core sector communique

Silver leads commodities super cycle

Rising demand for silver for investment and industrial use has prompted several analysts to predict that silver price could see a major bull run in 2011. 

“Silver is the hottest commodity around these days. Silver price has appreciated more than double in the last one year. Looking at the strong demand for industrial and jewellery use for silver from emerging countries like India and China, it can be easily predicted that silver price will surge to around $45 by December 2011,” Mark Robinson, a precious metals expert said.

He said that the ongoing super cycle in commodities is led by silver.

In the past few months, silver has been leading the commodities bull in precious metals. This week, HSBC said that silver price will remain “historically high” in 2011. 

HSBC hiked its 2011 average forecast to $28 an ounce from $26 and said it looks for a broad price range of $24 to $36. 

“Silver has been boosted by accommodative monetary policy, currency volatility and economic uncertainty, and these are likely to remain supportive,” said the global banking giant. 

HSBC said that higher mine output and increased scrap recycling will offset strong industrial and coin demand for silver. Industrial demand is now the majority of end-user consumption, and the bank cites multiple uses ranging from electronics, mirrors, textiles, biomedical, water purification and solar panels. 

“Silver prices exceed costs of production by several multiples, giving producers an enormous economic incentive to increase output wherever possible,” the bank said. 

HSBC added that 2010 trend of rising silver output will continue in 2011. 

Chris Berry, founder of Mountain House Partners, who specializes in the commodity space, says silver is one commodity that has the potential touch $50 in 2011. 

“Silver has certainly been volatile, and it seems like there could be a potential shortage of silver in the offing. It touched $34 [an ounce], now you’re starting to hear more and more people say that $50 silver isn’t that far off and it’s not that far off because of things like emerging markets and demand for silver as a store of value,” Berry said.