Back in the olden days, before the advent of digital cameras, photographers used a curious thing called film. Surely you remember having to feed a roll of the stuff into your analog camera. Then you’d take the roll to your local drug store and wait a week for it to be developed, only to discover that you had the lens cap on during the entirety of Cousin Ted’s birthday party.

What some people don’t know about film is that it’s coated with a thin layer of silver chloride, silver bromide or silver iodide. Not only is silver essential for the production of film but it was also once necessary for the viewing of motion pictures. Movie screens were covered in paint embedded with the reflective white metal, which is how the term “silver screen” came to be.

Since 1999, photography has increasingly gone digital, and as a result, silver demand in the film industry has contracted about 70 percent. But there to pick up the slack in volume is a technology that also requires silver: photovoltaic (PV) installation, otherwise known as solar energy.

For the first time, in fact, silver demand in the fabrication of solar panels is set to outpace photography, if it hasn’t already done so.   

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Every solar panel contains between 15 and 20 grams of silver. At today’s prices, that’s about $20 per panel. When silver was hanging out in the mid-$30s range a couple of years ago, it was double that.

Other industrial uses of silver can be found in cell phones, computers, automobiles and water-purification systems. Because the metal also has remarkable antibacterial properties, it’s used in the manufacturing of surgical instruments, stethoscopes and other health care tools. Explore and discover more about the metal’s many industrial uses in our “Brief History of Silver Production and Application” slideshow.

Going Mainstream
Solar energy was once generally considered an overambitious pie-in-the-sky idea, incapable of competing with and prohibitively more expensive than conventional forms of energy. Today, that attitude is changing. Year-over-year, the price of residential PV installation declined 9 percent to settle at $2.73 per watt in the second quarter of this year. In some parts of the world, solar is near parity, watt-for-watt, to the cost of conventional electricity.

According to a new report from Environment America Research & Policy Center:

The United States has the potential to produce more than 100 times as much electricity from solar PV and concentrating solar power (CSP) installations as the nation consumes each year.

Additionally, president and CEO of solar panel-maker SunPower Tom Werner says solar could be a $5 trillion industry sometime within the next 20 years, calling it “one of the greatest ever opportunities in the history of markets.”

This investment opportunity will likely expand in light of the climate agreement that was recently reached between the U.S. and China. Back in April I discussed how China, in an effort to combat its worsening air pollution, is already a global leader in solar energy, accounting for 30 percent of the market.

Commenting on how government policy can strengthen investment in renewable energies, Ken Johnson, vice president of communications for the Solar Energy Industries Association (SEIA), notes: “If governments are smart and forward-looking and send ‘clear, credible and consistent’ signals as called for by the International Energy Agency (IEA)… solar could be the world’s largest source of electricity by 2050.”

These comments might seem hyperbolic, but as you can see in the chart below, installed capacity has been increasing rapidly every year. According to the SEIA, a new PV system was installed every 3.2 minutes during the first half of 2014.

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With PV installation on the rise, silver demand is ready for a major surge. About 80 metric tons of the metal are needed to generate one gigawatt, or 1 million kilowatts, of electricity—enough to power a little over 90 typical American homes annually. In 2016, close to a million and a half metric tons of silver are expected to be needed to meet solar demand in the United States alone. 


Another clear indication of solar’s success and longevity is the rate at which employment in the industry is growing. Currently there are approximately 145,000 American men and women drawing a paycheck from solar energy, in positions ranging from physicists to electrical engineers to installers, repairers and technicians. Between 2012 and 2013, there was a growth rate of 20 percent in the number of solar workers, and between 2013 and 2014, the rate is around 16 percent. Nearly half of all solar companies that participated in a recent survey said they expected to add workers. Only 2 percent expected to lay workers off.

What this all means is that solar isn’t just for granola homeowners and small businesses. On the contrary, it has emerged as a viable source of energy that will increasingly play a crucial role in powering residences, businesses and factories. Already many Fortune 500 companies make significant use of the energy—including Walmart, Apple, Ford and IKEA—with many more planning to join them. This helps businesses save money over the long run and improve their valuation.

It’s also good news for silver demand.

Bullish on Bullion

Crude Cost of Production Rises as Demand Grows

Solar is only part of what’s driving demand right now. Since July, the metal has fallen close to 25 percent, attracting bargain-seeking investors.

