By Steve Fiscor, Editor-in-Chief
Gold prices continue to push through milestones on a seemingly weekly basis. This month, the E&MJ Prices Index pegs gold at $1,458.40/oz. It’s a new record high, but only a 1.8% gain month-to-month. A year ago gold was trading at $1,152/oz. As of press time, gold futures were nearing another all time record of $1,475/oz. A weakening U.S. dollar and higher oil prices pushed precious metal prices higher, according to Kitco. The U.S. dollar fell to a five-month low against the Euro. Meanwhile, interest rates are moving higher outside the U.S., creating the potential for inflation.
The real story with precious metals, however, was silver, which was getting ready to break through the $40/oz barrier. Silver reached a 31-year high of $39.64, a 14.3% month-on-month gain. Last year at this time, silver was trading at $18.20. May silver futures were already trading above $40/oz.
Increasing a hefty 47% last year to 178 million oz, silver investment recorded its all-time high, according to the Silver Institute. Much of the increase was due to exchange traded funds (ETFs), the over-the-counter market, and investment in physical bars. Global ETF holdings reached 582.6 million oz, representing an increase of 114.9 million oz over the total in 2009. The iShares Silver Trust accounted for almost 40% of the increase.
Silver mine production rose by 2.5% to 735.9 million oz in 2010 aided by new projects in Mexico and Argentina. Gains came from primary silver mines and as a by-product of lead/zinc mining activity, whereas silver volumes produced as a by-product of gold fell 4% last year. Mexico eclipsed Peru as the world’s largest silver producing country in 2010, and Peru is followed by China, Australia and Chile. Global primary silver supply recorded a 5% increase to account for 30% of total mine production in 2010.
Non-ferrous base metal prices remain high and stable. Lead posted an impressive 11.9% month-on-month gain to $2,660/mt ($1.21/lb).
In 2010, global demand for lead grew by approximately 6%. Speaking at the World Lead Conference in Brussels, Jerry Pyatt, COO, The Doe Run Co., said he expects a similar pace in 2011. Much of this need is driven by consumption in China, where growth is fueled by urbanization and industrialization. Further growth is also expected in other areas of Asia, India, South America and parts of Eastern Europe.
“The lead mining industry’s challenges go beyond mining techniques and breaking rock,” said Pyatt. “We have to manage for external forces, like new environmental regulations, economic and political instability, and competition for work force. In managing these obstacles, we need to think innovatively as we roll out new technologies and processes.”
Citing the strong market currently seen for base metals, Pyatt sees competition for resources in capital, skilled workers, mining supplies and equipment, and energy as important issues mining and metals producers will have to address.