April 25, 2011

Silver, Gold Still Rising

Silver up more than 5%; gold sets another record

The fever for precious metals still raged Monday as silver recorded gains of more than 5% in early trading, with gold sharing in the dizzying climb as it set yet another new record.

Reuters reported that silver's boost to $49.31 an ounce reached a 31-year high before the metal backed off just a hair to $49.07. Futures were equally manic, with U.S.silver futures rising 8.2% before backing off a bit to $49.11. The unusually large volume sent silver close to record territory, only about $0.50 off its all-time high of $50.35, which it reached on Jan. 18, 1980.

A Hong Kong-based dealer was quoted in the report saying, "Everyone is buying. There is stop-loss buying, as well as a good buying interest from China."

Buyers aren’t just purchasing shares in an ETF, although those holdings have risen substantially as well. They’re after the physical product. A private bank official in India was quoted as saying, "The rally has been great as traders are buying silver like mad. We normally don't import silver on a regular basis, but we imported about 10 tons from last month. Investors are joining in the rally in India to catch on the price appreciation."

Harshad Ajmera, proprietor of Kolkata-based JJ Gold House in India, said in the report, "Everyone wants a piece of silver, right from a cab driver to a professional. It looks like the whole of one billion population is chasing silver."

The largest silver-backed exchange-traded fund, iShares Silver Trust, has had to boost its holdings by 2.4% this year. On the other hand, SPDR Gold Trust, which is the largest gold ETF, has seen its holdings decline by 4%.

The cost of silver has jumped almost 60% so far in 2011, following an increase in 2010 of more than 80%. That’s far more than gold has gained this year: 7%, with a 10% gain in the Reuters-Jeffries CRB index, which is made up of 19 commodities. Even though silver is now more expensive relative to gold than it has been for more than 30 years, it doesn’t seem to be stopping investors hungry to own the precious metal. After all, it’s easier to buy an ounce of silver at close to $50 per ounce than to buy an ounce of gold at $1,500 per ounce.

An international bank trader in Singapore said in the report, "The world is in love with the stuff right now. Silver ETFs are doing a roaring trade and silver bullion is being snapped up by retail investors. But I would caution against chasing prices right now. There is way too much fizz in the market right now."

The "fizz" seems to have extended itself to spot platinum and palladium as well. The former was up $19.19, or 1.06%, to $1,829.99 in early trading, and the latter was up $7.24, or 0.95%, to $772.72.

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