Silver

Introduction

Silver is a white, soft, lustrous metal that has the highest electrical conductivity of any element and the highest thermal conductivity of any metal. The metal occurs naturally in its pure, free form (native silver), as an alloy with gold and other metals, and in minerals such as argentite and chlorargyrite. Most silver is produced as a by-product of copper, gold, lead, and zinc refining. Silver has long been valued as a precious metal, and it is used to make ornaments, jewelry, high-value tableware, utensils (hence the term silverware), and currency coins. Today, silver metal is also used in electrical contacts and conductors, in mirrors and in catalysis of chemical reactions. Its compounds are used in photographic film and dilute silver nitrate solutions and other silver compounds are used as disinfectants and micro biocides. While many medical antimicrobial uses of silver have been supplanted by antibiotics, further research into clinical potential continues.

Indian Scenario

India is the world’s largest silver importer; however, the scenario in 2009 was dire with consumption reducing by almost half owing to high prices. Industrial consumption, which contributes the highest towards demand world over, is less prominent in India. Most of the consumption in India comes from Silverware and Jewellery sectors. In India, jewellery and silverware form the biggest demand for silver, while industrial and dental demand is far less compared to USA and Japan. At the global level, industrial demand is the biggest consumption centre for silver.

Factors influencing Silver prices

The London Bullion Market constitutes the biggest physical trading market for Silver and COMEX (CME Group) offers derivative trading in silver. The London fix is widely regarded as a benchmark for bullion prices globally. London dominates the physical market while COMEX forms the biggest “derivatives” market offering futures, options, etc. Over the last century the price of silver and the gold/silver price ratio have fluctuated greatly due to competing industrial and store-of-value demands.

Regardless of the nation and consumption pattern, demand for silver primarily stems from performance of sectors like agriculture, overall industrial growth, travel and tourism, festivities and services catering to the above. Fluctuations in these sectors directly affect prices of silver across the globe. Stakeholders of the value chain need an avenue wherein they can hedge their inherent price risk. Additionally, the following factors stress on the need for futures trading in silver:

Mine production – uncertainties in output and indirect effect of prices of other metals
Sudden demand pressures cause decline in stocks
US Dollar fluctuations, owing to macro-economic factors like interest rate changes, central bank interventions, inflation, etc.
Fluctuating imports by India, and illegal imports from oriental nations, cause an artificial supply boost affecting spot prices

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Silver