MUMBAI: It is still doubtful whether average silver prices crossed the $13 mark in first quarter of 2009? Currently, it is trading at $12.25 levels. London-based GFMS Ltd in a quarterly report on the performance of the precious metal for Q42008 pointed out that fresh bout of investor interest in January against the backdrop of deteriorating global economic situation, a rise in risk aversion and rally in gold prices boosted the silver ETF holdings to 9000 tonnes. Further growth in ETF demand and continued interest in bullion products coupled with a rebuilding of long futures’ positions could result in investors driving silver prices towards, and, possibly, even above, the $13 level in the first quarter of 2009. During early 2009, investors’ have continued slowly to build up their long positions, the combined non-commercial and non-reportable net long reaching 32,195 contracts by the end of January. Trade sitting at the comfort of home. Start with a mere 50$ Total holdings during Q4 in silver ETFs proved resilient in the face of weak prices, and remained near record levels, even registering a 2% or 131 tonne gain during the quarter to end 2008 at 8,253 tonnes. There are already allegations that silver prices have been hammered at Comex. In its review of the fourth quarter of 2008, GFMS Ltd notes that the opening price for the period, $12.28, remained the high for the quarter, with the three monthly average of $10.21 down by over 28% on a year-on-year basis and over 32% weaker than the previous quarter. Q4 began with silver trading at $12.28, and from this point the metal largely mirrored gold’s downwards trajectory, slipping to a near three-year low of $8.88 on 24th October. A recovery in the dollar contributed to the fall in prices, but arguably more important was the growing negative sentiment. This in itself was driven both by the deteriorating outlook for industrial demand and for the broader commodities complex, which manifested itself in a drop on 21st October in the net long position on Comex, to its lowest level since April 2003. Silver staged a modest recovery in November but did not track gold price movements due to its use mainly as an industrial metal. Volatility was high in October at 72 % but on the whole prices were stable. GFMS notes that much of the surge in rates was due to sharply increasing demand from India in October and November. In the fourth quarter the silver price was often under pressure, trading for much of the time comfortably below the $12 mark (a near three-year low of $8.88/oz was recorded in October). Although the white metal drew some support from gold, it underperformed its more valuable cousin, the gold:silver ratio for instance trading above 75:1 during most of the period under review and hitting a peak of 84:1 in mid-November. Silver, like gold, drew some support in the fourth quarter from those looking for a physical hedge be that in the form of bullion bars and coins or investment in ETFs, although such ‘safe haven’ interest was far less marked than in gold’s case, GFMS pointed out in its report. Indian silver consumption was high but western jewellery consumption of silver was very weak. Silver output from six of the major silver producing countries registered a modest year-on-year decline in Q3 2008, reaching a total of 2,937 tonnes. Production gains in Mexico and Peru proved insufficient to offset slumps in Poland, Australia and Canada, while US output is estimated to have declined modestly. Meanwhile, Jasson Hommel is positive on silver prices going up as silver left for investment is just 5% of the total silver available. If the historic price ratio of silver to gold shows that about 10 ounces of silver would buy one ounce of gold, a 10:1 ratio. Recently, the ratio is about a 70:1 ratio (with silver at $13/oz., and gold at $1000/oz.) As the silver to gold ratio returns to historic values, from 70:1 to 10:1, you may make over 7 times more money investing in silver, than gold!, he writes in his Silver Stock Report.

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