the silver market in 2013 -...
TRANSCRIPT
![Page 1: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/1.jpg)
![Page 2: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/2.jpg)
THE SILVER MARKET IN 2013
Andrew Leyland
Manager, Precious Metals Demand
The Silver Institute - 2013 Interim Report
November 12th 2013
![Page 3: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/3.jpg)
THE SILVER MARKET IN 2013
• SILVER PRICES
• DEMAND
• SUPPLY
• INVESTMENT
• PRICE OUTLOOK
![Page 4: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/4.jpg)
0
10
20
30
40
50
60
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
US
$/o
z
US DOLLAR SILVER PRICES
Source: Thomson Reuters GFMS
US$/oz Average Price Average y-o-y change Intra-period change*
2012 31.13 -11.7% 9.0%
Jan – 31st Oct 2013 24.51 -20.7% -27.8%
*intra-period change refers to difference between the last business day and the first
business day of the year
![Page 5: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/5.jpg)
50
60
70
80
90
100
110
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13
Ind
ex
(2
nd
Ja
nu
ary
20
13
= 1
00
)
SILVER, GOLD & BASE METALS PRICES
Source: Thomson Reuters GFMS
Silver -29%
Gold -22%
Copper -12%
Lead -10%
Zinc -9%
![Page 6: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/6.jpg)
0
100
200
300
400
500
600
700
800
900
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
US
$ a
nd
Eu
ro/o
z
Silver (USD)
Silver (JPY)
Silver (INR)
US DOLLAR AND EURO SILVER PRICES
Source: Thomson Reuters GFMS
*intra-period change refers to difference between the last business day and the first
business day of the year
![Page 7: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/7.jpg)
20
30
40
50
60
70
80
90
2000 2002 2004 2006 2008 2010 2012
GOLD/SILVER RATIO, 2000 – 2013 TO-DATE
(BASIS WEEKLY AVERAGE PRICES)
Source: Thomson Reuters GFMS
Average 60.0
Jan 1st – Oct 31st 2013 = 59.4
![Page 8: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/8.jpg)
THE SILVER MARKET IN 2013
• PRICES
• DEMAND
• SUPPLY
• INVESTMENT
• PRICE OUTLOOK
![Page 9: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/9.jpg)
WORLD SILVER DEMAND
Source: Thomson Reuters GFMS
Industrial 42%
Photography 22%
Jewelry & Silverware
31%
Net Producer de-hedging
2%
Investment 4%
Industrial 45%
Photography 5%
Jewelry & Silverware
23%
Net Producer De-hedging
3%
Investment 24%
2003 Actual 2013 Forecast
![Page 10: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/10.jpg)
-5
0
5
10
15
20
Coins Jewelry & Silverware
Industrial Photographic
WORLD SILVER FABRICATION
FORECAST ANNUAL CHANGES: 2013 LESS 2012
Mil
lio
n o
un
ce
s
Source: Thomson Reuters GFMS
![Page 11: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/11.jpg)
SILVER BULLION COIN SALES
Source: Thomson Reuters GFMS Quarterly Bullion Coin Survey
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
0
5
10
15
20
25
30
07-Q1 07-Q3 08-Q1 08-Q3 09-Q1 09-Q3 10-Q1 10-Q3 11-Q1 11-Q3 12-Q1 12-Q3 13-Q1 13-Q3
Million o
unces
Other
Europe
N America
US$/o
z
Silver Price
![Page 12: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/12.jpg)
0
50
100
150
200
250
300
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
Silverware Jewelry
JEWELRY AND SILVERWARE DEMAND
Source: Thomson Reuters GFMS
![Page 13: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/13.jpg)
0
10
20
30
40
50
60
70
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
Mil
lio
n o
un
ce
s
PHOTOVOLTAIC SILVER DEMAND
Source: Thomson Reuters GFMS
![Page 14: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/14.jpg)
DEMAND SUMMARY
• Total fabrication demand forecast to rise by 4% in 2013
• After two years of contraction, we expect industrial offtake to rise by
1% this year on the back of improved global economic activity
• Demand for jewelry and silverware is expected to post robust growth
of 6% in 2013 as strong growth in emerging markets and the US
offset demand contraction in Europe
• In contrast, photographic demand for silver continues to decline as
part of its secular trend as consumers switch towards digital
technology
• After a record 2011 and a dip in 2012, demand for coins has
