Investment Demand and Silver ETFs

By Melissa Pistilli, Silver Investing News

The price of silver once again tested the $14 barrier Monday as oil rallied, the dollar fell to its lowest point against the euro in over eight weeks, and risk-appetite increased.

However, silver was unable to hold above this important psychological level as it tracked gold lower on Tuesday once the greenback recovered against the euro and oil slipped. By 1:00 PM PST silver was trading at $13.74 an ounce.

Silver vs. Gold

Despite Tuesday’s market setback, silver continues to outperform gold and precious metals analysts believe the white metal will encounter less resistance than gold going forward. “We still believe that it will outperform gold in the current market environment,” said StandardBank commodity analyst Walter de Wet.

For 2009, the silver London fixing (global benchmark for spot trading) has gained 30 per cent; a strong rally compared to gold’s 10 per cent advance.

Also, investment demand for silver through exchange-traded funds (ETFs) is on the rise as demand for gold has fallen in the last two months.

Holdings in the largest silver ETF, iShares Silver Trust, haven’t seen a decline since June 2 and maintained a record high of 8,766.93 metric tons Friday, according to MarketWatch reporter Moming Zhou. In comparison, says Zhou, holdings in the largest gold ETF, SPDR Gold Trust haven’t posted marked increases since early June and were down nearly 4 per cent from a month ago on Friday.

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