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The restless metal is on the move again. Having held steady at around $7 an ounce for the past few months, silver has risen by about 7% to $7.50 over the past fortnight, and a further 11% advance is on the cards for this year. Chartists “are cheering”, as silver has finally broken through the resistance level of $7.20, says Ingo Narat in Handelsblatt, while analysts also point to the fact that for the past three weeks silver has moved independently of dollar; it usually slides as the greenback rises, but not this time. Sentiment is also being bolstered by the news that Barclays Global Investors is to launch an exchange traded silver fund to meet growing investor interest in metals prompted by low returns in stocks and bonds. That will make it much easier for institutional and private investors to play the tiny, illiquid silver market. There has also been encouraging news from the annual survey of the world silver market by GFMS.
The report highlighted silver’s “improving” supply and demand fundamentals. There was a structural deficit in the market for the sixteenth sucessive year in 2004, with industrial and jewellery demand again outstripping mined supply. Industrial and jewellery demand retreated by 2%, which according to GFMS chairman Philip Klapwijk was an “outstanding performance” given that prices were rising quickly. While demand remains solid, supplies of silver from above-ground stockpiles decreased rapidly as sales by the Chinese government almost halved. The large decrease despite high silver prices suggests that these key stockpiles are dwindling rapidly. Throw in a likely gold upturn later in the year and mounting investor interest, says Klapwijk, and “there’s a pretty good chance” that silver is heading back to last year’s high of $8.29.
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Andrew Van Sickle
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