There are areas where their opinions converge and there are regions where their viewpoints stand diverged.
For instance, while Renisha's tone is supportive of a bull rally in silver, Bitupan is more cautious and reserved. But both agree that the Euro zone crisis is having no quick-fix solutions.
Ultimately, it is for the investor community to ponder over everything as we provide the best of both worlds.
Rakesh Neelakandan: What were your expectations for Silver in 2010 for the period of 2011? Did the commodity outperform your expectations?
Bitupan Majumdar: Silver prices during 2010 were almost in line with our bullish view as industrial demand for the commodity has improved after a slump from 2008 to 2009. However, the gain in the early 2011 was above expectation as ETF demand and industrial demand were expected to start contracting from 2011 second half onwards.
On MCX, prices rose towards 75,000 and in COMEX, it rose almost $50 which was not in sync with its fundamentals. The result there has been a collapse as long liquidation and fresh selling emerged at higher levels. For remaining 2011, we maintain a neutral stand on MCX while slightly bearish on COMEX. As USD-INR is expected to reach high as 52, silver parity prices on the Indian market may not drop much, despite a drop in prices in the international market.
The optimism from the Euro zone after the EU summit keep sellers away from the market as of now, but the Europe does not seem to have a long term fix for its debt as well slowing growth.
European economies may see contraction in growth or may see negative reading for medium term horizon following austerity measures taken by these countries. Apart from that, slowing US growth and Chinese fear of a real estate crisis may be a matter of worry for the white metal.
Renisha Chainani: We had silver as our diwali pick last year, we did forecast a price of 40000; but it certainly outperformed our expectations and could breach 70000 bucks; the rally was supported by the gloomy economic outlook as well as strong industrial demand in the developing world.
Q: By April end, silver touched $50. Will it rebound to those levels yet again? If so, what would be the driving factors? If it will not, what would be the dampening factors?
Bitupan Majumdar: We do not expect Silver prices to recover due to soft fundamentals. From supply perspective, mine production has been increasing after a decline in 2006.
Mine supply has increased an average of 2.1% YoY during the last decade. It is expected to rise in 2011 as well after a better price realization.
However, demand may weaken from 2012 onwards following contraction in industrial activity.
Silver is mostly an industrial metal while investment demand just contributes 15% of total demand. In our view, industrial activity to slowdown across US, Europe and emerging nations and this will result in slowdown of silver demand growth or a contraction.
Renisha Chainani: Technically, If Silver prices trade and sustain above $34 and $45, we will see $50 retesting.
Bullish factors would be the same- US and EU debt crises, demand from developing nations, alternative to higher Gold prices, new uses in Industrial sector, etc.
Q: Are you confident of the European summit achieving its objective of preventing a mayhem or contagion?
Bitupan Majumdar: The EU summit may have a short term fix and the EU problems are larger in nature. It may avoid the imminent banking crisis in the Euro zone, but structural problems will weigh.
Renisha Chainani: While talking about the EU Summit we should bear in mind that one can’t hold the globe and hence the surroundings are uncontrollable even if the Euro zone leaders get the world accord.
At the first glance they themselves are not in accordance with the goal they are sharing. Until last 15 days no one was ready to take an initiative but when it burnt, all started blaming the major partners of EU and hence Franco-German had to take the lead.
Hence, we are quite confident that EU summit will not be more than PAPER TIGER when it comes to a result, and if at all they will be able get certain forceful results out; then also sooner or later the murkier fundamentals are going to kill the EU as well as Euro.
Q: How do you see the industrial demand for silver for the rest of the year and early 2012?
Bitupan Majumdar: Industrial demand may drop due to weak industrial activity in developed and emerging nations. Silver fabrication demand has been in a declining trend since 2000 till 2009, but recovered in 2010 following sharp recovery of the global economy. We expect the industrial demand to drop by 5-6% during 2012 and total fabrication demand may drop to 8-10%- compared to 2010.
Renisha Chainani:In 2012 silver consumption in India is expected to rise to 5,000 tonnes. Silver demand in China and India has increased sharply in 2010 and 2011 as more investors use silver as a store of value. China's net imports of silver was up 400 percent to 3,500 metric tons in 2010.
About 70% of China's silver demand comes from the industrial sectors. Silver is widely used in the production of solar panels, electronic products, jewelry, industrial production, medical equipments, and water purification industries. China is the world's largest producer of solar power and electronics.
Q: How do you see the investment demand for silver—futures and ETFs--for the rest of the year and early 2012?
Bitupan Majumdar: Silver ETF holdings have dropped almost 10% from 2010 closing till date. The following chart of Silver I shares tell the story.
There has not been any significant demand rise after recent price drop.We do not think Silver ETF will keep pace in 2012 and will remain subdued due to soft fundamental of the commodity.
Renisha Chainani: Silver demand is expected to outpace in coming six months as an alternative to gold and safe haven. People who could not afford to buy gold due to higher prices are likely to buy silver. There is great demand coming from developing nations like India and China , where there is festive and New Year demand.
As published in : http://www.commodityonline.com/news/Silver-bullish-on-US-EU-crises;-bearish-on-soft-fundamentals-43202-3-1.html
