Lack of inflation – negative factor for silver price


Last week, optimistic investors continued to hike demand for the dual-purpose precious metal, lifting spot silver prices higher for the fourth consecutive week. With a firm footing over the $30 mark, the white metal has provided good profit-taking opportunities since the beginning of the year.

Hopes that industrial demand increases given the recent strength in some of the major economic indicators, lately has investors believe silver will advance in par with gold eventually. A weakening US dollar, following the dovish comments by the FOMC encouraged investors to increase demand in order to hedge against inflation.

However, analysts caution that despite low interest rates and loose fiscal policy providing support in the short term, lack of inflation predicted through 2014 may be a negative factor for silver price.

Speculative traders increased holdings of COMEX silver futures and options, purchasing 563 long positions, marking a 22.0% increase from a week ago as the metal posted a gain of more than 6.5% for two consecutive weeks. Being just a minor distance away the white metal lacked the demand to push it over the $34 barrier as it tries to make its way to the 200 DMA.

Silver outperformed the yellow metal for yet another week, pulling the gold to silver ratio to .51.11 from 51.81 last week.


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