Below you can see how silver ETF holdings continued to remain steady as gold ETFs lost assets earlier this year.

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Ralph attributes much of this action to solar energy: “Investors recognize silver’s importance in manufacturing solar cells, and it doesn’t hurt that silver is currently pretty inexpensive relative to gold.”

It’s also oversold, as the chart below shows.

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Last month about $1 billion was pulled out of New York’s SPDR Gold Shares, the world’s largest gold bullion-backed ETF, while holdings in silver-backed ETFs set a new record in September. Demand in India is booming, and sales of American Eagle silver coins rose last month to a two-year high of 5.8 million ounces, nearly doubling the sales volume from last October.

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Index Summary

  • Major market indices finished higher this week.  The Dow Jones Industrial Average rose 0.99 percent. The S&P 500 Stock Index gained 1.16 percent, while the Nasdaq Composite advanced 0.52 percent. The Russell 2000 small capitalization index fell 0.12 percent this week.
  • The Hang Seng Composite fell 2.58 percent; Taiwan was up 1.21 percent and the KOSPI rose 1.01 percent.
  • The 10-year Treasury bond yield fell 52 basis points to 2.31 percent.
In the News
November 18, 2014
Who Controls the Uranium Market?
November 14, 2014
Who Benefits from Low Oil Prices?
November 12, 2014
Gold, Oil and the Currency War

Domestic Equity Market

The S&P 500 Index was positive again this week, rising 1.16 percent, closing at an all-time high. The market has maintained its steady growth and recovery pace, spurred by global central bank actions and relatively positive sentiment.

S&P 500 Economic Sectors
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  • The materials sector performed the strongest this week, up 2.76 percent, with Mosaic and CF Industries both among the top performers in their sector, up 4.56 percent and 4.61 percent, respectively. Fertilizers were both up with the news of the Uralkali mine in Russia developing a 65-foot by 95-foot sinkhole, due to flooding from inflow water. This impediment will tighten global supply.
  • The energy sector was another top sector, up over 2.4 percent. Phillips 66 led the group, up 10.62 percent, followed by Baker Hughes, up 9.95 percent. Also included in the top performers were some of our local neighbors, Tesoro, up 7.82 percent, and Valero, up 1.64 percent. The top refiners are showing a continuation of strength in their sector as refiners come out of utilization.
  • The Macerich Company was the best performing stock in the S&P 500 this week, rising 13.50 percent. The company announced it had a new major shareholder, Simon Property Group, with 3.6 percent of the shares outstanding. Simon Property Group wanted to increase its position to above 5 percent as it believes that Macerich’s shopping centers could be an important addition to the company’s own market-leading portfolio of shopping malls.


  • The telecommunications sector was the worst performer this week, down 1.79 percent. Pulled down by large cap names such as Verizon and AT&T, down 2.50 percent and 1.73 percent, respectively. Both of these names were up last week following President Barack Obama’s net neutrality announcement. AT&T responded to cease all high speed network expansion; however, both companies have given back last week’s gains following the last five days of trading.
  • Another area of weakness was information technology, which closed slightly positive, up 0.42 percent. It was dragged down by, which was down 8.95 percent on a weak outlook after a positive third quarter earnings release.
  • The worst-performing company this week was Gamestop, which fell 14.75 percent as the company missed expectations on both top and bottom lines.


  • China made a surprise cut to its interest rates on Friday, cutting interest rates for the first time in two years, in order to spur growth. This could be beneficial for many sectors as a reinvigorated Chinese growth rate will help many aspects of the global economy.
  • Next week a few important economic data points will be released, such as new home sales, mortgage applications, durable goods orders, initial jobless claims and continuing claims, as well as personal income and spending.
  • OPEC has a meeting November 27, which may lead to a decrease in global production, which would in turn raise oil and gasoline prices. While this would negatively affect the average consumer, it would positively affect the domestic oil producing industry of the U.S., which is facing potential budget cuts over falling oil prices.


  • Following OPEC’s meeting, the cartel could maintain production, which could pressure oil further, helping the average consumer save, but lowering the feasibility and profitability of the shale oil and gas plays and the money that comes along with them.
  • With Black Friday next week, and holiday shopping season upon us, retailers are expecting one of the largest holiday sales ever, in terms of revenue. Any slight disappointment in these numbers could send the market downwards.
  • With the tensions in the Ukraine on the rise again, and President Vladimir Putin even leaving the G20 summit over how the other leaders treated him, one can only speculate the eventual outcome of the global conflicts that could tip the markets into a fearful negative decline.

