Silver Prices Hit $5.13 An Ounce Low Inventories, Rising Demand Trigger Increase In Price

Silver popped past the $5 mark in the first minute of Wall Street trading Thursday, climbing more than 23 cents to close at a five-week high of $5.135.

The rally started overnight on the Tokyo and London markets and picked up steam in New York as the opening level of $5.02 prompted automatic buy orders from traders scrambling to recapture contracts they sold while speculating prices would continue to decline.

Rumors have circulated for months about an engineered squeeze in London trade, but local stock brokers believe historically low inventories and skyrocketing demand are supporting silver’s surge.

“The recovery so far seems driven more by fundamentals than trading floor hocus-pocus,” said Tom Wobker, a broker with Pennaluna & Co. in Coeur d’Alene.

David Rinehimer, an analyst at Smith Barney in New York, also credited low stockpiles and tight supplies for the market rally.

According to reports from the Silver Institute and the CPM Group, supply shortfalls are having a greater effect as growing international economies boost silver consumption for industrial use.

The most recent warehouse data showed Comex inventories at a 12-year low of 129.3 million ounces on Nov. 12. That figure is down 36 percent from the average stockpile of 203.5 million ounces during the fourth quarter of last year.

Demand, meanwhile, is reaching record levels.

The Silver Institute projects the need for photographic silver will grow by 3 percent this year, based on an amateur photography boom in China and Russia.

Strong growth also is expected for the holiday season from jewelers and silverware manufacturers, which account for 32 percent of demand.

In the Silver Valley, anything resembling a bull market for silver will please the local mining industry.

The Big Board mining firms - Asarco, Coeur d’Alene Mines, Hecla Mining Co. and Sunshine Mining - have already cut costs and driven up production to profit from a low-price environment.

If higher silver prices hold, Wobker expects junior stocks to hitch up for the ride.

“When the big mines focused on cost of production it brought the whole valley back to life,” the Pennaluna broker said.”In the last year, there’s been a lot more activity from the little guys who were asleep for the longest time.”

At midyear, the Coeur and Galena mines, operated as a joint venture between Asarco and Coeur d’Alene Mines, increased silver production by 40 percent from the first quarter to reach 900,000 ounces.

Hecla’s second-quarter production tripled to 1.3 million ounces compared with the prior year.

In its third-quarter report, Sunshine Mining listed production at 1.2 million ounces - double the same year-ago quarter.

Wobker cited recent interest in small mining stocks as evidence of continued strength in the Silver Valley, a region he calls “the heart of the silver industry.”

Since spring, stock prices for the “juniors” has doubled in the case of Kellogg-based Plainview Mining Co., tripled for Osburn’s Silver Trend Mining Co. and nearly quadrupled in the case of Atlas Mining, another Osburn firm.

After “umpteen years of a bear market,” Wobker said, “There’s a comeback under way. “This valley has produced 1 billion ounces of silver in the past 100 years. It’s the richest silver mining area on Earth and it’s on its way back.”

, DataTimes