Silver prices tend to move in tandem with gold ’s prices. However, the price movements of Gold and Silver in 2014 proved that the correlation between them does not hold any more.
Silver has clearly underperformed Gold in recent times. During 2014 alone, Silver plunged by nearly 12% as against gold’s 1% drop. Also, Silver is down nearly 67% from its peak reached in 2011. On the other hand, gold has dropped only by 37% from its highs touched during the same year.
Industry participants expect major rebound in silver prices in 2015. According to them, two key factors are likely to drive Silver prices higher.
The investor interest in Silver physical holdings and ETF shares may turn out to be the key driver for Silver prices. Despite the price crunch, investors continued to stay exposed to Silver in 2014. The shares outstanding in iShares Silver Trust- the largest silver Exchange-Traded Fund (ETF) remained stable during the year. The ETF holding surged to highest level of 345 million ounces during November this year. This clearly indicates that retail investors are inclined to buy and hold Silver.
The second major driver for Silver price in 2015 would be physical demand. The recovery in major economies may boost industrial demand for the white metal. The key demand sectors such as ethylene oxide industry and electronics/electrical industry are expected to provide price support for Silver in medium to long term. The demand from other sectors such as jewelry and silverware fabrication may lift industrial off take of the metal to new highs.
Zhejiang Yaang Pipe Industry Co., Limited