Why Are Indian Investors Attracted To Silver?

February 13, 2009 | By | Reply More

The world’s biggest silver ETF, the iShares Silver Trust has holdings of the metal at an all time high of nearly seven thousand six hundred tonnes, up by more than 10 % already this year.

Drivers of silvers’ strength are said to be Indian investors attracted to silver as a less costly store of value than gold and the buying activity of fund managers.

Last year saw gold gain over 5% while silver fell out of favour with a fall of near 24% over the same period.  Now it looks like silver has regained the comfort zone above $13 an ounce with there are indications that it can move onward from here.

The renewed global interest in silver coupled with the rise in gold to US$950 an ounce, hitting new price records with non-US buyers, seems to reflect a rapid reassessment of President Obama and his team’s ability to counter the economic tsunami.

Technically the charts show a conflicting picture. A ‘saucer’ bottom has been forming that indicates a breakout and the price has risen through the 200 day MA for the first time in six months, another bullish signal. On the other hand two consecutive closes at $13.50 sends out a bearish warning.

In the current investment climate with buyers seeking out gold and silver as stores of value, governments running up the printing presses to sustain their spending plans resulting in the prospect of high inflation on the horizon, and speculators turning their attention to these two metals, our readers should be cautious of basing their investment decisions solely on technical indicators.

Too many fundamental influences are occurring too frequently on a global scale to rely on historical price movements to forecast the price direction of both metals.

Who knows when the IMF will unload a few hundred tons of gold to meet the loans it is making to impoverished countries?

What about further government manipulation of gold and silver prices as the conspiracy theorists would have us believe?

Are the Chinese going to sit back and watch the value of their massive holdings of dollar denominated assets deteriorate as the printing presses do their dirty work, despite the comforting words from a Chinese senior official speaking in the US yesterday?

Next week should give us some stronger pointers that may confirm a sustained rally in these metals with silver gaining the high ground above $14 an ounce. Any shorters are likely to close their positions today as it takes a brave gambler to sit it out over a weekend in these volatile times.

Encouragingly European mid morning trading sees gold at around $940 an ounce, shrugging off its earlier fall in Asian markets.

Exciting times ahead for gold and silver buffs!

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Category: Silver Investment

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