With the recent volatility and lows in the gold market, many investors also have been wary of silver prices.
Silver on Friday closed down 0.4% to $28.87 per ounce. For the week, prices dropped 5.1%.
Not the prettiest picture, but for the year silver has increased more than twice the price of gold thanks to growing confidence that the global economy will dodge another recession bullet.
David Jollie, an analyst at Mitsui & Co. Precious Metals Inc., recently said to Bloomberg News, "A greater amount of confidence in the global economy generally means higher growth and that means more silver demand. If you look out beyond the end of the year, you can still see reasons to be bullish."
Why Silver Prices Will Rally
Increased Demand: The global head of metals analytics at Thomas Reuters GFMS, Philip Klapwijk, has forecast silver sales to increase as end-users expand inventories that thinned at the end of 2011.
A large portion of silver demand – 80% – comes from fabrication, which is expected to rise about 3% to 5% this year to roughly 900 million ounces.
Also helping is China's manufacturing expansion and an increased electronics industry demand.
Klapwijk also sees current monetary policy increasing investors' appetite for silver and triggering a subsequent price rise.
He expects "a continuation of very loose monetary policy," he wrote in a report earlier this year. "We also see rates likely being cut in some of the emerging-market economies such asChina, India and Brazil."
This means current silver market lulls are great buying opportunities since the long-term outlook remains bullish.
Klapwijk toldDow Jones Newswire, "We see a range for silver north of $40 and maybe getting to a low of $28" per troy ounce.
Emergence of Chinese Silver Futures: Chinese investors now have an opportunity to trade silver from home, which will spur rising prices.
On April 26,the Shanghai Futures Exchange received approval to begin trading silver futures, according to China Daily. The contract launched on May 10.
Investors have shown great interest since trading began.
Trading silver futures was previously less convenient for investors in China. Their only options were using international markets or trading indirectly via local Chinese markets.
"There has been an absence of a means of trading in silver in China," Wang Ruilei, an analyst with precious metals trader CGS Co Ltd, said to China Daily. "The market will be bigger and more liquid with the advent of these futures contracts."
Look for U.S. exchanges to stop dominating silver futures trading, and the wave of new market entrants will impact silver's price point.
Silver manipulation: Recently Money Morning Global Resources Specialist Peter Krauth spoke with silver expert Ted Butler to discuss how silver market manipulation is affecting the future landscape of the market.
Manipulation in the silver market is currently depressing prices – but it won't for long. The manipulators will stop and silver prices will then increase in an open market.
Butler said silver manipulation has created cheaper prices than usual, making silver a good buy.
"Therefore, the manipulation is giving silver investors a double-barrelled bonanza," said Butler.
"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. That circumstance does not exist in any other investment, to my knowledge."
Krauth says to grab your cash now and fully pay for your silver transactions; don't borrow or go on margin.
For investors who stay with silver for the long term and deal with the price volatility, the payday will be there.
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