NEW YORK, NY -- (Marketwire) -- 10/18/11 -- Silver prices have been volatile of late as signs of a strengthening US economy has pushed the dollar up, and taken away the metal's safe haven appeal. Meanwhile, a slowing Asian economy has led to concerns regarding industrial silver demand. The Bedford Report examines the outlook for companies in the Silver Industry and provides equity research on iShares Silver Trust (NYSE: SLV) and Silvercorp Metals Inc. (NYSE: SVM) (TSX: SVM). Access to the full company reports can be found at:
Several marquee silver producers forecasted a drop in silver prices and took necessary precautions such as selling several mining sites. Many companies also increased hedging. Hedging programs allow producers to lock in current silver prices for future production, guarding against any potential price declines in the future. Banks which execute these forward sales borrow silver from the spot market, which reduces the physical supply of silver temporarily. Analysts warn that an increase in hedging could be taken as a bearish signal for silver prices as it directly increases selling pressure in the market.
The World Silver Survey 2011 report produced for Washington's Silver Institute noted that last year saw a dramatic return to net producer hedging, with 61.1 Moz added to the global hedge book -- a volume just short of the 1997 record high.
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Silver mining stocks -- which have underperformed silver prices all year -- are also struggling. "Concerns about a possible hard landing for the Chinese economy has weighed on mining stocks," David Jones, chief marketing strategist at IG Index, explains. "It is difficult to see a catalyst for further gains in the short term."
In China, roughly 70 percent of the country's silver demand comes from the industrial sectors. Chinese customs data recently showed export growth falling last month more than expected, while import growth also slowed.
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