Silver has become the preferred safe-haven among investors as inflation accelerates.
Silver above $41 as investors seek shelter
Silver surpassed US$41 an ounce yesterday, gaining for a ninth consecutive day as investors sought a haven against inflation.
The metal rose as much as 2.5 per cent to $41.9525 an ounce, trading at levels unseen since 1980, when the Texas brothers Nelson and William Hunt caused a spike in prices as they tried to corner the global market in the metal.
Gold for June in New York reached an all-time high yesterday, up as much as 0.3 per cent to $1,478 an ounce.
The difference between yields on US 10-year notes and treasury inflation-protected securities, an indicator of traders' expectations for inflation, widened to as much as 2.64 percentage points last week, the most since 2008. In an effort to curb inflation, the European Central Bankraised its main interest rate by 25 basis points to 1.25 per cent last week.
While gold and silver have had a bull run for two years, silver has outperformed gold this year. Silver has rallied 31 per cent since January, while gold futures are up a mere 3.7 per cent this year.
Analysts say that silver may peak at $50 by the end of this year but that a correction is likely.
"Monetary policy is unlikely to be tightened that much in 2011, and inflation and sovereign debt concerns will most probably grow further," GFMS, a metals researcher in London, said last week. "This will encourage investment demand for silver. Additional support should also flow through from solid gains in industrial demand."
Silver has a wide range of industrial uses including in solar panels, plasma television screens and chemical catalysts. Philip Klapwijk, the executive chairman at GFMS, said profit-taking would be likely at $50.
The silver-to-gold ratio, the number of ounces of silver required to buy one ounce of gold, showed that silver was becoming costlier, said Pradeep Unni, a senior relationship manager at Richcomm Global Services in Dubai.