Over the past three years, the price of silver has more than tripled in value and, in 2005, silver reached a high of $9.23 per ounce and averaged $7.31 per ounce for the year.

Going into 2006, the price of silver continued to rise at a fervent pace and, despite erratic fluctuations in price throughout the second quarter, market analysts predict we will see higher than $10 per ounce silver for quite a while. This strong trend is buoyed by excellent demand and supply fundamentals and by favourable macroeconomic conditions prevailing in the world.

The most significant factors influencing silver on the positive side in 2005 were: higher industrial demand, particularly in the electrical and electronics industries; the reappearance of investment on the demand side of the equation; the virtual disappearance of above-ground stocks of silver; the all-time low silver holdings of the LME and Comex; increased Chinese industrial demand; and lower silver scrap supply due mainly to less silver being used in photography.

For the fifteenth year in a row, fabrication demand outstripped silver supply from mines and scrap sources (by about 35.5 million ounces). The accumulated silver supply deficit since 1992 is now more than 1.4 billion ounces, which has been satisfied through the disposal of above-ground inventories. In recent years the major source of such inventories has been government stockpiles. In 2005, official sales from the Indian government reached almost 26 million ounces (about one-third of India's entire silver inventory) and is expected to sell off the remaining two-thirds over the next two years. In 2004 the US government sold the last of its silver stockpile that had been as large as 2 billion ounces in the 1950s, and the Chinese government sold about 40 million ounces from its stockpile, a sharp reduction from earlier years.

The outlook for 2006 and beyond remains lofty for silver prices. Strong prices for all metal commodities are being driven by strong economic conditions globally, particularly in China and southeast Asia. Silver and gold prices are likely to move higher with any continuing weakness in the US dollar. The depletion of above-ground stockpiles continues and at some point will be insufficient to feed the silver deficit, requiring higher prices to establish an equilibrium in supply and demand.

On the mining side, although Pan American and a few other companies are increasing their production of silver, mining is inherently a depleting business and many existing silver mines are slated for closure in the next five years, to offset the production growth.  New industrial applications for silver continue to make their way to market, particularly in the biocide and electronic industries, thus bolstering industrial demand. Finally, silver-based ETF will likely increase investment demand for silver even further

In addition, in April of 2006, Barclay's silver-based exchange trade fund ("ETF"), iShares Silver Trust, was launched on the American Stock Exchabge (SLV), each iShare being backed by 10 ounces of physical silver. By mid-2006 close to 100 million ounces of silver have been removed from the market and held in allocated accounts, putting additional upward pressure on the price of silver.