Commodity Blog

Archive for January 2nd, 2010

Silver has history of being a traditional store of value. It is also used in industry, medicine, photography, jewelry manufacturing and in the making of coins. But should investors consider this precious metal when devising their trading strategies these days, when everyone’s attention seems to turn to gold, and how the commodity will perform in the future?

Analysts predict that silver will follow gold performance, which means it should steadily rise in 2010. It is not unexpected if we’ll recall the fact that most factors favorable for gold, like declining dollar and demand for commodities as investment assets, are also bullish for other precious metals, including silver. But, what’s even more interesting, some factors, that are bearish for gold, are in the same time favorable for silver. Just think how many investors and consumers will be repelled from gold by its skyrocketing price. And all these people may turn their attention in silver.

There are still some factors which are bearish for silver. With widespread use of digital photography demand for silver in photography industry was diminishing at pace around 10% a year and even 16% in 2008. Yet this decline in demand can be easily offset by demand from other industries like medicine, where silver used because of its antibacterial qualities. And while new technologies are replacing the old, silver is finding new applications, laptops and cell phones being the examples of modern technologies requiring silver.

Demand from industry rise as economy rebounds. Will supply satisfy this demand? It is not likely. It is true that output in China Russia, Mexico, Peru, Australia, Turkey and Bolivia is growing. But about 80% of silver are mined as a byproduct of other base metals and there are only a few pure silver mines left, with their reserves are depleting. And we should remember that most silver is not recycled, like gold, as it has much lower value. Therefore silver is gone forever after it is used.

Demand for silver is rising while stockpiles are dwindling. Analysts estimate silver price in 2010 in the range from $25 to $27.50. But as silver is greatly undervalued compared to gold, we can expect even greater increase in price of the precious metal in the future years as trader turn their attention to this less expensive but quite profitable commodity.

The technical analysis, that includes the indicators’ data and major pivot points for Brent Oil, Gold, Silver and Copper as traded on spot market as of January 2nd 2010: