Silver Bulls Overtake Gold; Jump 31% Higher in June


". . .new highs cannot be ruled out, especially if gold rallies again."

Silver bulls were handsomely rewarded in early June, when the metal fixed at $15.97/oz on the 3rd, its highest level since August 2008 and an astonishing 31% higher than at the start of May.

Over the same time period the gold price managed to rise just 5.2%, platinum 11.6%, palladium 12.7%. Only lead, tin and nickel (21%, 20% and 27%) of the base metals beat it; copper, also clearly performing strongly, rose just 9%, says a research report from Fortis Metals Monthly.

A weaker dollar clearly helped, but the US currency was down just 7% against the euro and on its currency index, so silver was higher in all the major currencies. Silver then fell back to $14.02/oz by 17th June, but that was still 15.4% higher than at the start of May.

That silver's performance can be compared to the hottest of base metals, rather than gold, or even the PGMs, suggests that it is industrial demand, or at least the expectation of an increase in industrial demand, rather than safe-haven demand that is driving prices.

This does not mean investors have been absent; however the BGI ETF added 260t on 1st June, its 7th largest daily increase on record (and the largest this year) and the COMEX net long hit 7,758t in the week ending 9th June, the highest level since August.

But what goes up sharply can come down just as sharply. Silver is a relatively small market and is often subject to exaggerated moves in either direction. This means new highs cannot be ruled out, especially if gold rallies again. But it also means that there could be a sharp correction lower, especially if investors decide to take some profits; most ETF holdings were bought at prices considerably lower than the current price.

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