Shining Silver could hit $100

Shining Silver could hit $100
http://www.commodityonline.com/news/Shining-Silver-could-hit-$100-32824-3-1.html


Spokane (Kitco News) -- Most of the analysts attending the Silver Summit in Spokane, Wash., described themselves as bullish on silver’s long-term outlook. Following is a sampling of views.

David Morgan, analyst with Silver-Investor.com

Silver should consolidate during the rest of the year, although he described himself as bullish for the long term.

“We went from $19 to very close to $25.…I do believe the market has gotten a little heated on a temporary basis.”

Profit-taking could set in, perhaps taking silver back to the $21-$20 area, he said. Still, he does not see a change in the fundamentals and said $30 is “achievable” next year, as silver re-establishes itself as a monetary metal in addition to an industrial metal.

Over the next decade, demand from such uses such as solar power, food preservation and water purification is likely to exceed growth in supply, he suggested.

There are still other growing industrial uses. And, he continued, investment has grown sharply, particularly since the launch of the first exchange-traded fund in 2006. ETF holdings eventually may rise at a slower rate, but there could still be some 100 million ounces of demand annually over the next decade.

Silver conceivably could hit $100 down the road, with potential for “buying panic” as late-comers flock into the market as they see prices rise, resulting in a sudden acceleration, Morgan said. Such a phenomenon occurred when gold hit its old record back in 1980, only trading above the $800 level for roughly four business days, he said.

Jeffrey Christian, managing director of CPM Group

“Our expectation is the silver price is going to stay strong between now and February to March, and the potential for the price to spike even higher exists,” Christian said. The $30 area is possible, he said.

Investors remain nervous about the economy, while there are concerns about the financial system’s stability and political uncertainty, he said. “As a result, investors are moving heavily into gold and silver.”

Additionally, there is “tremendous” amount of speculation in the December and March Comex futures and options. “That is having the self-fulfilling prophecy of exerting upward pressure on prices,” he said.

But as 2011 progresses, there is potential for prices to taper off, particularly if worries about the economy abate, he said. Also, gold often hits cyclical peaks in the December-March period. Pressure could come from profit-taking by short-term participants.

“But from a longer-term perspective, we’re looking for stronger prices,” Christian said. The annual average could be in the $24 to $25 range for several years, he said. At first glance, this might not sound bullish. “But it is,” he continued. Such averages would include periods when there would be downward corrections, meaning even higher prices other times. Silver is in the $24 neighborhood, even though the average for the year so far was around $18.50.

Industrial demand should remain supportive due to solar panels, flat-screen displays, semiconductors and more. “We think investment demand is going to stay strong for at least a couple of years,” Christian said.

David Franklin, market strategist with Sprott Asset Management

“We’re very bullish on silver,” Franklin said.

Money flows have changed so that U.S. Mint coin sales are now at a ratio of $2 for gold for every $1 of silver, he said. This shows greater interest in silver than another ratio in which the above-ground value of the world’s gold to silver is 118 to one.

“So people are choosing silver over gold with their own dollars,” Franklin said. Some may feel they missed the rally in gold and want to board silver’s train, he said.

Franklin said any new mine supply is likely to be “spoken for” by new demand for silver, including solar panels, use of as an anti-bacterial agent for medicine and clothing, plus radio frequency identification tags.

Furthermore, he added, it’s hard for the mining community to suddenly ramp up silver output to take advantage of higher prices. Most silver is mined as a by-product, meaning output often relies on prices of other metals.

Franklin also cited Comex positioning. The total of some 1.1 billion ounces means an equal amount of short and long positions, he said. Still, that could mean upward pressure should longs start taking delivery of metal, Franklin said.

Silver could hit $50 an ounce, Franklin said. As an example of the company’s optimism, he said, a hedge fund run by chief executive Eric Sprott has a 30% exposure to silver, mainly in bullion.

Jon Nadler, analyst with Kitco Metals

Nadler expressed reservations about silver’s ascent mainly because so much of the rally has been fueled by investment. This means potential for the market to fall back should this demand stagnate or decline.

In many instances, speculative funds put borrowed money to work in markets they think will rise, such as record oil and copper prices a couple of years ago, he explained. The advent of exchange-traded funds also boosted silver.

But eventually, he said, this investment could be hurt whenever global central banks opt to reverse loose-money-supply policies, or should the Federal Reserve should not be as aggressive with quantitative easing as many expect. As an example, he pointed to “tremor” that occurred in the market earlier this week when gold fell after China hiked interest rates.

“It doesn’t mean assets are leaving this sector totally,” Nadler said. “And they shouldn’t. Because with economic recovery ought to come fairly sunny days for things (with industrial demand) like copper and silver.”

Ultimately, industrial use will be a key. Excluding investment, he said, supplies now top demand. Global fabrication fell amid economic weakness in 2009, much of it from industrial users, he said.

However, he said, industrial demand should in fact help provide a floor for silver somewhere on price pullbacks. This means silver should still remain well above the aggregate global price of production.

Greg McCoach of the Mining Speculator newsletter

McCoach suggested rising precious-metals prices will be as likely as death and taxes. He looks for further safe-haven buying due to financial and economic concerns, including worries about rising U.S. debt and government moves to inflate the money supply.

He called for $30 silver in the next six months and suggested the gold/silver ratio could decline to 50 or 48 to one by year-end. This ratio is calculated by dividing the price of an ounce of gold by the price of an ounce of silver, and a declining number means silver is outperforming.