GFMS “Silver Prices To Rally In Second Half Of 2012” based on Silver to Gold Ratio

Silver Forecast Summary 2012

–Silver To Trade Between $28-$40/troy ounce In 2012

–Silver Likely To Rally In 2H 2012

–Speculative Investors Necessary To Push Silver Above $40

–2012 Industrial Demand For Silver Set To Outpace 2010 Record

NEWS

NEW YORK (Dow Jones)– The Global Head of Metals Analytics at Thomson Reuters GFMS told Dow Jones Newswires that silver is poised to rally in the second half of the year.

Philip Klapwijk said in a phone interview “We see a range for silver north of $40 and maybe getting to a low of $28” per troy ounce. On April 29, 2011Silver hit a record settlement price of $48.599

In the near term, weakness in gold prices, such as a drop below $1,600 a troy ounce, is the biggest risk to silver prices. Investors tend to buy silver and gold as a store of value and a hedge against economic uncertainty. A decline in gold, a higher-profile investment, will likely be the culprit if silver trades to the lower end of the forecast range.

However, silver prices are likely to rally in the second half of 2012, he believes, seeing a rally in gold sparking a resurgence in silver.

“Prices are probably going to head higher [in the second half of 2012] and we could see a push above $40 at some point,” though silver is unlikely to sustain those price levels he said. “I don’t think silver has the same get up and go that it did last year.”

Both silver and gold are likely to benefit from monetary stimulus measures, Klapwijk said, which he see likely in the summer or early fall.

“As the prospect for further new stimulus measures grow and expectations of those further measures grow that will encourage a firmer tone to investors in both gold and silver,” Klapwijk said.

Investor interest in silver, as opposed to commercial interest, is key to propelling prices higher, he said. Silver tends to benefit from both tactical investors seeking short-term price gains and from buyers who look to silver as an alternative safe haven to gold.

“To get past $40 you need some commitment from some speculative investors to add more fuel and that requires silver to get some momentum behind it to bring in fresh money,” Klapwijk said.

Industrial demand for silver is likely to exceed the record levels seen in 2010. Commercial demand for silver fell sharply in the 4th quarter of 2011 as companies were worried about the global economic outlook.

This meant that manufacturers started 2012 with low supplies and will likely need to replenish their inventories.

“We’re reasonably positive that the [economic] backdrop is sufficiently strong…for silver industrial demand to make some gains this year,” Klapwijk said.

Philip Klapwijk said in a phone interview “We see a range for silver north of $40 and maybe getting to a low of $28” per troy ounce. On April 29, 2011Silver hit a record settlement price of $48.599

Silver to Gold Ratio

The ratio of silver prices to the price of gold, a measure of how many silver ounces will buy an ounce of gold, will likely move in gold’s favor over the coming months, moving close to 55, Klapwijk said.

Historically, the ratio of silver to gold is about 53 to 1, he said. Currently, the ratio is 52.

“In the second half of the year, if silver makes a strong run, [it can] get well below 50 again,” he said, adding that the ratio could get down to 45 to 1 this year.

Source(s):

http://online.wsj.com/article/BT-CO-20120419-708757.html

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