Institutional Investors Continue Gold and Silver Buying Spree

Thursday, April 5, 2012
By Paul Martin

By: Anthony David
Market Oracle
Apr 05, 2012

The global silver market was pretty shaken up in 2011 when silver bullion prices dropped from a high $49 to $32 and then again from $43 to $28. Investors around the world have been reacting differently to the price upheavals which triggered the most paranoia in October 2011. However, about 50% of investors have turned the fall into an opportunity and are aggressively buying the lower-priced silver. Considering the uncertain financial future, the decision to hold silver bullion instead of fiat currency certainly appears to be a wise one.

Silver prices are expected to remain volatile in 2012 as well. Analysts expect the market to mirror last year’s performance with sharp rises and falls and in fact, Barclays Capital has predicted that silver will be the most unpredictable of the precious metals. Although price predictions vary from $32/oz to $52/oz, the consensus seems to be in the mid-$30s. Analysts have also pointed out that traditional supply and demand rules are unlikely to drive prices. Instead, the only factors that would affect the silver market are market sentiment and investor behaviour.

For example, China’s mega-sized demand for silver is well-known, but given that the country’s trade deficit has been at its highest in more than two decades, fears of a slowdown are high. A weak Chinese economy means a lower silver demand.

Egon von Greyerz, founder and managing partner at Matterhorn Asset Management, said that silver was not for the faint hearted this year. His advice to investors, “My view is people should hold more gold than silver, but from a profit potential point of view, silver looks very much like it’s going to have a bigger move.” He said that while silver corrected more easily than gold, the correction seen in February is rather mild. He believes that when silver turns, it will run positive very quickly.

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