CPM Says Silver Will Be Strong in Late 2008, Early 2009

Source:

CPM's research found that the sharp increase in the price of silver last year "reflected strong investment demand, from many parts of the world and from many types of investors..."Non-commercial market participants have been increasing their gross long positions since September 2007."

CPM Group's Silver Yearbook 2008 released Tuesday forecasts that net investor buying is expected to keep silver prices strong this year, although seasonal price weakness is anticipated during the second and third quarters.

The New York-based precious metals consultants predicted that higher silver prices are expected later this year and early in 2009...

CPM's research found that the sharp increase in the price of silver last year "reflected strong investment demand, from many parts of the world and from many types of investors...Investors were buying silver for all of the same reasons they were buying gold: As a safe haven during times of financial market distress, as an inflation hedge, as a hedge against a falling dollar, and more. They also found silver interesting because it has stronger fundamentals behind it.

"Fabrication demand has held up well. Supplies are rising, but not so fast as to overwhelm the market. Inventories meanwhile are low in many markets around the world. Given the perception that silver's fundamentals were more positive than gold, some investors were buying silver for commodities-oriented reasons, as well as for all of the financial reasons mentioned above."

Meanwhile, CPM noted that, "humorously, some mining analysts lamented at the start of 2008 that silver prices had risen ‘only' 15.3% over the course of 2007, while gold prices rose 31.3% from start to finish last year. They overlooked the fact that silver prices had risen 45.5% over the course of 2006, twice the 23% increase in gold prices over the same time...

CPM estimated that four exchange-traded silver investment trusts held 230.4 million ounces of silver at the end of last year. Total ETF physical silver holdings stood at 230,386,911 ounces at the end of 2007. At the end of February 2008 total holdings increased to 236,604,557 ounces with two new ETFs holding 10% of the total silver ETF holdings.

Activity in the future and options markets among large non-commercial participants also indicated an increase in investment demand, according to CPM. "Non-commercial market participants have been increasing their gross long positions since September 2007."

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