Silver is near 18-year high
By Purchasing Staff -- Purchasing, 12/5/2005 7:00:00 AM
Silver closed at an 18-year high of $8.62/oz on Friday, its highest price since August 1987, amid growing demand from electronics makers and jewelry fabricators, as well as speculative buying. This price rally is expected to continue well into next year, according to Macquarie Bank.
Silver’s price has gained 25% this year, after advancing almost 15% in 2004. Silver prices will rise in the next five years as demand in China expands faster than supply, fueling imports for jewelry, electronics and photography, according to research group GFMS Ltd. Meanwhile, Macquarie Bank’s latest precious metals report expects silver to remain above $8/oz into the first half of 2006, before gradually declining to around $7/oz in 2007. The report notes that silver’s price is influenced much more by industrial activity than gold, for example, since fabrication demand for silver accounts for 66% of total consumption, compared with 25% for gold. The report also dismisses the often-discussed ratio between gold and silver prices as a barometer for silver prices. "Judging purely from a scarcity value—the amount of gold and silver, existing as reserves and resources—gold should be valued around 19 times higher per ounce than silver," the Macquarie report notes. "However, over the last few years, the gold/silver ratio has hovered around 60:1. It is, therefore, unlikely that the gold/silver ratio alone will give any hint as to where the silver price should stand."
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