Precious Metals

Alongside gold’s recent record highs, the demand for precious metals as an asset class has helped propel the price of silver to 30-year highs. Many analysts are concerned the price is trading off momentum and not off fundamentals. However, a major firm has raised their price target even higher.

By Michael Montgomery—Exclusive to Silver Investing News

Silver continued its rally yesterday as the price closed at $21.46 an ounce, up another $0.08 from Friday’s close. Prices rose as high as $24.645 during the trading session. The rise may show that investors are concerned with currency devaluation in the US and Europe. The euro fell against 15 other currencies mainly because of fears stemming from the bailout of Anglo Irish Bank Corp. and fears that other European banks may be lacking capital.

The greenback has faired no better than the euro. Investors are concerned with speculation that the Fed will continue employing quantitative easing measures to support the economy.

“The Dollar remains close to the bottom of an extended sell off as widespread expectations of upcoming US quantitative easing has pressured the market down to the lowest price levels for the past eight months,” stated Jamie Greenough, futures representative at Global Securities Corp, in a note to clients.

The silver price represents a 30-year high. Many analysts are questioning whether the rally is moment driven and based on fears of a struggling economy; a development that surpises some analysts given silver’s dual role as an industrial metal. As gold hit an all-time high of over $1300 anounce, the rally in silver may also be reflective of gold’s record highs.

“Some investors may prefer silver over gold because it is cheaper,” stated James Moore, an analyst at in London.

However, the price of silver is well below its nominal high of over $50 per ounce reached in 1980. The ‘poor man’s gold’ seems to be trading in line with, and benefiting from the gold price. Since the start of the year, silver has gained 35 percent, and gold has risen 21 percent.

“Wealth preservation are the key words… We expect silver to keep trading in parallel or stronger than gold, but with higher volatility as recovering industrial demand and even stronger investor demand gives the metal an extra boost,” stated Filip Petersson of SEB Commodity Research in an article in The Wall Street Journal.

There is a risk of a price correction if a sluggish world economy holds down the industrial demand for silver. Silver’s main sources of demand are industrial uses in semi-conductors and jewelry. Industrial demand fell off during the global downturn, but are gaining ground. Silver’s role in the production of solar panels holds promise for future growth. In relation to gold, silver’s demand in the jewelry market is taking off because of the prohibitive cost of gold.

In India, the world’s largest importer of gold, there is a growing sentiment that silver is replacing the yellow metal. “Several major jewelry chains across India are promoting silver as affordable and modern jewelry in place of gold,” stated a report on Commodity Online. For the first half of 2010, silver imports in India have risen 579 percent, for a total of $1.69 billion. Many analysts see the momentum in India rising through the festival/holiday buying season.

The forecast for silver is overwhelmingly positive. “The medium-term outlook for silver remains positive in our view and we therefore raise our medium-term price target to $25 an ounce,” said metals strategist Michael Widmer at Bank of America Merrill Lynch.

The gains of silver may be due in part to the price of gold becoming out of reach for the average individual investor. It may also be in part to the relative uncertainty with currency strength and poor economic data from advanced economies. However, until anything changes with the outlook for the world economy, or the price of gold, the gains of silver should remain strong in the near term.

Silver Company News

Vancouver-based silver miner Endeavor Silver Corp. (TSX:EDR) (AMEX:EXK) will offer to buy Cream Minerals (TSXV:CMA). The deal, worth C$10.6 million in cash, will see Endeavour offering C$0.12 a share for each share of  Cream Minerals, “which represents a 76% premium to the average closing price for the ten trading days ending September 24,” stated the report on Mining Weekly. Shares of Cream Minerals shot up over 66 percent on Monday on news of the sale.

Cream’s main asset is the Nuevo Milenio exploration property located in Nayarit State, Mexico, but the company also has properties in Sierra Leon and Canada.


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