• 2 days Shell Oil Trading Head Steps Down After 29 Years
  • 2 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 2 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 2 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 2 days Venezuela Officially In Default
  • 2 days Iran Prepares To Export LNG To Boost Trade Relations
  • 2 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 2 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 3 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 3 days Rosneft Announces Completion Of World’s Longest Well
  • 3 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 3 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 3 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 3 days Santos Admits It Rejected $7.2B Takeover Bid
  • 3 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 4 days Africa’s Richest Woman Fired From Sonangol
  • 4 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 4 days Russian Hackers Target British Energy Industry
  • 4 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 4 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 4 days Lower Oil Prices Benefit European Refiners
  • 4 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 5 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 5 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 5 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 5 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 5 days OPEC To Recruit New Members To Fight Market Imbalance
  • 5 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 5 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 6 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 6 days GE Considers Selling Baker Hughes Assets
  • 6 days Eni To Address Barents Sea Regulatory Breaches By Dec 11
  • 6 days Saudi Aramco To Invest $300 Billion In Upstream Projects
  • 6 days Aramco To List Shares In Hong Kong ‘For Sure’
  • 6 days BP CEO Sees Venezuela As Oil’s Wildcard
  • 6 days Iran Denies Involvement In Bahrain Oil Pipeline Blast
  • 9 days The Oil Rig Drilling 10 Miles Under The Sea
  • 9 days Baghdad Agrees To Ship Kirkuk Oil To Iran
  • 9 days Another Group Joins Niger Delta Avengers’ Ceasefire Boycott
  • 9 days Italy Looks To Phase Out Coal-Fired Electricity By 2025
Stuart Burns

Stuart Burns

Stuart is a writer for MetalMiner who operate the largest metals-related media site in the US according to third party ranking sites. With a preemptive…

More Info

Where Will Silver Prices go from Here?

Where Will Silver Prices go from Here?

The rise and fall of the silver price this year had much more to do with speculative exuberance than any fundamental change in supply or demand. With a foot in both the industrial and investment markets, silver has always lived a dual life. Either pulled up or depressed by a rising or falling gold price and likewise supported by improving global macro economic trends suggesting industrial demand improvement. Sometimes this pushes silver counter cyclically to gold. Occasionally both factors coincide to encourage a high level of speculative interest in the metal.

Silver demand change by type
Source: ETF Securities

This scenario occurred in the run up to silver’s $50 peak in late April. In 2009, investment demand soared but industrial demand plummeted. Last year both industrial and investment demand coincided. Speculators thought a bonanza at hand what with silver supply from mines and scrap sales growing only slowly, on average 2% and 4% respectively. And that bonanza existed for a while, but reality kicked in as the gold-silver ratio pushed 31.  Would a correction ensue?

Gold/Silver price ratio
Source: ETF Securities

The current ratio around 40-45 seems reasonable with industrial demand gradually recovering and with elevated gold prices making silver a more attractive metal for the small investor to hold. Bloomberg reports Australian Mint sales hit a record with the rising silver price. The FT reports the UK’s Royal Mint has seen the same surge in sales, as have other mints around the world. And India’s state trading company, MMTC announced in Reuters it will almost double its silver purchases this fiscal year to 1,500 tons. On average, India buys some 4,000 tons of silver per year. If MMTC double their purchases the more ‘fleet of foot’ private importers will do so likewise. A portion of this will go into jewelry which along with photographic use has trending lower over the last ten years. But in India demand remains strong particularly as the price increased. Silver became a more desirable store of value.
In addition, Exchange Traded Funds have sucked up considerable quantities of physical silver this year. Following the Comex silver restriction based sell off in May, many sold their ETF position but since that time, have made a comeback in late June-July.

Going forward much will depend on some key issues. First, perceptions of industrial growth both in China and the West. China, currently undergoing progressively tighter credit conditions in an effort to stifle inflation but has just posted some impressive export numbers suggesting the economy remains far from constrained by steps taken so far. In the west, recent PMI numbers suggest European manufacturing demand may slow. Naturally enough the Silver Institute appears very optimistic. They predict industrial demand for silver will increase to 666 million ounces by 2015, a 36% increase from 487 million ounces in 2010.

In addition, much will depend on Asia and global growth generally. Second, the strength of the US dollar, which as the European debt crisis has worsened over recent days has strengthened considerably. Gold has reached record highs in Euros and Pounds but remains off peaks in dollars because of the currency’s relative strength. We see that unlikely to continue unless the European situation deteriorates further. Finally inflation which has remained benign in most mature markets has become a problem in many developing ones. If inflation fears surface in developed markets, expect gold and silver to move higher again.

We have never considered ourselves bullish on precious metals, as we tend to prefer markets that move based on more solid supply – demand fundamentals and less on speculative pressures such as inflation or currency hedges. But short term volatility aside, we would leave readers with the view that for silver to reach the heady heights it scaled in April it swung to an unprecedented gold-silver ratio of 31. At a more comfortable ratio around 40 gold would have to hit over $2000/oz for silver to see $50 again.

By. Stuart Burns

(www.agmetalminer.com) MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends, strategies, and trade policies that will impact how you source and/or trade metals and related metals services, MetalMiner provides unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.




Back to homepage


Leave a comment
  • Anonymous on July 20 2011 said:
    Can we really trust those ETF's to actually hold physical? Just look at GLD, they move 1 and 2 tons a gold in and out on a daily basis. SLV sees inflows of 1 or 2 million of ounces in a wink of the eye, how credible is that?

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News