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Silver surged 17% in January, to outperform gold, making it the strongest performer of all precious metals in the first month of the year.
However the volatile market could mean that silver, also called ‘poor man’s gold’, struggles to keep up the pace.
Edel Tully, head of precious metals strategy at UBS, said: ‘Quite often the case with silver is that it can rise quite violently, in a very fast fashion and also repeat that on the downside. Silver has been on the rise so far this year making it by far the best performing precious metal. We have never ruled out silver getting back above towards $50, and even $60, given what the silver market is like that isn’t entirely impossible.’
Silver bullion ended January at $33.80 an ounce, up from $29 at the start of the year, compared to gold which rose 9% from $1,601 an ounce to $1,748.
However the gulf between gold and silver prices isn’t expected to hold out. If there is another sharp downturn in the global economy or further upset in the eurozone, gold prices could power ahead, leaving silver behind.
Tully, speaking at a conference in London, added: ‘Silver is nowhere near the safe haven element that gold is. Silver and gold are an entirely different market, silver very rarely is a spec driven, herd mentality metal. It’s not very grounded in physical markets, although clearly it does have a physical market like gold, it’s never the physical markets that send the bigger signals like with gold.’
Silver needs new investors
Silver’s reputation for investors has been tarnished by its big price swings, according to Tully. The metal peaked at over $48 an ounce in April last year but fell back to $26 at the end of the December.
She continues: ‘Also silver has done a lot of damaged to its followers people got several burnt in silver if they didn’t get out on time. So in a sense it needs to gather a new group of investors.
‘If silver wants to get back to those elevated levels, it needs the return of Chinese participation in the market. If you look back at silver’s previous attempts in 2011 and those big strong rallies, you can see the Chinese footprint in the silver market is exceptionally high.
‘You need to see the investor side of the market get back in and it’s not going to be the physical side of the market that pushes silver higher.’
Comments (4)
The silver futures market is the tail wagging the dog here. For every ounce of physical traded there are 100 + futures contracts being traded. If the price manipulators working through the COMEX were to be forced to stop their antics we might just find that the true value of silver is quite a lot higher than where it is today. Silver was a monetary metal, just like gold. A £Sterling used to be equal to a pound of silver.
Since the advent of the fraudulent fractional reserve banking system government fiat currency has become the coinage that we have been forced to use by government dictat. It is no coincidence that since governments were able to print money at will there has been a 98% fall in the value of paper money ie it has reached it's intrinsic value of zero, almost.
With the money and debt merchants now putting their feet to the floor the depreciation of the currency will ensure that gold and silver prices both move higher. Silver is a smaller but more volatile market but the gold to silver ratio will show which is lagging and which is leading.
Finally, silver is a critical metal for applications ranging from biocides to electronics and these markets are growing very fast. Physical demand will most likely more than underpin the value, indeed there will come a point when physical demand will push prices much higher.
17:44 on 03 February 2012
The UBS report was mostly old news.
Truffle Hunter ---a far better letter with the facts as they are. A nice break above $36 should be excellent news for silver.
18:24 on 03 February 2012
I laughed at this article. You want new investors??? How about India, China & Russia for starters. The silver market manipulation is an on going joke. There is more paper chasing less silver thank ever before. The SMART investor isn't worried about "more investors in silver." His concern is just buying more physical of the metal. WAKE UP PEOPLE.
01:20 on 05 February 2012
I laughed at this article. You want new investors??? How about India, China & Russia for starters. The silver market manipulation is an on going joke. There is more paper chasing less silver thank ever before. The SMART investor isn't worried about "more investors in silver." His concern is just buying more physical of the metal. WAKE UP PEOPLE.
01:20 on 05 February 2012
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