Silver Still Dependent on Gold for Upside, But Fundamentals Strong

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For the market as a whole, investment thus remains the most interesting element, with investor activity the main driver of silver's high and volatile price in 2007, and expectations for gold prices were an important consideration for silver investors. This is expected to remain the case during the rest of 2008 and despite the fact that investment is a relatively small component of the supply-demand balance...

The latest Silver Survey from the Silver Institute, compiled by independent research house GFMS Ltd., points to the positive prospects for investment demand, for this year at least, citing the primary influences as follows; expected gains in gold prices, continued US dollar weakness [these two of course are not unconnected], growing inflation fears and a further substantial inflow of money into the commodities sector. On this basis, the group says that it would be surprised if this did not translate into another major year-on-year gain in silver prices in 2008. It is perhaps significant though that the case for silver investment is in some ways a "second order" argument, as it depends on the rest of the sector, not purely on silver's stand-alone fundamentals.

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