The Street had some interesting analysis on the near term prices of silver, and they are a bit bearish, with several analyst predicting that silver will fall and settle at near $30 per ounce. I would like to silver stablize at a lower price point in order to spare much great collectible silver from being melted down for scrap value.
The Street reports on Gold and Silver
The consensus seems to be that silver has more downside now than gold. Barclays Capital thinks that silver will find support in the low $30s as "retail demand" takes the lead but that "longer-term investor interest in gold remains robust." Barclays cites Asian demand as a key factor for higher gold prices.
Goldman Sachs seems to be in agreement, issuing a 12-month silver price target of $28.20 with silver slipping as low as $24.70 in the next three months, while gold's one-year target is $1,690 an ounce after falling to a three-month low of $1,480.
"There is overhead resistance in silver," said David Morgan, founder of silver-Investor.com, "the ratio will favor gold" for a while. The ratio refers to how many ounces of silver it takes to buy an ounce of gold. The ratio fell to as low as 31 when silver hit a recent intraday high of $49.82, and has now risen to 40.
"We're seeing gold outperform silver on a ratio basis ... I'm not that eager to get back into the market," Morgan said.
Morgan thinks the ratio could move even higher, as much as 50:1, which implied more downside from the $36 level, but that long term he is sticking by his ratio of 16:1.
"The fundamental fact remains that you cannot print wealth, and as long as Federal Reserve Chairman Ben Bernanke and other central bankers in the world try to print wealth you're going to have more and more upside for the metals," he said.
The Commodity Futures Trading Commission's bank participation report for May shows that gold long positions fell 7% as of May 1 compared to April 1, but short positions stayed relatively the same, whereas silver's long position rose 25% and short positions fell 18%.
"I think that as we neared the expiration of the May contract of silver, we saw more aggressive buying in the silver versus the gold," says Brian Booth, senior market strategist at Lind-Waldock. "I think traders had $50 silver in mind for a target ahead of the May expiration."
Booth thinks that gold could be headed for some margin hikes of its own despite the fact that the market is more liquid and historically less volatile than silver.
However, it doesn't mean the recent correction in gold and silver is finished. James Moore, research analyst at FastMarkets, thinks that volatility could remain high with participants protecting themselves against more long selling.
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