bounced back this year, and we forecast a y-o-y growth of 19%
![Page 15: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/15.jpg)
THE SILVER MARKET IN 2013
• PRICES
• DEMAND
• SUPPLY
• INVESTMENT
• PRICE OUTLOOK
![Page 16: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/16.jpg)
WORLD SILVER SUPPLY
Source: Thomson Reuters GFMS
Mine production
68%
Government Sales 10%
Scrap 22%
Mine production
77%
Government Sales
1%
Scrap 22%
2003 Actual 2013 Forecast
![Page 17: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/17.jpg)
-30
-20
-10
0
10
20
30
Mine production Net Government Sales Scrap
WORLD SILVER SUPPLY
FORECAST ANNUAL CHANGES: 2013 LESS 2012
Mil
lio
n o
un
ce
s
Source: Thomson Reuters GFMS
27 Moz -0.36 Moz
-20 Moz
![Page 18: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/18.jpg)
0
100
200
300
400
500
600
700
800
900
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
WORLD SILVER MINE PRODUCTION M
illi
on
ou
nce
s
Source: Thomson Reuters GFMS
Primary
By-product
Growth of almost 220 Moz in 2003-2013F
![Page 19: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/19.jpg)
MINE PRODUCTION WINNERS AND LOSERS IN 2013*
Mil
lio
n o
un
ce
s
Source: Thomson Reuters GFMS * Figures represent year-on-year change, i.e. 2013 less 2012
-8
-6
-4
-2
0
2
4
6
8
United States
Mexico Dominican Republic
Honduras Australia Poland
![Page 20: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/20.jpg)
OUTSTANDING DELTA ADJUSTED PRODUCERS HEDGE POSITION
0
20
40
60
80
100
120
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
Mil
lio
n o
un
ce
s
Source: Thomson Reuters GFMS
![Page 21: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/21.jpg)
CASH COST VS. SILVER PRICE
Source: Thomson Reuters GFMS
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2005 2006 2007 2008 2009 2010 2011 2012 2013H1
Total Cash Cost
Average Price
US$/o
z
$27/oz $17/oz
![Page 22: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/22.jpg)
SUPPLY SUMMARY
• Total supply forecast to be marginally higher (+0.7%) year-on-year
• Mine production expected to rise by 28 Moz or 4% in 2013, driven by
increased supply from both the primary and by-product sectors
• We estimate producer de-hedging of 35 Moz during 2013 as producers
continue to deliver into outstanding positions or take advantage of lower
prices to close out existing ‘in-the-money’ contracts
• Scrap supply is set to contract by 8% in 2013 due to lower prices and a
decline in the availability of ‘close to market’ stocks
• Government sales largely unpredictable but GFMS expect levels will be
the same as 2012 around 7 Moz
![Page 23: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/23.jpg)
THE SILVER MARKET IN 2013
• PRICES
• DEMAND
• SUPPLY
• INVESTMENT
• PRICE OUTLOOK
![Page 24: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/24.jpg)
600
700
800
900
1000
1100
1200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
Mil
lio
n o
un
ce
s
Investment and Coins Remain Key
DEMAND (fabrication excluding coins)
SUPPLY (mine production + scrap)
Source: Thomson Reuters GFMS
Investment 287 Moz
![Page 25: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/25.jpg)
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011 2012 2013
iShare
ZKB
ETF Securities*
Other**
SILVER ETF HOLDINGS
Mil
lio
n o
un
ce
s
655 Moz on October 31st 2013, up by
25 Moz from the beginning of the year
*Includes ETFS London, Australia, NYSE, Glitter and WITE ** Includes Julius Baer, Mitsubishi, Sprott, Central Fund of Canada, Silver Bullion Trust, BlackRock Silver Bullion, DB Physical Silver, DB Euro Hedged, DB GBP Hedged, iShares ETC, Source Physical Silver, Royal Canadian Mint ETR
Source: Respective issuers
![Page 26: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/26.jpg)
INVESTORS’* POSITIONS IN COMEX SILVER FUTURES
* non-commercial & non-reportable net positions in futures taken as proxy for investors’ positions Source: CFTC
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
5,000.00
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Co
mex
po
siti
on
s (c
on
trac
ts, t
ho