The Economy and Bond Market

U.S. Treasury bond yields were basically flat this week even though central banks and policymakers were pretty active. The key stories this week were a surprise interest rate cut out of China and European Central Bank (ECB) President Mario Draghi pledging to ramp up stimulus to fight off deflation. Both of these events occurred on Friday and while the fixed income markets rallied modestly, the equity markets were much more responsive.  The reason behind all the dovish talk from global central bankers is related to the stalling growth that we have seen in many parts of the world and the low levels of inflation and real concern that Europe could slip into outright deflation. Inflation in the U.S. has consistently been running below 2 percent for more than two years and in Europe inflation has been declining since 2011 and currently stands at just 0.4 percent on a year-over-year basis.

Two-Year Treasury
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  • Global central bankers responded to slow growth and the potential for deflation. While bonds didn’t rally materially on the news it significantly increases the odds the Federal Reserve will not move to tighten monetary policy in the foreseeable future.
  • Housing data was generally better this week with existing home sales rising to the best level in 13 months and homebuilder confidence hit a nine-year high.
  • The Index of Leading Economic Indicators rose a better than expected 0.9 percent in October, indicating solid growth prospects ahead.


  • China’s HSBC/Markit manufacturing index fell to a six-month low in November, which is likely one of the key reasons the central bank surprised the market and cut interest rates.
  • Industrial production fell 0.1 percent in October and was below expectations.
  • Japan’s economy slid into a recession in the third quarter, on surprisingly weak numbers.


  • Global central banks are easing again, offsetting the incremental moves from the Fed that recently ended quantitative easing (QE), and remains a positive for fixed income globally.
  • Short-term treasury yields remain near the top end of the recent range, this is likely an opportunity as yields could reverse course. The Fed is likely on hold for an extended period based on weak international growth and a strong U.S. dollar which will act as a brake on U.S. growth in coming months.
  • Municipal bonds continue to look like an attractive alternative in the fixed-income universe.


  • With the Thanksgiving holiday next week most of the economic data is crammed into Wednesday, with durable goods orders, initial jobless claims and new home sales being the highlights.
  • Quantitative easing has ended and the next logical step would be an interest rate hike. While estimates of when that may occur remain fluid the Fed’s relatively hawkish tone increases the risk to the bond market. 
  • The geopolitical situations in Ukraine heated up again this week and the potential for a misstep remains high. Potential fallout would be difficult to predict.



Gold Market

For the week, spot gold closed at $1,200.29 up $11.54 per ounce, or 0.97 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, rose 4.24 percent. The U.S. Trade-Weighted Dollar Index gained 0.87 percent for the week.

Date Event Survey Actual Prior
Nov 18 US PPI Final Demand YoY 1.2% 1.5% 1.6%
Nov 19 US Housing Starts 1025K 1009K 1017K
Nov 19 HSBC China Manufacturing PMI 50.2 50.0 50.4
Nov 20 US CPI YoY 1.6% 1.7% 1.7%
Nov 20 US Initial Jobless Claims 284K 291K 290K
Nov 25 US GDP Annualized QoQ 3.3% - 3.5%
Nov 26 US Durable Goods Orders -0.7% - -1.3%
Nov 26 US New Home Sales 471K - 467K
Nov 27 Germany CPI YoY 0.6% - 0.8%
Nov 28 Eurozone CPI Core YoY 0.7% - 0.7%


  • Gold reversed losses after China cut benchmark interest rates for the first time since July 2012. Additionally, Standard Chartered raised its forecast for 2015 average gold prices to $1,245 per ounce, up from $1,160 saying that many of the factors pressuring gold will be neutralized. Standard expects dollar bullishness to fade and worries about deflation to subside.
  • The Dutch central bank shipped 122 tons of gold from safekeeping in New York back to Amsterdam, increasing its home reserves to 31 percent from 11 percent previously. The bank said it is joining other central banks that are keeping a larger share of their gold supply in their own country, contributing to a more balanced division of the gold reserves. This move may also have a positive effect on public confidence.
  • The U.S. Mint has sold 2,570,500 ounces of silver coins so far in November. If the pace continues, total sales for the month would be around 4,284,167, up 257 percent from a year earlier.


