the breakout on its own. Given the situation on the gold market (the resistance level was not reached), it seems that the mining stocks could see higher prices in the coming few days as well, but we don’t think that this is the start of another huge rally just yet.