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Silver Pricing on the International Market
As we begin 2006, the buzz in the silver jewelry market is all about silver prices. How high will they go? Are we headed for a big correction?

This is more than just idle chat at the water cooler. If you are involved anywhere along the supply chain, from manufacturer to retailer, then the current price crisis will affect your business. As of February 1, the closing price of silver was US$9.79 per ounce. Compare this to the closing price on September 1, 2005 (five months ago) of $6.85 and you can see what a wild ride it has been!

Ironically, we have seen a spike in silver prices in the face of declining demand in both the photography and jewelry sectors. What is even more interesting is the fact that production of silver has actually been increasing over the past several years despite the decrease in demand. Economics 101 tells us that if you have increasing supply and declining the demand, the price should go down, not up.

This begs the question that I have been hearing over and over lately: What the hell is going on with silver? And of course the answer to this question depends on who you ask. According to the analysts at the website technical indicators, the market is headed for a correction. This prediction is based on the increased supply, decreasing demand, and the fact that the rally in silver prices has been fueled by something other than concerns about the US Dollar which they say is often a primary price indicator. They say look for prices to fall as low as $4.00 to $4.20.

Then you have the $20+ price that Theodore Butler, the analyst who predicted the famous silver crash of the early 80's, says is not just probable, it's certain. He lists the primary reasoning for this as the loosening of control of the silver market by the manipulative hands that have artificially suppressed the price for the past 60 years.

What is certain is that as the silver price increases, we will see a decrease in demand from the jewelry sector. Jewelry is discretionary, and as prices climb consumers will spend less because silver (and gold) are more expensive. The rumor among silver jewelry manufacturers in Jaipur, the silver capital of India, is that prices will stay high until the spring, then head downward again.

While in Tucson in early February, I spoke to a gentleman who predicted (correctly) a year ago that silver prices at the show this year would be near $10. Last year's price during the show was below $7/oz., so his prediction of an almost 50% rise seemed crazy to me at the time, but now I admit I give him some serious analytical street cred.

His prediction this year? Nothing but up, with $15 or $20 prices per ounce of silver being totally possible by next year's show. Ultimately, it's out of our hands. The best I can do as a supplier of silver jewelry is to continue to produce the highest quality pieces at the lowest prices possible. Other than that, lets keep our fingers crossed for lower prices before much longer.

(This article written by Mike McGinnis and published originally on indiasilver.com. We allow republication provided the piece is copied in its entirety with links and attribution.)

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