  • The U.S. Geological Survey noted on Monday that gold production by U.S. mines in August had decreased by 11 percent from a year earlier.
  • Hedge funds extended their fastest exit from gold this year, cutting bullish gold wagers for a third week. Holdings tumbled 49 percent over three weeks, the most since December. Additionally, assets in exchange-traded products backed by the metal dropped to the lowest since 2009, as the World Gold Council said third-quarter global demand was the weakest in almost five years.
  • The Sierra Club filed a last minute request for review of proposed state mining permit against Romarco Minerals’ Haile gold project. The project has been under permitting for nearly four years and this filing calls for the state to seek more bonding, citing figures in the $100 million to $500 million range, way beyond the $60 million that was agreed upon through Romarco’s negotiations in permitting the project.


    • Canaccord Genuity’s study looking at the four major Venture Composite corrections in the last three decades found that historically, the up-ticks after the corrections have varied from 144 percent to 347 percent. They also note that the previous three corrections ended around the year-end. The current correction is the second-longest at 43 months and Canaccord believes we could be closer to the end.

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  • The rate at which gold is lent for dollars is the most negative since March 2001 as refineries spend longer recasting bars from vaults to meet demand from Asia, where consumers prefer smaller ingots and jewelry. This signals a bottleneck in supply that could support or even increase prices.
  • Virginia Mines and Osisko Gold Royalties announced on Monday they would merge in an all-share deal that is to make the company the fourth-largest royalty company in the world after Royal Gold, Franco-Nevada and Silver Wheaton. The all-stock offer represented a deal premium of 41 percent.
  • As can be seen in the chart, gold and the S&P 500 traded in a narrow range for much of 2012 but in the last two years the spread between S&P 500 and gold had widened significantly.  For portfolio rebalancing at year end this presents an opportunity to readjust your weightings.  Sell some of the assets that have been the strongest performers and reinvest the proceeds in the underperformers to reset your portfolio asset allocation mix back into balance for the new year.

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  • India is examining policy to curb the surge in gold imports that increased to $4.17 billion in October, up from $1.09 billion a year earlier. The policy measures are being considered to narrow the current account deficit and support the currency. As the second largest importer of gold, any measures would create a headwind for gold prices.
  • Goldman Sachs executives were probed on Thursday by members of Congress due to allegations that the bank had taken too large a role in the commodities market. The Senate subcommittee released a 400-page report saying that Goldman devised policies that made it hard to get aluminum out of its Detroit warehouses, pushing up the price of aluminum for American companies.
  • On Thursday the Peruvian government branded a 10-day long strike at the country’s biggest copper and zinc mine illegal while the operating company Antamina urged laborers to return to work. The union organizing the strike said the workers would meet to decide whether to apply for a legal review of the government’s declaration that their walkout is illegal, a move which would allow the strike to be extended for another week. Antamina produces nearly 33 percent of Peru’s copper and 23 percent of its zinc. Peru is the world’s third largest copper producer.

Energy and Natural Resources Market

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  • Silver stocks had a huge bounce this week after experiencing severe oversold conditions. News of China’s rate cut boosted silver stocks as well, given the metal’s industrial use. The Global X Silver Miners ETF closed up 6.26 percent this week, with Tahoe Resources Inc. rising 1.57 percent.
  • An improvement in investor sentiment concerning the global growth outlook and fresh monetary stimulus in China caused a rally in metals and mining stocks this week. The S&P/TSX Capped Diversified Metals and Mining Index rose 6.34 percent this week. Nevsun Resources Ltd. closed up 15.61 percent on a rise in merger and acquisition expectations.
  • Refining stocks came back this week with positive gains for six-straight days. The S&P Supercomposite Oil & Gas Refining & Marketing Index rose 6.25 percent this week. Tesoro Corp. closed up 7.60 percent this week.


  • The dry ships industry underperformed this week due to the continued depression of iron ore prices. The Bloomberg Dry Ships Index fell 1.02 percent this week.
  • Concerns of overproduction in global steel caused iron and steel stocks to underperform for most of this week. The stocks did, however, rally on Friday after the news of China’s rate cut.
  • Paper and forest stocks sold off this week after a strong run alongside a rising dollar. The underperformance is most likely attributable to profit taking, despite the dollar making new highs on Friday. The S&P Supercomposite Paper & Forest Products Index fell 1.38 percent this week.


