QE tapering: US continues to impact gold, silver prices

By Naveen Mathur, ET Bureau | 14 Oct, 2013

With applications ranging from industrial use and jewellery to silverware, photography and investment, silver is an essential commodity. A quick break-up shows that industrial demand accounts for 44%, followed by consumption in jewellery and silverware at 22%, investment demand at almost 30%, while photography accounts for a little more than 5%.

Since the metal is used for a variety of industrial purposes, the factors impacting its price are also numerous. Starting with its applicability as a precious metal, it is seen that it takes major cues from the price movements in gold. In case of its usage in industrial applications, base metals also provide direction to silver prices. Other than these, major economic indicators with respect to manufacturing from top countries like the US, the UK, China, Eurozone and Japan provide further direction to prices. As for facts on the consumption front within the industrial metals category, in 2012, the US stood as the top consumer in this space, followed by China, Japan and India.

In the silver jewellery segment, China tops the charts as it was the top consumer in 2012, followed by India, Thailand and Italy. In the case of demand for silver coins and medals, the US is the top consumer, with the other top players being Canada, China and Austria. In the space of photography for 2012, the Eurozone occupied the top consumption slot, with the US, Japan and China following it.

Among the top silver miners, Mexico’s share stands at 21%, China’s at 15%, Peru at 14%, and Australia’s contribution is at a little above 7%. Russia, Poland and Bolivia account for more than 5% of silver mine production, and Chile and the US account for more than 4% each.

Price performance

From approximately $30/oz at the start of the year, spot Silver prices have slipped to around $21/oz now. While several factors have affected this downside movement in prices, the primary among these is the loss of gold’s status as a safe haven amid the dev elopments regarding the tapering of quantitative easing by the US. This, in turn, has led to the pressure on silver prices.

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