If the last few weeks are anything to go by, it seems everyone and their aunt is buying up as much gold as they can afford. And perhaps for that reason the affordability of the precious metal is keeping many, if not most, restricted to just gazing on glittering gold in showcases.
The shine of return may be found in other less precious metals as well. Silver has hit a 30-year high in recent weeks. Year-to-date it has shot up 41 percent, outpacing gold, which has risen amidst much fanfare by just over 26 percent in the same time.
"It doesn get as much interest as gold but it does track similar movements in capital markets," a precious metals trader based in London told BR Research.
Gold/Silver price ratio has been flirting with the 60 mark, and data from the past sixty years reveals the historic relationship that between the commodities is largely similar at around 58 mark. That means gold and silver move in step with each other, so any further rallies in gold could be expected to follow closely by its cheaper cousin.
Bullish commodities derive much of their strength from a weak dollar and uncertainty about economies on both sides of the Atlantic. Till the dollar remains weak, precious metals are expected to remain strong, according to sources keenly following the global economy.
Preliminary announcements of the second round of quantitative easing by the US Fed, and most likely by the Bank of England, are further strengthening the gains in precious metals. Market participants seem to be pricing in the Feds decision and therefore precious metals have been rising sharply in recent days.
Demand for silver is expected to rise in 2010 given expansion in industrial demand. Combined growth of OECD economies is projected around 2.7 percent, which is likely to fuel appetite for silver. There are many large-scale manufacturers that employ silver as production inputs, such as manufacturers of plasma TVs, solar panels, photography and silver cutlery to name a few.
Nearly 94 percent of all the silver extracted from the earths crust is employed in non-investment activities. On the other hand, only 62 percent of gold is used for purposes other than investment and jewellery making.
Silver is not expected to reach the heights being breached by gold. But for those looking to lock in similar returns without having to tie up a significantly larger capital, silver may just be worth looking at.
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