  • The long awaited OPEC meeting is a week away. Given the current state of oil prices and their effect on producing economies, there is a real chance that production cuts will be made. If so, the rise in oil prices would cause a large bounce in energy stocks.
  • China’s unexpected rate cut this week is already having positive repercussions in the commodities space. The new monetary stimulus should continue to boost the energy and metals space, especially if purchasing manufacturers’ index (PMI) numbers rise as a result.
  • China and Australia signed a free trade deal, removing an 8 percent import tariff on aluminum. In addition, China may remove some of the export tax it has in place on certain aluminum products.


  • The dollar reached its highest level since the middle of 2010 this week. The recent breakout is the result of China’s monetary stimulus and comments from ECB President Mario Draghi stating that the bank will do whatever it takes to boost inflation and growth.
  • The Fed may place new restrictions on Wall Street commodity businesses after accusing the firms of engaging in unfair trading practices. The restrictions could include ownership limits, which would restrict the amount of revenue derived from commodities.

Emerging Markets


  • Greece officially ended last week one of the worst recessions the country has ever experienced. Third-quarter gross domestic product rose 0.7 percent, causing year-over-year non-seasonally adjusted GDP to grow at 1.7 percent. The political environment in Greece is showing signs of improvement as well, as Finance Minister Gikas Hardouvelis told reporters that the country will reach an agreement with the Troika on time. The Athens Stock Exchange was up an astonishing 11.71 percent this week.
  • Brazil’s annual inflation declined to 6.42 percent this week, coming in lower than the estimated 6.54 percent. The updated inflation figures are within the government’s target range, which provides more flexibility to the central bank which has been struggling to address the country’s low growth, depressed currency, and high inflation. The Ibovespa Brasil Sao Paulo Stock Exchange Index closed up 8.33 percent this week.
  • Indonesia was the best-performing Asian country this week, as president Joko Widodo fulfilled his campaign promise by cutting gasoline and diesel subsidies, resulting in around 1 percent of GDP in fiscal savings set aside for more productive use.


  • Investors are fleeing Russia. The steep decline in the ruble, induced by sanctions and depressed oil prices, caused capital outflows in Russia to jump to $28 billion in October, the largest monthly outflow this year. In fact, the amount of outflows from Russia last month is almost half of last year’s total outflows.
  • Hong Kong was the worst-performing Asian country this week, as the first five days’ liquidity inflow after the official launch of the Hong Kong-Shanghai market integration program did not live up to market expectations.
  • Polish stocks closed down slightly this week. Inflation data came in less than expected, while global growth fears pushed down government bond yields. Furthermore, the fee Polish banks must pay to protect the industry from potential bankruptcies increased, causing financial stocks to decline.


  • China’s first interest rate cut since mid-2012 pleasantly surprised the market and introduced the potential for more cuts, given weaker economic activity, lukewarm order flows from the Shanghai-Hong Kong market linkage, and disappointing November flash PMI driven by factory closures during the APEC summit.  Bullish for Chinese equities overall, this government policy change should benefit rate-sensitive property and financials sectors and highly leveraged power producers the most.

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    • Indonesian President Joko Widodo’s bold decision to cut the fuel subsidy less than one month in office and use partial fiscal savings to accelerate infrastructure spending sets the country on the right path for further economic reform.  Lower domestic fuel demand should help improve Indonesia’s current account balance and strengthen its currency, and more infrastructure investment bodes well for construction material makers.

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  • Brazil's central bank announced that it could recalibrate monetary policy, implying the bank may raise interest rates again. A further increase in rates would boost the real, which sold off significantly during the months leading up to the election.


  • Increasingly challenging exports pressured by a stronger Korean won versus Japanese yen, weaker corporate return on equity as well as negative earnings revision, and above decade-average price to earnings valuation may continue to weigh on investor sentiment towards South Korean equities in general.
  • This week, Russia’s Finance Minister, Anton Siluanov, said that a recession is inevitable if the price of oil drops to $60 dollars a barrel. While Russia faces many threats, its economy and currency are directly linked to the price of oil. Further decreases in oil prices could prove disastrous.
  • The dollar climbed to the highest level since mid-2010 on Friday as the ECB reiterated its intention on expanding its balance sheet and China cut two of its benchmark rates. The growing strength of a dollar continues to act as a headwind to emerging markets.

© US Global Investors

© U.S. Global Investors

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