Since posting a high over $49.50 in late April, silver has been treading water at around $35/ounce. But there are several analysts who believe that the devil’s metal is looking good for another breakout that could push the price to $100/ounce, or perhaps even higher.
We’ve already looked at the possibility that a silver price above $40/ounce may be a death trap. But the possibility of $100/ounce silver is worth a look, too. Silver ETFs, including iShares Silver Trust (NYSE: SLV), ETFS Physical Silver Shares (NYSE: SIVR), PowerShares DB Silver (NYSE: DBS) and Global X Silver Miners ETF (NYSE: SIL), will react regardless of which way prices move.
Technical analysts at Citigroup Global Markets say that silver prices are following a trend begun in late 2001 that saw prices rise nearly six times before a March 2008 correction that pulled the price down by 60%. Since then, prices have recovered and once again tested the all-time high set in 1980. Citigroup analysts told Bloomberg, “If the final rally in the last bull market repeated then we can expect $100 over the long term.”
Another view on silver prices is related to the massive number of short contracts that will have to be covered if the price rises above $40/ounce. Demand for silver remains high, especially in China, where the trade in silver is not subject to Comex margin hikes. A small boost in price could quickly develop into an explosion of demand, putting a short squeeze into play and driving silver prices even higher.
A third view is that a fundamental supply shortfall will occur as stockpiles dwindle. Unlike gold, silver is consumed when used in some industrial applications, and industrial demand for silver is rising.
Finally, until permanent steps are taken to resolve Europe’s sovereign debt crisis and the US debt ceiling issue, demand for silver as a safe haven will also factor in the gray metal’s price.
The iShares Silver Trust (NYSE: SLV) moved above $39/share last week, before pulling back to close at $38.31 yesterday. The 52-week range is $17.06-$48.35.
The ETFS Physical Silver Shares (NYSE: SIVR) also peaked at slightly above $40 last week and closed yesterday at $39.07. The 52-week range is
$17.37-$49.28.
The PowerShares DB Silver (NYSE: DBS) peaked last week at $70.94, and closed yesterday at $68.81. The 52-week range is $30.91-$86.98.
The Global X Silver Miners ETF (NYSE: SIL) posted a recent high of $27.75 last week and closed yesterday at $27.41. The 52-week range is $14.18-$31.34.
While the share prices of these silver ETFs are still wobbly, they are wobbling at a slightly higher level. Spot silver prices have posted an intra-day high of $39.97 this morning, about half an hour before US equity markets open. If silver closes at around $40/ounce today, next week should be very interesting.
Paul Ausick
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