Silver Shows Signs of Independent Growth as Demand Increases Says Wall Street Journal

Although silver appears to be moving, primarily in an upward trajectory, in step with gold, it's also showing signs of independent growth in demand, reported the Wall Street Journal’s MarketWatch.

“Silver isn’t just tracking gold, it's breaking some ground of its own,” wrote MarketWatch’s Myra P. Saefong, “at least when it comes to holdings in exchange-traded funds and demand for silver coins.

The silver precious metal is up 10 percent in 2014 and gained 11 percent in the last month. Meanwhile, gold is up 11 percent year to date and up seven percent over the last month.

“Silver is finding its own support independent of gold due to strong buying from China and India and an increase in industrial production of electronics,” including smartphones, said Paul Mladjenovic, who wrote the book Precious Metals Investing For Dummies.

Mladjenovic agreed that silver does typically move in sync with gold futures and that given the white metal’s smaller market, those moves may sometimes appear exaggerated. But he cautioned that there is more going on in the marketplace today.

Silver mining was disrupted and frequently halted over the last six months, as the cost to extract it became greater than its market value. Many analysts say that cost to extract silver is around $20 per ounce. When the price dropped below that figure, many mines were forced to close, reducing the new silver that is being released into the market today.

“Rising demand and shaky supply bode well for a silver rally,” said Mladjenovic.

Meanwhile, the sale of American Eagle silver bullion coins to authorized purchasers quadrupled to about 42.7 million ounces last year from around 9.9 million ounces in 2007.

“The U.S. Mint has been and is still allocating their production of silver American Eagles to authorized purchasers as the Mint is not able to meet demand,” said Michael Haynes, a chief executive officer at online precious-metals dealer APMEX Inc., which is one of the Mint’s authorized purchasers.

Mint spokesman Michael White told MarketWatch this week that “the investment required to establish additional capacity requires careful financial analysis, and the demand from global mints did not exist throughout the early part of the last decade.”

Mladjenovic told MarketWatch that he expects a “good rally for silver” this year, with prices heading north of $30 by fall 2014, with an “outside chance” of $40. “Don’t be surprised if silver is in triple digits by 2016,” he said.

Read the full story at the Wall Street Journal’s MarketWatch.