LONDON (Commodity Online): It might seem a bit odd to say silver is under-performing, when during October it rose 7.9% (to 20th October), compared with gold, which managed 6.6% during the same first three weeks of the month. Moreover, silver has popped over $18/oz in intra-day trading. But if looking at the period since both metal's previous peak back on September 17th, gold to its latest peak on the 20th October gained 4.2%, whereas silver in that same period gained just 3.2%. This is not the normal pattern when both metals are charging higher.
One possible explanation for silver being less strong than gold is that base metal prices over that period fell by 2.7% (judged by the LME's LMEX index of key base metals) - and of course silver is to an extent a key industrial metal. Some support for this explanation also derives from platinum, another industrial precious metal, which managed only a 1.2% gain in that period. But this theory is undermined somewhat by palladium, which rose 8% during that period. And silver has done worse since than base metals or the PGMs. However, the strongest explanation for gold relatively outpacing silver is that when the US currency comes under hostile attack, gold really comes into its own - and others tend to lag behind.
ETF investment in silver has been relatively quiet. Total (two US, one Swiss and one UK) holdings by 13th October were 11,191t, lower than they were at the start of August and 124.3t off their mid-August peak. This was primarily because of a 128t sell-off in the market-leading BGI ETF in late September. Comex has seen more spectacular gains, up to 7,356t (of non-commercial net long) by 13th October, more than 3,000t higher than the position in mid-August. However even there the position was only 200t higher than on 22nd September.
Silver Outlook Silver is clearly enjoying the precious metal rally but ETF and futures data suggests it hasn't seen as much investor interest as might have been expected. This might mean it is poised for another leap higher, or that the market is getting wary at these high prices. We don't think a correction in the industrial metals will knock it much lower, so long as gold holds up. Short-term LBMA fix: $16.75/oz-$19/oz.
Some Silver News Oct 14th: Pan American Silver, the Canadian miner, bid $626m for Canadian exploration company Aquiline Resources - whose directors have supported the approach. Aquiline’s major deposit is a silver one in Navidad, Argentina, together with a gold/silver deposit (Calcatreu) in the same country and a gold deposit in Peru.
Oct 14th: The world's largest silver miner, Fresnillo, saw production (attributable) rise to 9.75 Moz in Q3 2009, up 9.3% from Q2 2009. The company said it was on target for full year production of 40.1 Moz.
Courtesy: Fortis Metals Monthly
