Silver prices have outperformed gold this year as the metal has responded to the prospect of a surge in industrial demand in the coming year. Silver prices are mainly driven by the fact that traditional industrial end users of silver, such as the global electronics industry have in recent begun to replenish severely depleted inventories. During the financial crisis, silver inventories had run down sharply and it may take approximately six months to fully rebuild the inventories to normal levels.
An important factor to understand in the case of silver is that demand from the industrial sector tends to be quite inelastic. This means that buyers have few options and have to pay at prevailing prices.
Outlook for 2010: In the coming year, we expect silver to witness a bullish phase as new avenues of demand open up amid the existing traditional applications of the metal. We also expect investment demand along with industrial demand to drive silver prices higher in the coming year. In the coming year, we expect Spot Silver prices to trade in the range of $14.00 - $24.35/oz. Silver prices on the MCX are expected to trade in the range of Rs21,000 – Rs31,350.
Courtesy: Angel Commodities
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