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    Page 1 of 31

    Riding the Silver Bull

    Silver is targeting $20 per ounce or Rs.30000 per KgBy the end of accounting year 2006-07

    MineSupply

    Govt.Sales

    ScrapSupply

    ExchangeInventories

    TotalSupply

    IndustrialDemand

    JewelryDemand

    PhotographyDemand

    InvestmentDemand

    TotalDemand

    Silver has begun its upsw ing and may be expected to reach a high

    of $20 during next year. Currently it is trading in the range of $12 -

    $14. Fresh buying is expected to emerge at current levels which to

    stop falls in the next year.

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    Page 2 of 31

    Riding the Silver Bull

    Silver P rologue

    Too m any peop le m iss the Si l ve r l i n i ng ,

    Because they a re exp ec t i ng Go ld - Maurice Setter

    ilver is time and again called poor man s go ld . It has always

    been considered to be less attractive than gold and other precious

    metals like Platinium and Palladium and obviously the price of silver

    has always been much lesser than the price of these precious metals, which

    creates an illusion that that silver, is somehow worth less. Silver is the

    poorest metal among the precious metals pack. This is also evident from

    the comparison of silver prices with other precious metals, where silver is

    quoted at $12-$14 per troy ounce where as gold is quoted at $550 -

    $600. There are many ironies about silver and the most recent one is that

    this poor cousin of Gold has made its devotees or investors richer than

    any other precious metal and also it has given returns far more than any

    other investment option at-least in the first quarter of 2006.

    Recently a rally in silver followed by sideways movements for sometime

    raises a question that is the silver rally over or there is still a lot to expect

    from this highly undervalued asset. Obviously the investors and analyst

    world around are optimistic about silver. This is only due to understated

    silver fundamentals for a long time which are slowly playing their role and

    helping silver to express its fundamentals and prohibiting silver from

    following Gold blindly.

    Looking back in the history it can be seen that silver was able to hit highest

    spot price ofUS$50.36 on January 17, 1980. On contrary Gold climbed

    to an historical high ofUS$875.00 in the same month. Depending on these

    numbers, silver investment does appear to be second to gold. But closer

    analysis shows and proves that silver has been a better investment at

    times, and has given investors a higher return than gold ever has.

    S

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    Riding the Silver Bull

    If we focus on the bull run of silver and gold in decade 1971-80 we can

    find that silver started its gigantic price run-up in 1971 from a base price of

    US$1.39 per ounce. Over the time silver reached its peak ofUS$50.36 in

    1980 silver investors had realized a shocking cumulative return of

    approximately 3,600 % . During the same period Gold also did well but

    not as well as silver. One troy ounce of gold was priced at US$40.80 in

    1971. It reached its price peak of US$875.00 per ounce in 1980 which

    resulted in a return on investment of approximately 2,100% . Thus there is

    a profit difference of 1,500 % which can be a good reason for any

    investors to buy silver over gold. Past is past and also people would

    attribute the silver rally to the market cornering strategy of Hunt Brothers.

    If we look at the recent past in the first quarter of 2006 among the

    commodity pack highest returns were given by silver, this hints that

    whether a brisk bull run foreseeable in near future. In the current scenario

    when so many investment options are open, the question is whether an

    investment in silver bullion, today, is a wise decision to make and is this the

    time to enter the precious metals game. This report analyses the long-term

    and short-term fundamental factors expected to move silver prices. It is

    believed that the short-term weakness and sideways movement going on in

    silver is a great opportunity for the late-comers to join the great silver rally.

    This report would be of use for serious investors to understand thefundamental front of silver and understanding the intrinsic value of silver.

    This would also help them a bit to make an informed decision while

    investing in silver and creating wealth.

    But the fact always remains is that no investment return can be

    guaranteed. Never has, never will be. The idea is of investing in the

    markets, is to capitalize on the growing fortunes of various asset classes.

