Precious metal silver has been tracking gold’s rally on an ever-weakening dollar. Despite today’s dollar rebound, the downward pressure on the greenback is expected to continue as long as the Fed keeps up its low-interest rate, paper pumping scheme. Economic data on unemployment, manufacturing, consumer confidence, new home sales, etc due out this week is likely to further influence the dollar’s direction and that of precious metals.
While gold is up 21 per cent this year, silver has soared 56 per cent. However, despite outperforming gold, silver still remains undervalued compared to its yellow cousin. As a recent Bloomberg article points out, when gold first hit $1,000 an ounce, silver was trading above $20 compared to the $17 range today.
Many analysts are forecasting further dollar declines and continued optimism over global economic recovery, which will in turn boost precious metal and base metal prices. Of course, silver stands to benefit immensely from this scenario, given its dual nature as both precious and industrial commodity.
Bank of America Merrill Lynch has said gains in the silver price spurned on by robust investment demand will continue as rebounding economies drive industrial demand. “After the recent sharp price rises, we are cautious on silver in the near-term, but we believe that a spike toward $20 an ounce is possible in 2010.”
