News about physical shortage drive silver price higher
Last week, silver finished at 31.185 per once. In general, precious metals dipped while industrial metals climbed.
Silver prices are up over 3% month to date as silver’s popularity as an investment asset grows. Meanwhile, gold posted a loss of over 1%.
News that HSBC has concluded a second large purchase of silver bullion has sparked speculation that there is a physical silver shortage in the markets.
Earlier in the week, a news about the U.S. Mint temporarily running out of Silver Eagle coins added to the momentum. Many of the latest rumors about physical silver shortage talk about the relationship between physical silver-actual silver bullion-and paper silver, which is the silver that exists only on paper in the form of exchange-traded funds (ETFs) or futures contracts. Some market observers have speculated that there isn’t enough physical silver currently available to make delivery to all of the owners of silver futures, which would result in a “default” by the Comex where the silver contract is traded.
Whether these issues are actually reflective of high demand, problems with the mints’ supply chains, or games being played in the silver bullion market by outside forces or silver traders, remain in question.
Recently, precious metals weakened as US lawmakers voted to allow the debt ceiling to rise until May 18th, allowing the Treasury to fund the government.
It is very much likely silver to push over the $35 level over the next six months, setting up for a larger extended move over the next year and a half targeting $45 per ounce. This is still bellow all time high of above $50 from September 2011, although a few silver traders predict the white metal to reach above $90.
Traditionally, gold and silver rise is somewhat connected, however, unlike gold the white metal is not subject to central banks buying. On the downside, silver is set to see a sizable surplus this year as it costs a little over $5 an ounce to produce though it trades above $31 an ounce.