    With the availability of innovative financial instruments like derivatives itpossible for an informed investor to capitalise not only on the growing

    fortunes of assets by going in for Long positions but also on the dooming

    destiny of assets by short positions on the reversal of the bull run trend.

    In the particular case of precious metals and silver bullion, signals are such

    that there is a huge prospect of silver Bull Run in near future and beyond.

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    Page 4 of 31

    Riding the Silver Bull

    Price history

    Silver P rices 1975 - 2006 (Weekly Average)

    Source: Bloomberg Service

    Significant Events Affecting Silver Prices Since 1950(Source: USGS)

    2006 Launch ofSilver ETF by Barclays at American Stock Exchange.

    1985 U.S. Mint authorized to begin minting a silver bullion coin

    1979-80

    Attempt to corner the silver market by Hunt Brothers

    1968 Redemption of silver certificates for silver could only be made until June24; thereafter, silver certificates would be exchanged for FederalReserve Notes

    1967 Announcement by U.S. Government that all silver coins would be

    withdrawn from circulation

    1965 Silver eliminated from all U.S. coins except the half dollar, which has itssilver content reduced from 90% to 40%

    1963 Silver Purchase Act and various other legislation repealed; U.S.

    Treasury authorized to print Federal Reserve Notes, which were notredeemable for silver, for circulating currency

    1950-68

    Huge U.S. Government silver holdings largely depleted

    US$50.36 on January 17, 1980

    US$14.27 on April 19, 2006

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    Riding the Silver Bull

    Silver Prices J an 2006 - April 2006

    Source: Bloomberg Service

    Silver prices in 1st four months of2006 have averaged $10.42, with a rise

    of 42.53% rise year-on-year in spot markets and 19 year high. Annual

    average price of silver in 2005 was $7.31 as per London Silver price

    fixings.

    A rush in investment activities in silver drove much of the rally though a fall

    in net government sales and higher industrial demand were also important.

    Silver prices staged a rally in the first 4 months of 2006 with a whooping

    rise of57% compared to the opening price on 2nd Jan 2006.

    Gold, Silver Pr ices Jan 2006 - Apr 2006

    Here it can observed that both gold and silver prices are moving upwards

    but till 2nd week of March Gold leads the rally where as in the later part

    silver lead the rally in the precious metals pack.

    +57.1%

    Silver Price

    Gold Price

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    Riding the Silver Bull

    Real P rice of Silver for past 600 years

    600 year real prices if considered to evaluate present silver prices, silver

    seems to be highly undervalued. The current fundamentals do not agree

    with the present day prices of silver. Therefore understanding the

    fundamentals of silver and finding potential signals that may spark of an

    unstoppable silver rally becomes very important.

    As silver has given highest returns among the commodity pack in the 1st

    four months of 2006, it has attracted the attention of most of the investors

    and the question to whether there still there exist the potential for silver to

    grow or has its bull run is to subside in near future. Thus the timing of this

    report becomes very important to understand this unusual commodity

    and so that this understanding can aid little bit in taking informed decisions

    about investments in silver.

    Source: www.goldinfo.net\silver600.html

    All time high $806

    All time low $4.73

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    Riding the Silver Bull

    Silver Supply Dynamics

    Like all metals or precisely precious metals, silver cannot be created. It

    occurs naturally. The source of silver are mine production, government-

    central bank reserves (which is also termed as above ground supply of

    silver) and recycled scrap. Delay, interrupt or reduction in any one of these

    supply sources result into big market price hikes, as daily demand for silver

    bullion begins to surpass supply.

    Classification of Silver Supply Sources

    Mine production of silver is the largest component of silver supply. It

    can be seen that mine production accounts for nearly 72 % of silver supply.

    Other sources of silver being scrap and sales by government bodies also

    play their role in meeting the ever increasing demand of silver. Government

    sales are most done to stabilise the price of silver or in crisis situations like

    war or natural disasters. The detailed trend analysis of the

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