Hindustan Zinc will be asia's larget producer of silver by 2013 if they increase capacity to 500,000 kg per yr

Originally posted by dilip.r Spot market price was 5% higher than future market   <SPAN style="FONT-SIZE: 9.5pt; COLOR: black; FONT-FAMILY: 'Tahoma','sans-serif'">Backwardation starts when the difference between the forward price in the futures market and the spot price for physical delivery is less than the cost of carry, or when there can be no delivery arbitrage. This is generally because the asset is not currently available for purchase or is increasingly illiquid.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p></SPAN> <SPAN style="FONT-SIZE: 9.5pt; COLOR: black; FONT-FAMILY: 'Tahoma','sans-serif'">It can end in default, failure to make delivery, and in sharply higher prices.<o:p></o:p></SPAN> <SPAN style="FONT-SIZE: 9.5pt; COLOR: black; FONT-FAMILY: 'Tahoma','sans-serif'">Backwardation rarely happens in the gold and silver bullion markets. Since gold futures first started to be traded in 1972 (on the Winnipeg Commodity Exchange), there have only been momentary backwardations of a few short hours.<o:p></o:p></SPAN> <SPAN style="FONT-SIZE: 9.5pt; COLOR: black; FONT-FAMILY: 'Tahoma','sans-serif'">The extent of the backwardation in silver is unprecedented. It suggests that retail investment and industrial demand internationally is very robust and the small silver bullion market cannot cater to the level of demand for refined coin and bar product.<o:p></o:p></SPAN>

Taking your analysis into account - Gold and Silver have much higher to go

The Cl0udy Silver Bubble
                                                        BY DHIRENDRA KUMAR   
    
Readers of the investment press may have noticed in recent weeks a sharp increase in
the number of articles that use the phrase ‘silver lining’. However, most of these articles
are not saying the obvious thing--that every cl0ud has a silver lining. Instead, they are
saying that every silver lining has a cl0ud; or that silver has a cl0udy lining. Or something along those lines.
It’s quite amazing the way interest in silver investing has increased. Or maybe, it’s not
so amazing after all. The last few years have seen one commodity after another going
through a similar cycle, and perhaps it’s just silver’s turn now. However, what is different is the ordinary investor’s reaction to silver prices shooting up. When copper prices
shot up, hardly any mutual fund investor clamoured for a copper ETF. No one tried to
buy physical copper and stash copper at home.
Basically, copper was of concern only to copper users and those who were already investing in commodity futures.
But silver is different. Silver is one half of the gold and silver duo so many of feel that we should have bought or could
have bought it and made these awesome gains of many times our investments. However, silver is not gold either. Despite the phrase ‘gold and silver’, investing in silver is a very different matter than gold.
Unlike the deeply-ingrained centuries old culture of buying gold, Indians don’t actually buy silver traditionally in any
quantity. For one, silver is not a dense enough store of wealth. You can’t store, hide or transport a lot of wealth in any
reasonable physical volume. Also, silver has traditional been a status symbol (as jewellery etc) only among the relatively less well-off. In a manner of speaking, silver is the poor man’s gold. From the middle class upwards, silver jewellery is not part of any trousseau and no one’s family has a horde of silver that is handed down from generation to
generation. The fact that silver is not gold is true on a wider scale too. Silver is not the ultimate reserve currency like
gold, nor has it ever had the same role in the world economy. There never was a silver standard.
All of this makes silver a purely financial investment. Unless you are into commodity futures, there is no way to invest in silver in India. Sure, you can buy chunks of physical silver but you’ll be paying sales tax and VAT. You can’t
really invest in something in which the transaction is costing 15 per cent or so. And of course, there are no silverbased mutual funds so that route is closed too.
Don’t think that I’m pointing these out as problems—I’m not. This is all good news. Silver’s price rise is a bubble, and
as usual, by the time that the news has become disseminated widely enough for the non-investor to consider becoming an investor, the fun is over and the dangerous part is looming large. You can come across any number of ideas as
to why silver’s shock rise is justifiable. The favourite is that silver has industrial uses and so its demand will shoot up.
While silver has many uses, nothing in its usage justifies the way its price has shot up and the short timeframe in
which it has shot up.
Basically this amounts to the fact that in today’s world, you can point to anything and scream ‘Chinese Demand!
Emerging Economies! Buy!’ and its price will shoot up. We’ve seen this trick many times in the last five years and we
will doubtless see it many more times in the coming years. Would you like to make money off this phenomenon?
Then you will have to be a bit smarter about recognising the next silver—this particular boat has already sailed.
   
— Syndicated from Value Research Online

Edited by rdyn - 07/May/2011 at 12:52pm

@subuji,

Any idea which book?