silver ~ budfox on the dow jones wire

  1. 2,839 Posts.
    Afternoon all,
    Thought you might find this an interesting read. By crikey I hope Tony's forecasts a right, it's going to mean early retirement for me and a few others I know.
    Rumour has it the Lone Ranger isn't too excited at the prospect of paying through the nose for his bullets, but theses fears are somewhat tempered by his large holdings in MAR, MMN & MCO.
    Cheers all and good luck if, like me, you are a believer.

    By Jim Hawe of Dow Jones Newswires:

    TOKYO (Dow Jones)--The dismal second-quarter forecast issued earlier this week by Eastman Kodak Co. (EMN) has left players in the silver market focusing
    on the negatives, which isn't surprising considering that the film giant is thefirst or second largest buyer of this metal in any given year.

    However, a handful of market insiders are warning that investors who focus too much on Kodak's tribulations may miss the bigger picture - specifically,
    that silver is still an undervalued commodity with plenty of upside.

    Wednesday Kodak sharply curtailed its second quarter outlook due to "significantly lower-than-expected" sales of consumer film and photographic paper in Asia.

    Kodak said industry wide sales of film in China during April and May were nearly half the amount sold during the same period last year.

    This could prove problematic for the silver market as it is believed that Kodak purchases anywhere between 37 million and 50 million ounces of silver annually, making it and Japan's Fuji Photo Film Co. (FUJIY or 4901) the biggest buyers of silver in the world.

    The film industry is dependent on silver as the photographic process is based on the presence of light-sensitive silver halide crystals. Silver is a key
    component in both photographic film and the paper on which photos are developed.

    "The SARS outbreak, as well as concern about geopolitical tensions, is keeping people from participating in activities that foster picture taking,"
    said Kodak Chairman and Chief Executive Daniel Carp in a statement.

    However, Tony Locantro, Senior Private Client Adviser with brokerage firm Paterson Ord Minnett in Perth, said he believes this is only a temporary setback, and he expects shutter-bugs will be back snapping pictures in no time.

    "The decline in photography is unfortunate for the silver market, but this is only a temporary problem that will recover in line with the travel industry, which is expected to be stimulated by higher advertising expenditures and record low airfares," said Locantro.

    Dips May Provide Buying Opportunities

    A metals trader with a big commodities house in Tokyo cautions that Kodak's second-quarter warning could be used as fodder for rumormongers looking to stir up the market.

    "The silver market is rather small and illiquid and so any rumors that a major player like Kodak will be reducing its silver purchases could really damage the market," says this trader.

    To illustrate his point, this trader noted that ever since U.S. investor Warren Buffet bought 130 million ounces of silver in 1997, the market has been
    frequently visited by rumors that Buffet is either selling or adding to this position sometimes resulting in dramatic price movements.

    Still, Paterson Ord Minnett's Locantro remains bullish on silver over the long term, suggesting that price dips from this point could offer up good buying opportunities.

    Spot silver was quoted at just over $4.60 an ounce prior to the Kodak's announcement late Wednesday in the U.S., but slipped to $4.55 Thursday in Asia.
    It was quoted at $4.57 an ounce Friday in Asia, unchanged from overnight in New York.

    Locantro said silver market fundamentals, particularly that demand continues to outpace supply, are the main reason why investors should be giving this metal more than just a "curious glance."

    According to the London-based research group Gold Fields Mineral Services Ltd., the combined silver demand in 2002 for industrial use, photography,
    jewelry and coins outpaced supply from silver mines and scrap by 67.4 million ounces, to mark the 14th straight year that supply has failed to keep pace with demand.

    So where does Locantro see the silver price headed?

    "I envision a solid break above $5 for silver and above $400 for gold. This would attract further interest in mining company shares and fuel further momentum for spot prices."

    Locantro is sticking to his earlier projection of spot silver moving into a $5.50-$5.75 range later this year.

    "This is based on a combination of market tightness and increasing Indian and investment demand," said Locantro, suggesting that despite Kodak's woes, the overall picture for the silver market isn't so bleak.

    -By Jim Hawe, Dow Jones Newswires; 813-5255-2950; [email protected]

    -Edited by Nick vonKlock

    (END) Dow Jones Newswires

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