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Sunday, January 27, 2013

HSBC Buys $876 Million Worth of Silver



Silver has now rallied for 7 days due to the flood of inflows into silver backed ETF’s and investment demand for coins and bars internationally. Analysts polled by Reuters expect silver to rise in 2013.

Holdings of iShares Silver Trust, the world's largest silver ETF, stood at 10,689 tonnes on Jan. 22, up 604.9 tonnes, or nearly 6 percent, from the end of 2012.

By comparison, SPDR Gold Trust, the world's top gold ETF, saw an outflow of nearly 15 tonnes so far this year.

This has helped silver prices rally over 6% so far this year and 4.5% last week alone. The close above $32/oz yesterday was bullish technically and could lead to silver testing the next level of resistance which is at $34/oz.

The U.S. Mint has sold out of 2013 American Eagle silver coins and will resume sales the week of January 28 when the US Mint said inventory would be replenished.

Chinese silver turnover surged to 2,200 tonnes on Friday and analysts say Chinese investor’s interest in silver is continuing to rise as many are looking at silver as a cheaper alternative to gold.

Hence, trading volumes for the precious metal on the SGE soared in 2012.

Silver bullion imports by China remain robust too. Silver imports were 228 metric tons in December, according to data released by the customs agency.

There are also rumours that Apple is experiencing delays in producing the new iMac due to difficulty in sourcing industrial silver in volume in China. More silver than is typically used is utilised in the new 21.5" Apple iMacs.

HSBC has quietly moved into acquiring large amounts of silver bullion.

The bank has secured another deal to buy silver bars from KGHM which brings their total purchases of silver from KGHM alone in the last 12 months to $876 million or PLN 3.65 billion.

KGHM is one of the largest producers of silver in the world and is the second-largest producer of refined silver in the world.

They produce silver bars registered under the brand KGHM HG that are attested to by “Good Delivery” certificates issued by the London Bullion Market Association and the Dubai Multi Commodities Centre.

 Listed metals producer KGHM signed an estimated PLN 1.67 billion deal on 2013 sales of silver to HSBC, KGHM said in a market filing yesterday.

The deal puts the total value of deals between KGHM and HSBC in the last 12 months to PLN 3.65 billion or $876 million, the filing read.

The Management Board of KGHM announced that on 21 January 2013 a contract was entered into between KGHM and HSBC Bank USA N.A., London Branch for silver sales in 2013.

The estimated value of the contract is PLN 1,672,260,469.66. As a result of entering into this contract, the total estimated value of contracts entered into between KGHM and HSBC Bank USA N.A., London Branch over the last 12 months exceeded 10% of the equity of the Company and amounts to PLN 3,654,120,061.59.

The highest-value contract signed during this period is the above-mentioned contract. The criteria used for describing the contract as significant is that the total estimated value of the contracts exceeds 10% of the equity of KGHM.

KGHM is one of the largest companies in Poland and one of the largest mining & metallurgy companies in the world.

The main customers of Polish silver in recent years have been the United Kingdom, Germany and Belgium.  HSBC appears to be one of their main customers now.

Respected and erudite, James Steel, the chief commodity analyst at HSBC Securities (USA) Inc. continues to be bullish on silver and recently said how “silver tends to track gold, except it over performs in a bull market”  and how he was “moderately bullish on silver” in 2013.

HSBC did not comment on the deal and it only came to light as KGHM is a listed company and had to report the deal which was then picked up in Polish media.

The massive deal could simply be HSBC securing supply for the NYSE listed ETFS Physical Silver as they are the custodian.

Or it could be that senior people in HSBC are concerned about securing supply as they expect robust investment demand to continue and possibly increase resulting in higher prices.

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