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Silver Prices: New Chinese Futures Trading Supports Rally

We already told you that silver prices would rally this year, and developments last week could make the surge approach even faster.

The white metal was trending down last week until dovish remarks from Team Bernanke following the Federal Open Market Committee meeting on April 25 reversed the price slide. Spot silver prices on the Comex ended the week at $31.27.

But there's another reason supporting a long-term silver price climb.

That reason lies in a news item out of China that many investors may have missed.

China and Silver Prices

On April 26, China Daily reported that the Shanghai Futures Exchange received approval to begin trading silver futures.

Previously, Asian investors had to access international markets to trade silver futures, or else they could trade indirectly on local Chinese markets.

"There has been an absence of a means of trading in silver in China," Wang Ruilei, an analyst with precious metal trader CGS Co Ltd, told China Daily. "The market will be bigger and more liquid with the advent of these futures contracts."

The Chinese announcement allows for two major things to take place.

First, it means that U.S. exchanges and sentiments will no longer dominate futures trading in the silver market.

Second, it means a whole new group of traders will be able to have an impact on silver's overall price point.

These two facts bode well for silver futures long term.

China allowing investors wider access to the silver market will pump more money into the commodity. In addition, it will make it more difficult for American speculators to manipulate the markets in their own favor.

We can expect some volatility in the market as commodities investors absorb and process China's news, but any price lows should be buy-in points.

Silver's Price Rally

China's news isn't the only catalyst boosting silver prices.

A report released earlier this month from the global head of metals analytics at Thomson Reuters GFMS forecast a silver price climb in the second half of 2012.

Philip Klapwijk of GFMS says silver sales for industrial application as well as for jewelry, silver, silverware and photography will rise as end-users restock inventories that diminished in late 2011. Fabrication demand makes up 80% of total demand for the metal, and should be up about 3% to 5% this year to roughly 900 million ounces.

Finally, the stops put on American silver market manipulators will be another huge factor in silver's coming rally.

Ted Butler, who publishes bi-weekly commentary at with a special focus on the silver market, said that while silver market manipulation is currently helping depress silver prices, that won't be the case for long. Once the manipulators are stopped — which, Butler said, always happens when they're controlling an investment in such a manner — silver will soar higher to where the price would be without a rigged market.

"Therefore, the manipulation is giving silver investors a double-barrelled bonanza," Butler told Money Morning Global Resources Specialist Peter Krauth. "One, a cheap price to buy at than would otherwise be the case and, two, a much higher price to sell at once the manipulation is ended."

There are already signs of a subtle beginning to silver's 2012 price push. This means it's time to pay attention to silver's dips as buying opportunities.

If you're still wondering what to buy as silver shoots through the roofin 2012, then you need to take a look at our special report: How to Buy Silver: A Guide to Today's Top Silver Investments.

In that exclusive report, we explain all of the opportunities involved in silver investing.

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  1. Bob | April 30, 2012

    I still think that JP Morgan and friends will just dump twice as much paper as usual and that will subdue the metal prices. The only way that I can think of busting these clowns is when the available silver is bought up

    • Silver T. Rader | May 16, 2012

      Mid-May Silver will be at low $27 because JPM has positions to sell. Even if it means throwing its own clients on the opposit side. As JPM sells down, they will be buying it all hand-over fist this time. Time to jump out gradually and use cost averaging.
      Will sell my positions in Sprot Physical and go all in on something like EGO when it drops under $10.50.
      Junior producing silver mines that pay dividens will be a good place to drop a bundle.

  2. Robert | May 9, 2012

    "We already told you that silver prices would rally this year"
    Don't break an arm patting yourself on the back- its down 20% since March

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