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Investors in silver are persuaded by many of the same arguments that have driven the gold price higher: the prospect of a global currency war in which central banks race to devalue their currencies to support domestic gr..
21 Oct 2010
LONDON (Commodity Online): Silver, the shining start among precious metals, has already set a 30-year record and the silver exchange traded funds (ETFs) also posted big gains in the recent past.

To add to that, silver prices could go even higher than what they are now. Primarily driving the price now is safe-haven buying, driven by beliefs that governments around the world will enact more stimulus and weaken their currencies. There also may be less of the metal to go around here, too.

Silver exports from China, the world’s largest, may drop about 40% this year as domestic demand from industry and investors climbs.

Although precious metals prices have a positive outlook, investors are cautioned that a short-term pullback may be in the offing.

Analysts say that the silver prices are being driven by surging speculative demand as investors sweep up supplies of the grey precious metal whose primary use is industrial.

Investors in silver are persuaded by many of the same arguments that have driven the gold price higher: the prospect of a global currency war in which central banks race to devalue their currencies to support domestic growth and the belief that a second round of emergency monetary easing by the Federal Reserve could eventually lead to a sharp jump in inflation.

Gold has captured the headlines, ticking off one new record high after another, but volatility in bullion is near a five-year low, which for some investors makes it a less exciting prospect. Returns on silver could be greater.

Indeed, there are symptoms of spreading silver fever. Sales of silver coins are set to hit a record high this year, while investors have snapped up more than 1,500 tonnes of silver through exchange-traded funds (ETFs) in the past two months alone. That is more than 5 per cent of total annual silver supplies.

The interest in ETFs, coins and futures has helped to drive prices higher. Silver is one of the best-performing commodities this year. In the past two months it has rallied 31 per cent – to $23.72 an ounce on Wednesday – more than three times gold’s 8.9 per cent rise.

The price rises, in turn have prompted a response from the main silver mints. The US Mint this month raised the premium above the value of the metal content that it charges dealers buying silver American Eagles. The Canadian mint has run out of 2010-dated silver Maple Leaf coins.

Analysts and investors, though, are divided on the outlook for the metal. Some see silver as having brighter prospects than bullion. The reason for this is that, unlike gold, for which investment is now the biggest single source of demand, silver consumption is still largely accounted for by its traditional end-uses in the production of jewellery and in the electronics industry and photography. In theory, this should mean that, as the world economy recovers, silver will benefit from an extra shot in the arm and outperform gold.
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COMMENTS (1)
Joe
23 Oct 2010
Paper is paper . Silver through out history has been currency , money . It took the fiat money system to dissuade people that silver was not currency .
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