Originally published on Market Watch.com
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Silver, which has topped gold and platinum to become the fastest rising precious metal this year, has a chance to keep outperforming thanks to its double use as both an inflation hedge and industrial material, analysts are forecasting.
But with higher returns come greater risks. Silver has proved much more volatile than gold, partly because fewer people trade the white metal than gold.
If "prices of precious metals turn higher across the board, silver will tend to move up faster," said Neil Meader, research director at London-based precious metals consultancy GFMS.
"If all the prices come off, you will see silver prices collapse much faster," he said.
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -
If "prices of precious metals turn higher across the board, silver will tend to move up faster," said Neil Meader, research director at London-
The London fixing, a global benchmark for silver's spot trading, has rallied nearly 50% this year to near $16 an ounce, the highest level in 10 months, as investors piled into coins, bars, and silver exchange-traded funds such as iShare Silver Trust. Holdings in iShare Silver /quotes/comstock/13*!slv/quotes/nls/slv ( SLV 16.54, 0.00, 0.00%) hit a record high this week.
The year-to-date gain in silver easily outpaced gold's 12% advance and has also outrun platinum's 30% increase.
Silver futures traded on the Comex division of the New York Mercantile Exchange, another benchmark, surged 27% last month, the biggest monthly gain in 22 years. It's the second-best performer in 26 major commodities tracked by Merrill Lynch's MLCX commodity index, topped only by gasoline futures.
Silver's use in a range of industries from photography to electronics to medical applications, as well as its attraction as a store of wealth when inflation heats up, could keep propelling its outperformance, analysts say.
"The [investment] scenario is pretty strong for silver," said Frank Holmes, chief executive officer at U.S. Global Investors Inc., which manages funds such as the $200 million Gold and Precious Metals Fund /quotes/comstock/10r!userx (USERX 15.46, +0.10, +0.65%) .
Industrial demand for silver is expected to pick up in the second half, although this year's total demand is still forecast to lag last year's levels. Likewise, in crude oil, this year's demand is also expected to stay lower than last year, but investors, pushing up oil prices by 50% this year, seem to focus more on economic optimism.
More than 60% of silver produced last year was for industrial uses. In comparison, only slightly more than 10% of gold is used in industries such as electronics and dental cares.
"The [investment] scenario is pretty strong for silver," said Frank Holmes, chief executive officer at U.S. Global Investors Inc., which manages funds such as the $200 million Gold and Precious Metals Fund /quotes/comstock/10r!userx (USERX 15.46, +0.10, +0.65%) .
Industrial demand for silver is expected to pick up in the second half, although this year's total demand is still forecast to lag last year's levels. Likewise, in crude oil, this year's demand is also expected to stay lower than last year, but investors, pushing up oil prices by 50% this year, seem to focus more on economic optimism.
More than 60% of silver produced last year was for industrial uses. In comparison, only slightly more than 10% of gold is used in industries such as electronics and dental cares.
