Filed Under:  U.S. & World

Investors Rush To Silver

Contributed by on May 1, 2011 at 12:29 pm

Silver Gold (Image Courtesy Reuters)

For the past several weeks the price of Silver has shown no signs of stopping. The price of the precious metal has reached over 49 dollars per troy ounce (31 grams), a new all-time high.

The last time we had seen prices anywhere near these level was 31 years ago, in early 1980 as a result of much speculation, and then fell back  to $15/ounce.

Currently, investors are buying the shiny metal, apparently driven by concerns about inflation and the weak dollar.   In just the past two weeks, the price of silver has risen by about ten percent. Experts are now warning of an imminent price correction.

The recent Silver bull market has come without a corresponding run in gold.  The price of gold (which hit an all-time high last Friday at $ 1,569) increased in the past three months by more than 12 percent, in contrast, silver rose by more than 41 percent.

Experts are warning of a bursting bubble for the precious metal, although the experts opinions are divided.   While some market observers will not exclude a silver price target of up to $ 100 an ounce, others warn now against setbacks.   “As a bubble has developed, fueled by speculators, be cautious” warns trade professional Breckling.   After the steep flight of the precious metal it is vulnerable to a correction. Newcomers should now probably stay away from it.

Golden future or speedy crash?

The speculation on further price increases was “not healthy”, says the trade expert.   The hope of good profits entice even inexperienced investors to buy silver bullion and securities at current high prices, Marco Cabras, a spokesman for the German protective association DSW (DSW) has observed. He knew of many investors who had placed silver bars worth around a five-figure sum in their basement, reported Breckling.   Now is not the time for  “swim with the crowd, but massive skepticism is called for”.   As fast as the climb has come, it can go away just as quickly.

A new entry to the current record high price was “crazy,” warns Roland Aulitzky, precious metals expert at “Financial Test”.  He says: “It really reminds me of the bladder from the new market.”   Silver as an investment is significantly more risky than gold and much more highly speculative.

A weak dollar is one reason  investors from around the world are so obsessed.   Analysts think the weak dollar is the number one reason why Silver has risen recently, in addition, it is much more affordable than gold and Gold has already been reaching record levels.   The U.S. currency is currently trading as low as it had in December 2009 (see Euro / dollar exchange rate).   Silver currently costs more than ever before. More than 32 Euros must be currently put down for 31.1 grams of the white metal, five years ago there was the same amount of silver for 8 Euros.

The fact that demand has picked up is also the reason many feel that silver still has a golden future ahead of it.  Many commodity experts also turn to a study on the industrial demand. According to “Silver Institute, the World Organization of the silver industry is to increase the global demand of 487 million ounces from 2010 to 2015 by about 36 percent to 666 million ounces per annum. Given such a brilliant forecast, the precious metal could still stand for months in the favor of investors, analysts go on to say that many banks and investment houses are still feeling positive.

“Safe Harbor”

The global inflation fears, unrest in the Arab world, the disasters in Japan and the debt crisis in Europe were all responsible for massive purchases said Eugene Weinberg, commodities expert at Commerzbank.  He, is convinced  Gold and silver in uncertain times “earned its reputation as a safe haven.

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