Gold's less respected cousin silver is firming up and its price is expected to increase on the back of declining mine output and a rise in its demand in the renewable energy sector.
Yesterday, the silver markets reacted positively to the launch of a new exchange-traded fund (ETF) – the ETFS Silver Trust.
Silver was priced at $14.05 (Dh51.6) an ounce yesterday and it is expected to move to $15.40 an ounce in a few weeks time.
The forecast for the metal in the medium- and the long-run remains bullish, said Jeffrey Rhodes, CEO of Dubai-based INTL Commodities. Silver gained 3.35 per cent on the week, as the industrial precious metal reacted to strength in gold and copper, he said.
"The rally has extended to $14 this morning with the market buoyed by news of the launch of a new silver investment product, which will boost physical offtake and could impact silver lease rates in London as the metal is allocated out of the pool of liquidity. On the charts there is a band of resistance located between $14.10 and $14.35 that should contain the current move, however, if the price can clear this hurdle, chart watchers will be eyeing a move to $15.40," Rhodes said in his update.
Volumes of silver traded on a daily basis in the futures and the spot markets is about 25 per cent of the gold volumes and this value is expected to rise as industrial demand picks up, said Sajith Kumar PK, CEO of JRG International Brokerage DMCC.
"Most of the silver in Dubai is currently being traded in the spot markets. There is certainly a possibility the futures market will improve," he said.
Unlike gold, which is increasingly assuming the form of a global currency and as an investment option to hedge against inflation, about two-thirds of silver demand comes from industry. The metal is used in fields as diverse as making solar cells and photographic films to medication. The rest of the demand for this precious metal comes from jewellery and recycling.
Investment represents a very small portion of the demand for silver.
Much like gold, silver markets have gained from the launch of ETFs. While the markets reacted positively to the launch of ETFS Silver Trust, the other prominent ETF, the iShares Silver Trust, trades on average 8.8 million shares at the New York Stock Exchange.
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