Can Silver Count on Gold?


"Will the gold market continue to buoy silver prices?"

Gold is riding high on dollar weakness, increased risk appetite and inflation fears bringing its price above $1,100/oz. Silver has come along for the ride, but hasn't managed to hold a break over the $18 level. Concerns over sluggish industrial demand for base metals have hampered silver's gains.

As we wait for confidence in the economic recovery and commodities demand to pick up, can the silver price count on the gold market?

Some analysts, like those at, believe the $1,000 price level for the yellow metal is "sustainable" over the long term and that silver is still way undervalued versus gold and bound to catch up.

Others believe gold has much further to go given that the quantitative easing methods employed by central banks across the world will lead to exorbitant inflation sending the gold price through the roof. In which case, precious metal silver is expected to go along for the ride.

Others argue against this scenario and don't see gold prices making any larger gains. Kitco's Jon Nadler explored this debate in a recent article. (Nov. 9)

HSBC analyst James Steel sees strong fundamentals for gold for the next 12 months, saying ". . .we do believe that quantitative easing will have a sufficiently stimulative effect to boost commodity prices globally and weaken the dollar, which would further reinforce gold prices."

And then there's the "fight" between respected economist Nouriel Roubini and investor guru Jim Rogers.

Rogers believes gold is headed for $2,000/oz. "The old high, back in 1980 adjusted for inflation, would be over $2,000 now, just to get back to the old high. So we'll certainly get there some time in the next decade."

Roubini, who predicted the 2008 housing market collapse and economic crisis two years prior, called Rogers' assertion "utter nonsense." Deflation worries Roubini more as governments look for the door on their recent measures to prop up their financial institutions.

Will the gold market continue to buoy silver prices? Only time will tell.

But don't forget silver's other face. New industrial applications for silver and economic recovery, despite its present fits and starts, will continue to boost physical demand.

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