Silver Up 15% This Year but Some Worrying Demand Signs

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Silver was slow to move earlier in the year when gold showed a sharp increase, but of late it has caught up with a good price surge over the past week bringing it up to just short of $17.20 an ounce on the spot market - and silver futures are strong too suggesting that the market is looking for further rises ahead.

Silver has again been tracking the rise in the gold price, although it is probably fair to say that the correlation has been a little erratic. The metal was slow to move earlier in the year when gold showed a sharp increase, but of late it has caught up with a good price surge over the past week bringing it up to just short of $17.20 an ounce on the spot market - and silver futures are strong too suggesting that the market is looking for further rises ahead. Gold is looking strong and many predict a good increase for the yellow metal in the months ahead and feel that silver will follow suit.

What may help silver on the jewellery front has been the sharp rise in gold and platinum prices which is putting silver coloured jewellery alternatives (platinum and white gold) into far higher price brackets and with gold over fifty times more expensive per ounce than silver and platinum over 100 times, the cost of gold and platinum jewellery is now out of reach for many at the lower end of the market. While the rise in silver prices may match those of its more pricey cousins its price differential could make silver based jewellery more and more attractive to purchasers.

However, to set against this, India - a huge consumer of silver in the jewellery sector - has been importing virtually no new silver for the past few months according to press reports, suggesting local demand is being met entirely from the scrap market. Photographic sector demand - the key industrial usage - continues to fall, although some other industrial and medical usage may help keep this end of the consumption balance relatively steady. Also as photographic usage falters, so does the scrap supply from this sector...

Like all commodities, if you choose your moments well there are probably good gains to be made, but even if you don't trade in and out of the market there has to be a good chance that the metal price will continue to rise in the short to medium term at least. But those predicting huge rises bringing silver back to some of its historic levels vis-a-vis the gold price look set for disappointment.

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