Silver is a white, lustrous metallic element that conducts heat and electricity better than any other metal. In ancient times, many silver deposits were on or near the earth's surface. Before 2,500 BC, silver mines were worked in Asia Minor. Around 700 BC, ancient Greeks stamped a turtle on their first silver coins. Silver assumed a key role in the U.S. monetary system in 1792 when Congress based the currency on the silver dollar. However, the U.S. discontinued the use of silver in coinage in 1965. Today Mexico is the only country that uses silver in its circulating coinage.
Silver is the most malleable and ductile of all metals, with the exception of gold. Silver melts at about 962 degrees Celsius and boils at about 2212 degrees Celsius. Silver is not very chemically active, although tarnishing occurs when sulfur and sulfides attack silver, forming silver sulfide on the surface of the metal. Because silver is too soft in its pure form, a hardening agent, usually copper, is mixed into the silver. Copper is usually used as the hardening agent because it does not discolor the silver. The term "sterling silver" refers to silver that contains at least 925 parts of silver per thousand (92.5%) to 75 parts of copper (7.5%).
Silver is usually found combined with other elements in minerals and ores. In the U.S., silver is mined in conjunction with lead, copper, and zinc. In the U.S., Nevada, Idaho, Alaska, and Arizona are the leading silver-producing states. For industrial purposes, silver is used for photography, electrical appliances, glass, and as an antibacterial agent for the health industry.
Silver futures and options are traded at the CME Group, the NYSE-LIFFE U.S., the EUREX, and the Moscow Exchange. Silver futures are also traded on the Hong Kong Mercantile Exchange (HKMEx), the JSE Securities Exchange, the Multi Commodity Exchange of India (MCX), the National Commodity & Derivatives Exchange (NCDEX), the Shanghai Futures Exchange, and the Tokyo Commodity Exchange (TOCOM). The CME silver futures contract calls for the delivery of 5,000 troy ounces of silver (0.999 fineness) and is priced in terms of dollars and cents per troy ounce.
Prices - CME silver futures prices (Barchart.com symbol SI) moved higher in Q1-2014 and posted the high for the year at $22.18 an ounce in February 2014. Silver prices found support on increased demand for precious metals as an alternative asset after the BOJ expanded its emergency lending programs and extended them for another year. Silver then moved sideways into Q3 as a rally in the dollar limited the upside and pressured silver prices. Silver slumped in Q4 and plummeted to a 5-1/2 year low of $14.10 an ounce in December. Besides dollar strength, silver prices in Q4 were undercut by (1) a rally in stocks as the S&P 500 continued to post record highs, and (2) reduced inflation expectations after crude oil plunged to a 5-1/2 year low. Fund liquidation was another negative factor as long silver holdings in ETFs fell to the low for the year low in December. Silver prices finished 2014 down -19.5% at $15.57 an ounce.
Supply - World mine production of silver in 2014 rose +0.4% yr/yr to a new record high of 26,100 metric tons, continuing to show some improvement after flat production figures in 2000-03. The world's largest silver producers in 2014 were Mexico with 18.0% of world production, China (16.1%), Peru (14.2%), Australia (7.3%), Russia (6.5%), and Bolivia (5.0%). U.S. production of refined silver in 2014 (through August, annualized) rose by +2.6% to 5,008 metric tons, down from the 2011 record high of 6,375 metric tons.
Demand - U.S. consumption of silver in 2009 (latest data) fell -11.8% yr/yr to 164.4 million troy ounces. The largest consumption of silver is for electrical contacts and conductors with 31.9% of total usage, followed by coinage (20.6%), photographic materials (13.4%), jewelry (7.1%), and brazing alloys and solders (3.2%). The world's largest consuming nation of silver for industrial purposes is the U.S. with 20% of world consumption in 2004 (latest data), followed by Japan (16%), India (10%), and Italy (7%).
Trade - U.S. exports of refined silver in 2011 (latest data) rose +27.5% yr/yr to 29.064 million troy ounces, which is about half of the record high of 99.022 million troy ounces seen in 1997. The major destinations for U.S. silver exports are Japan (17.3%), South Korea (14.3%), and Canada (11.0%). U.S. imports of silver ore and concentrates in 2011 rose from 104,000 troy ounces to 2.707 million troy ounces. U.S. imports of refined silver bullion in 2011 rose +2.2% yr/yr to 168.788 million troy ounces. The bulk of those imports came from Mexico (67.515 million troy ounces), Canada (40.509 million troy ounces), and Chile (3.122 million troy ounces).
Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.