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Price of silver is given a further shine
Silver hit a 10-week high, reflecting an improvement in market sentiment and extending gains it saw last week after expectations of monetary easing in the US.
The metal rallied to $33.95 a troy ounce, the highest level since November 17 last year, although it was later trading at $33.58, down 0.8 per cent from last Friday.
Silver tends to be more volatile than its fellow precious metal, gold, attracting more short-term investments. Many investors have been discouraged from buying silver after it hit a 30-year high of $49.51 last April before falling 35 per cent in a matter of weeks. However, since the start of this year, silver has risen more than 22 per cent.
“Silver is a very good indicator of risk appetite,” said Anne-Laure Tremblay, precious metals analyst at BNP Paribas in London.
Analysts noted silver’s tendency to do well amid an increase in liquidity. It rallied when the US announced its first quantitative easing in March 2009.
Investors also piled into silver after Ben Bernanke, the Federal Reserve chairman, signalled a second round of quantitative easing in August 2010.
With bullion up just less than 11 per cent since the start of the year, the ratio of the price of gold to silver has fallen from 55 at the end of last year to 51.5, indicating that the grey metal has started to outperform bullion again, in a repeat performance of last year when the ratio fell to 32 in April.
Physical demand for silver has also been strong. Sales of US American Eagle silver coins in January so far total 5.7m ounces, the highest since January 2011, when sales were at 6.4m ounces.
“The high volumes are likely related to beginning-of-year stock building,” said Edel Tully precious metals strategist at UBS. Coin dealers had a bit more incentive to buy in January given that 2011 silver coins stocks were sold out by the end of last year, she noted.
The latest weekly data from the Commodity Futures Trading Commission showed the increased bullishness among silver investors. Net bullish positions in the metal rose by 17 per cent, or 20.6m ounces, in the week to January 24 – the biggest weekly increase since late October, as bearish positions fell by 12 per cent.
The figures preceded the US Federal Reserve Bank’s announcement that it would maintain low interest rates until 2014, which triggered a rally in the silver price.
Copyright The Financial Times Limited 2012.
Tags: price of silver, Silver, silver analysis, silver futures, silver futures prices, silver news, silver price, silver price 2012, silver price forecast, silver prices, silver spot, spot silver
Posted by Silver Guru
on Jan 31 2012. Filed under Silver Analysis.
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