[miningmx.com] -- With gold at last piercing a new high, investors may next turn their attention to silver, which now looks overdue for a rally even as it and other metals remain constrained by a halting global industrial recovery.
Often dubbed bullion's bridesmaid, silver is now trading at near its lowest ratio to gold in a year, slipping to around the equivalent of 59 units per ounce of gold, just above September's low and down more than a quarter from the peak in late 2008.
Signs are emerging of investors seeking an alternative to gold -- which hit a lifetime high of $1,048.20 an ounce on Wednesday, surpassing the previous record in March 2008 -- as a hedge against inflation and a falling dollar.
India's HDFC Bank, a large seller of gold in the world's top consumer of the metal, is looking at offering silver bars for sale in some cities because of interest from investors, a bank executive said on Wednesday.
"If it does move higher, you'd expect silver to outperform. The last time gold hit its high, silver was trading at $20. It's got a lot of catching up to do," said Mark Hewlett, a commodity analyst at Cornhill Capital in London.
Silver was little changed at $17.44 on Wednesday, moving closer to a 13-month peak of $17.63 in the middle of September but nearly 19 percent below its its record high of $21.24 from March 17, 2008, the same time gold last peaked.
Unlike gold, investment into the world's largest silver-backed exchange-traded fund, the iShares Silver Trust, has flatlined for the past three months, while gold inflows have boosted ETF holdings to near record highs. Silver holdings were unchanged at 8,594.22 tonnes.
But like gold, silver has also witnessed a surge in speculative long investment on the Comex futures exchange.
Physical trading was muted in Hong Kong, with silver bars offered at a discount of 10 to 20 U.S. cents to the spot London prices, barely changed from last week.
"Physical demand for gold will definitely slow down because of the high prices. Platinum is still expensive, so probably people would like to buy silver because it's cheaper," said a physical dealer in Hong Kong.
"But I still have doubts because most investors see silver as an industrial metal," he added.
MUMBAI (Reuters) -
India's HDFC Bank (HDBK.BO: Quote), a large gold seller, is looking at offering silver bars for sale in some cities because of interest from investors, a bank executive said on Wednesday. A sharper rise in silver prices than gold over the past one year has sparked demand for the metal and could make it an additional item on investment portfolios.
"Silver bars in select cities is an option we are considering," Seshan Ramakrishnan, head of the bank's retail liabilities product group, said in an emailed reply to questions.
"As an investment option, silver was never accorded enough importance. However, off late it has started catching investors' attention too," he said.
Silver XAG= has jumped more than half over the past 12 months to $17.3 an ounce, while gold XAU= has climbed 17.5% in the period to $1,041.8 an ounce.
"The possibility of playing on the volatility of silver is much higher. The rise in prices is also sometimes higher," said Nayan Pansare, an analyst who works for gold jewellery exporting companies.
Ramakrishnan said new products were on the anvil and the market should see some of this in the coming months.
HDFC Bank is one of India's top sellers of gold coins and bars for investment, a segment which accounts for about 30 percent of sales in the world's biggest gold market.
In 2008, India imported 501.6 tonnes of gold for making jewellery and 211 tonnes for investment, data from World Gold Council showed. (Reporting by Ruchira Singh; Editing by Ranjit Gangadharan)
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2 comments:
I´m currently long gold and silver because of technical reasons and wouldn´t sell my physical holdings for anything less than a hectare of arable land, but I have to be contrarian here, stories like this are an indicator that the metals are going to top out short-term, and silver´s relative weakness compare to gold combined with the robust and growing contango suggest that the PMs are just the headiest part of a reflation trade that is about to run out of gas.
>wouldn´t sell my physical holdings
>for anything less than a hectare >of arable land,
Agreed, exchanging real assets for fiat is a mug's game at best when all indicators are that one will not be able to predict the purchasing power of fiat past the short to medium term.
>but I have to be contrarian
>here, stories like this are an >indicator that the metals are >going to top out short-term,
Not necessarily. Some metal speculators need these regular 'cheerleader' articles in order to keep their resolve toward holding real assets until the current monetary situation is resolved one way or the other.
OTOH, fluctuations in real assets can be an opportunity to increase one's position if so inclined.
>and silver´s relative weakness >compare to gold combined with
>the robust and growing contango
>suggest that the PMs are just the >headiest part of a reflation >trade that is about to run out
>of gas.
Until the silver stockpile is exhausted, there is no indication of the true value of silver. Gold unfortunately will never really change due to the above ground supply of gold increasing each year.
When silver goes into JIT delivery mode due to there being no large stocks to distort the price, then I think silver will show it is the better value.
I have to be prepared to hold silver 17 years in order to see this situation pass but I can't see any other outcome for silver.
Reflation trade, weakness, contango - all for the day to day
traders. The accumulators see it differently and as such are not likely as concerned about these factors as you are.
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