SILVER PRICE NEWS - The silver price fell $0.28, or 1.5%, in the month of May as the price of silver was unable to extend its monthly winning streak to four. The iShares Silver Trust ETF (SLV), which acts as a proxy for the silver price, fell $0.23, or 1.3%, to $18.03 for the month. The silver price had risen 1.2%, 6.1%, and 6.7% in February, March, and April, respectively, amid the rally in precious metals and cyclical commodities.
However, in May financial markets succumbed to broad-based liquidation as the effects of the European sovereign debt crisis weighed on the global economy, and silver fell victim to the accompanying selling pressure. When the gold price reached a new all-time high of $1,249.50 per ounce earlier this month, the silver price reached only $19.64 - considerably below its March 2008 high of $20.92 per ounce.
Despite the underperformance relative to gold, the silver price remains higher by a strong $1.54, or 9.1%, year-to-date, and the outlook remains positive according to London-based metals consultancy firm GFMS. In its latest silver report, GFMS noted that investment demand for silver rose by 90% last year to 215.6 million ounces. The firm’s Chairman Philip Klapwijk predicted that the silver price could reach $20 and outperform the gold price this year. “Silver’s demand is a function of the economy, not of the price,” said Mr. Klapwijk. “Industrial demand has come back quite strongly this year from a low level. I would imagine we could continue to see this year very strong investment demand.”
GFMS also noted that silver investment demand has reached 25% of total silver demand - a feat that has not occurred since the 1970s. Industrial applications, including televisions, batteries, mirrors, and DVDs, made up 40% of silver demand in 2009. Bolstering the pricing fundamentals on the supply side, central bank and other government sales of silver fell 50% to 13.7 million ounces.
According to GFMS, companies that are likely to benefit from the rise in silver prices include the world’s three largest silver producers - BHP Billiton (BHP), Poland-based KGHM Polska Miedz, and Fresnillo of Mexico.
