Silver miners like Freeport and Mexican producers owned by Carlos Slim are selling Silver forward upto 5 years into the future at $33/oz. The current market is over supplied with weak industrial demand and high speculative demand from Retail investors. Accordingly, silver will plunge much more severely, even below $ 30/oz by end of December 2011 or early 2012.
Suki Cooper, New York-based analyst at Barclays Capital, warns that the price of silver is liable to "see a sharper drop" than gold in the event of a precious metals sell-off, as a result of silver's "heavy bias towards retail demand", which is evidenced in part by the growth in Silver Exchange Traded Funds (ETFs) – securities designed to track the Sold Price, and traded on a stock exchange like shares.
"I think the real concern is if we see a slowdown in coin sales, or a slowdown in ETFs, the fundamental support for prices is much lower than where we are at the moment," she told Bloomberg TV Monday. "I think we could see a much sharper correction in silver if investor interest starts to slow down across gold and silver."
Cooper believes the fundamentals of the silver market are "pretty weak" relative to current price levels.
"We think the industrial demand growth looks good, but not strong enough to drive prices where they are at the moment," she said. "We still have a market in a hefty surplus. So we think that support from the fundamentals is going to be much lower for silver in comparison to gold because in gold we've seen good physical demand materializing every time we've seen the price dip, providing a cushion for prices."
Data published by Virtual Metals show that, since July last year, the volume of silver held by Silver ETFs has risen by more than 20%, while statistics released by the London Bullion Market Association (LBMA) show the average daily settlements between the major bullion banks increased more than 150% over the same period.
There has been disagreement this week among technical analysts over whether movements in Silver Prices suggest a sell-off is imminent.
Russell Browne, of bullion bank Scotia Mocatta, wrote Tuesday that "today's lower close confirms a sell signal".
Meanwhile Axel Rudolph, senior technical analyst at German investment bank Commerzbank, believes there may be some upside.
"We anticipate [seeing] a recovery towards the $50 mark in the course of this week but believe that this level should cap," he wrote.
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Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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