[T.S.R:16865] Silver In Backwardation

Silver mining companies have begun to buy insurance against a sharp drop in prices after years during which hedging fell out of favour.

The move by several large miners to lock in prices comes as gold and silver prices have slipped from recent highs, with investors turning to other assets as economic sentiment improves. Some analysts have begun to warn that the precious metals may soon peak after a decade-long bull run.

Gold is down 5.7 per cent from its record high in December. Silver jumped 75 per cent from August to hit a three-decade high last month, but has since fallen 6 per cent, trading at $29.30 an ounce on Tuesday.

Bankers said at least five miners had hedged a portion of their silver output in recent months, either by selling future production ahead of time at a fixed price or by buying options to protect against falling prices. This has helped push the market into "backwardation" – an unusual condition for silver in which the price for future delivery is lower than for immediate delivery.

The quantity of silver hedged in the latest wave of activity is several times the size of previous outstanding hedges, according to bankers' estimates.

Raymond Key, head of metals trading at Deutsche Bank, estimates that about 100m ounces of silver has been hedged in the past two months. That compares with total outstanding hedges, called the global "hedgebook", of 20m ounces in late 2010 and annual mine production of about 700m ounces, says precious metals consultancy GFMS.

Michael Jansen, metals strategist at JPMorgan, said 2011 was "probably the year of the producer hedge". He added: "This bull market in commodities is maturing to a point where, as much as supply is under pressure, you can say with a bit more certainty that in two to three years it's going to be different."

Bankers and analysts cautioned against expecting a widespread return to gold and silver hedging, noting that silver was not the main product of any of the miners who had executed hedges in recent months.

Mining companies have cut back on hedging – and several gold miners spent billions of dollars buying back their hedges – after protests from shareholders who preferred full exposure to the commodity markets.

Minera Frisco, the Mexican mining company spun out of Carlos Slim's conglomerate, said last month it had hedged 70m ounces of silver production to 2013.

"Gold and silver's slide in January may have spooked some producers," said Edel Tully, precious metals strategist at UBS. "When you put it in the context of silver's massive rise last year it is not surprising some producers are locking in price gains."

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

--
For Anything related with Stock market be Online at
http://www.niftyviews.com/
 
Get free updates on your mobile phone. Sms "Join TSR " and send to 09223492234
 
FOR TRIAL STOCK/NIFTY/OPTION CALLS
 
 
You received this message because you are subscribed to Google Group "STOCKRESEARCHER" group.
To post to this group, send an email to STOCKRESEARCHER@googlegroups.com
 
To unsubscribe email
Stockresearcher-unsubscribe@googlegroups.com
 
for more info visit
http://groups.google.com/group/STOCKRESEARCHER?hl=en-GB
.
This is Not a Spam Mail.
Disclaimer :-
"The opinions expressed by the members on this board are based on
their individual experience and perceptions and to share information
with other members with the best of intentions to help fellow members
in investment decisions as equity investment is a risky venture."