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Silver breaks through $20 - up around 35 percent this year

The silver price has been quietly rising far more rapidly than that of gold so far this year and has already recorded a 35 percent increase in 2008 in only two months trading.

TORONTO, 03 Mar 2008 (mineweb.com) By Lawrence Williams

While gold and platinum have been generating the headlines as they attain new record levels, it will be the silver investors who will be feeling smug about the markets and their holdings. Silver is now up around 35 percent this year as it moved through the $20.00 mark today as investor interest continues to grow in this, the lowest cost entry into the precious metals market.

To a large extent, silver is being dragged up by gold as the yellow metal achieves new records, but gold this year has risen by only 17 percent - admittedly a pretty spectacular performance in only a couple of months in its own right. With the US dollar striking new lows, gold is likely to remain strong as it powers towards the anticipated $1000 an ounce, but again it is silver which may well continue to benefit more in percentage increase terms.

But why has silver done so well in comparison with its senior precious metals partner? We did point out last year that when gold started its pretty meteoric rise in late August that silver seemed to be being left behind and could well provide the better investment when the markets adjusted to this. As it happened this took a fair amount of time to strike home. All the publicity was directed at the gold price and silver literally was being left behind. It was following gold but at a more muted level, and it has only really been this year that the realisation seemed to have hit the markets that silver was now perhaps underpriced in relation to its higher priced cousin.

In part the most recent moves seem to have materialised as gold is, perhaps, for the moment, becoming too pricey for some of its markets - notably Eastern jewellery where there are signs of fairly strong resistance to the higher prices. But the East is very much precious-metals oriented in terms of what could be described as ‘investment jewellery' and there is almost certainly a move towards people switching to the much less costly silver as an entree into the precious metals sector.

Silver though could be prone to higher volatility than gold. Market fundamentals are perhaps not as strong as for gold as industrial demand plays a much greater role in usage and the biggest industrial use, in photography, continues to decline. But other industrial uses are beginning to come to the fore as we noted in our comments a couple of weeks ago on a presentation by analyst Jessica Cross at a Global Metals Forum on gold and silver in London: Positive on silver - despite chronic oversupply and Cross's prediction was that silver would be a good investment in the weeks and months ahead - a prediction which has already come to pass.

So where from here? As long as the dollar remains weak, gold will remain strong and silver will continue to rise on gold's coat tails. There is a danger of profit taking and increased scrap sales to take advantage of the higher prices denting the pace of the price increase, but as long as demand is investor, rather than industrial, driven then the upwards move will no doubt continue, although perhaps not quite as fast as it has been travelling over the past couple of months.

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