Silver Falls to 9-Month Low

March 31, 2000

Silver Falls to 9-Month Low

Silver futures fell more than 2% this month, dropping below $5 an ounce for the first time in nine months, according to Bloomberg News. Bloomberg attributed the decline to expectations that rising mine output will overwhelm sluggish demand from jewelers and other users.

Mexico's Industrias Penoles SA, the world's biggest silver producer, announced last month it would boost output 19% in 2000 – to 64 million ounces – even as world demand is expected to fall for a second straight year. That will exacerbate a glut of metal that's sent New York Mercantile Exchange-monitored inventories up 39% this year.

"There's ample silver around," said William O'Neill, head of futures research at Merrill Lynch & Co. in New York City. "You're going to need production losses to get this market higher."

Silver for May delivery fell as much as 13.3 cents, or 2.6%, to $4.97 an ounce on the Comex division of the New York Mercantile Exchange, the lowest price since June 21, 1999. Prices are down 8.6% this year.

Silver for immediate delivery was down 11.5 cents at $4.955 an ounce. World silver demand is expected to drop 3.1% this year to 790.6 million ounces, mostly because of reduced purchases by jewelers and silverware makers, who accounted for 36% of silver use in 1998, according to a report last month by New York City-based CPM Group. The metal also is used in making photographic film.

Silver inventories in warehouses monitored by Comex, at 105.3 million ounces, are hovering close to the two-year high of 106.2 million reached on March 6.

- by Mark E. Dixon