Silver Dealers Gear Up for Increased Demand

Summer lulls are a normal occurrence in commodities markets, and this is holding partially true for silver, which until recently has been steady in the $35 an ounce range for the past three months since the price took a dip from a high of around $50 at the end of April. Fall is traditionally a time for much more active trading, and this, combined with insecurities over global currencies, is preparing metals traders for a renewed rush to silver buying.

“I think we are gearing up for an increase in silver sales. I think in two weeks or so we’ll see a huge increase in demand again because people are starting to wake up, as economic worries go all around the world,” said Usman Khalid, a supervisor at Gold Stock, a Toronto-based precious metals dealer. “If I had my bet, I would definitely go with silver long-term. I think silver is under-valued, there’s a big demand for it and it should go up.”

Gold Stock deals in physical silver – mostly coins and bullion bars, which Khalid says provides a different appeal for investors than Exchange Traded Funds (ETFs).

“Most of the clients we deal with hold it for long-term investments, because with the physical, it’s not something you can sell right away,” said Khalid. “With physical silver you have the option of doing a lot of stuff, but with ETFs you just have it as an account. Physical silver you can use it as an investment, jewelry, or anything you like in any form.”

According to the Silver Institute, demand for silver coins and medals rose 28 percent in 2010 over 2009. In the same period, jewelry also made gains of 5.1 percent – the first substantial rise since 2003 – primarily due to strong GDP gains in emerging markets.

Khalid says that when silver prices climbed in the first quarter of 2011, sales picked up so fast that he began to have difficulty keeping up with demand.

“We were running short at the $35 range,” he said. “As soon as it went up to $50, again we we’re running short because people were running in thinking it might be the next big thing – that it might be hitting $100.”

Though silver has yet to hit the $100 an ounce mark, Khalid says that even after the downturn in price, it is still outpacing gold as the long-term investment of choice.

“As the downturn came, not a lot of people sold, and lot of people actually bought as well,” said Khalid. “Most of the clients that do purchase silver with us know that if you buy silver you have a bigger return than with gold. With gold you could only buy one ounce but with silver you could buy more than 35 ounces in the same price range. And if it goes up a few dollars, you’re already making a five percent return there.”