usa
nd
s)
Long Positions Short Positions Comex Settlement Price
US$
/oz
![Page 27: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/27.jpg)
WORLD SILVER INVESTMENT* VOLUME AND VALUE
0
2
4
6
8
10
0
50
100
150
200
250
300
350
2002 2004 2006 2008 2010 2012
US
$ B
illion
Mil
lio
n o
un
ce
s
*World Investment is the sum of implied net investment and coins & medals
Investment in US$ Billion
Source: Thomson Reuters GFMS
![Page 28: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/28.jpg)
INVESTMENT SUMMARY
• Silver, having a greater volatility and trading range than gold markets,
saw a sharper decline in price compared to gold this year
• Primary driver behind the fall in silver and gold prices – talks of QE
tapering, improved economic outlook, more attractive returns in other
asset classes
• In contrast to gold ETFs, where holdings declined to a 3 year low, silver
ETF holdings rose throughout the year to a record high of 650 Moz
• Improved global economic outlook may offer a cushion of support to
prices as silver’s properties as an ‘industrial metal’ benefits from higher
off take
• For some, silver is a more ‘economical’ alternative to gold (~60 x lower
unit price). Silver’s greater volatility and trading range than gold makes it
attractive to certain investors
![Page 29: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/29.jpg)
THE SILVER MARKET IN 2013
• PRICES
• DEMAND
• SUPPLY
• INVESTMENT
• PRICE OUTLOOK
![Page 30: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/30.jpg)
PRICE OUTLOOK
Negatives:
• Mine production rising (2013 forecast: 815 Moz)
• Market in a residual surplus (287 Moz forecast for 2013)
• Global economic recovery may curtail the need for expansionary monetary policy, reducing
investors requirement for safe havens
• Ongoing secular decline in photography (though mainly offset by lower photo scrap)
Positives:
• Improved global economic outlook may offer cushion support to price as silver’s properties as an
‘industrial metal’ benefits from higher off take
• Gold:Silver ratio currently at 60, lower than the average level of 55 in the past 3 years, potential
opportunity for outperformance?
• Strong physical demand in India as consumers switch towards other precious metals amid
draconian measures to curb gold imports. Buoyant demand for silver coins globally
Price forecasts:
• We now forecast an average price of $24.24 in 2013 (1st Jan – 31st Oct average $24.51)
Our short-term forecast is that through to year-end silver will trade between $20.20 - $23.70
![Page 31: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/31.jpg)
DISCLAIMER
The information and opinions contained in this presentation have been obtained
from sources believed to be reliable, but no representation, guarantee, condition
or warranty, express or implied, is made that such information is accurate or
complete and it should not be relied upon as such. Accordingly, Reuters Ltd
accepts no liability whatsoever to the people or organizations attending this
presentation, or to any third party, in connection with the information contained in,
or any opinion set out or inferred or implied in, this presentation. This presentation
does not purport to make any recommendation or provide investment advice to
the effect that any gold related transaction is appropriate for all investment
objectives, financial situations or particular needs. Prior to making any investment
decisions investors should seek advice from their advisers on whether any part of
this presentation is appropriate to their specific circumstances. This presentation
is not, and should not be construed as, an offer or solicitation to buy or sell gold or
any gold related products. Expressions of opinion are those of Reuters Ltd only
and are subject to change without notice.
![Page 32: THE SILVER MARKET IN 2013 - Reutersshare.thomsonreuters.com/...Silver_Market_in_2013_interim_report.pdf · THE SILVER MARKET IN 2013 Andrew Leyland Manager, Precious Metals Demand](https://reader031.vdocuments.site/reader031/viewer/2022022016/5b69d31c7f8b9a422e8b5734/html5/thumbnails/32.jpg)