opinion

The real reason silver prices fall after a spike

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By CPM Group
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In part 4 of the Silver Facts and Fantasies Seminar, Jeffrey Christian of CPM Group addresses several of the most common misconceptions surrounding the silver market, including the widely repeated idea that the world is running out of silver. He explains how silver supply, fabrication demand, and price interact over time, and the effect of higher prices on demand, mine production, and secondary recovery.

Jeff also discusses long-term trends in silver fabrication demand, including the decline in traditional uses such as photography and the role of newer demand sources like solar panels. He also discusses how investor selling at higher prices feeds additional supply into the market, contributing to refinery backlogs and increased secondary supply.

The presentation continues with an explanation of how futures market dynamics work in practice, including why prices sometimes rise ahead of delivery periods, and common misunderstandings about Comex inventories and physical supply.

Finally, he reviews cost structures for silver production and global reserve data, emphasizing why the long-term availability of silver remains far greater than many investors have been lead to believe.

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CPM Group

CPM Group is a commodities research, consulting, financialadvisory and commodities management firm providing independent research,analysis and advisory services related to commodities markets, corporate andproject finance, and the financial management of exposure to commodity orientedinvestments.

We started our business in 1986 predicated on the idea that commoditiesresearch and advice is best delivered by independent experts who do not work forbanks, brokers, mining companies, or any other entity that has interests thatcould conflict with the best interests of the clients receiving the research,analysis, and advice.

All of our work is driven by fundamental commodities research and economicanalysis. As we undertake our research into individual commodities markets wegather a tremendous amount of information and develop an enormous body ofextremely high quality, unbiased analysis of the markets and the companies thatare involved with individual commodities. The outputs of our research andanalysis take the form of research reports, specialized and targeted consultingrelated to these markets, financial advisory services ranging from corporate andproject finance structuring to equity introductions, and managing specificcommodities and investment positions for clients.

CPM Group continues to demonstrate the economic value and financial worth ofsuperior research, information, and analysis. Our research is based onmicro-economic analysis of the individual components of each commodity market,wedded with a top-down macro-economic analysis of the global trends affectingthese markets. We apply the results of that analysis to our research,consulting, and advisory services.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.