Where is Silver going?

-- Silver may outpace gold through mid- 2010 as a recovering global economy increases industrial demand, said Citigroup Inc.
The CHART OF THE DAY shows the ratio of gold to silver. An ounce of gold bought 59.4 ounces of silver on Oct. 14 when gold for immediate delivery jumped to a record $1,070.80 as investors sought an alternative to the weakening dollar and a hedge against inflation. That compares with 48.5 ounces when gold first exceeded $1,000 on March 13 last year and 43.6 on April 19, 2006, the lowest level in the past 10 years.
“Silver is set to benefit from stronger gold, but also the improving outlook for global industrial production,” said David Thurtell, a London-based analyst at Citigroup, in an interview. “I think the gold-to-silver ratio can get to the low 50s.”
When gold reached $1,000 for the first time, silver traded above $20 an ounce, compared with $17.82 now. Silver has already climbed 56 percent this year, more than double the 21 percent advance in gold. Gold is on course for its ninth straight annual gain while the U.S. Dollar Index, a gauge against six major currencies, has fallen 7.4 percent this year.
“The dollar’s decline has been pushing gold to a series of record highs,” Harjas Wadhwa, vice president for New Delhi- based AUM Capital Market Private Ltd., said. “If gold moves higher from here, you’d expect silver to outperform,” he said. “It has a lot of catching up to do” since “bullion’s bridesmaid” was more than $20 an ounce when gold first surpassed $1,000, he said in a report.
Industrial applications such as electrical switches and batteries accounted for 50.3 percent of silver demand in 2008, compared with 40 percent five years earlier and 51 percent in 2007, according to The Silver Institute. Use in jewelry comprised 18 percent, followed by photography with 12 percent. “Net investment” about doubled from 2007, to 5.7 percent of demand, according to the Washington D.C.-based institute. The world economy will expand 3.1 percent next year after shrinking 1.1 percent in 2009, the International Monetary Fund forecasts.

New Record High for Gold

The price of gold leapt to a record peak above 1,070 dollars per ounce here on Wednesday as the dollar slid in value against the European single currency.
On the London Bullion Market, gold struck 1,070.80 dollars an ounce, which was the highest level in history.
The latest peak was forged as the euro surged above 1.49 dollars for the first time since August 2008.
In recent days and weeks, gold has enjoyed a record-breaking run as the tumbling dollar has stimulated demand.
A fading US dollar makes the precious metal cheaper for investors holding other currencies. Gold is used in jewellery, dentistry and electronics

Silver bullion information

-- With gold at last piercing a new high, investors may next turn their attention to silver, which now looks overdue for a rally even as it and other metals remain constrained by a halting global industrial recovery.Often dubbed bullion's bridesmaid, silver is now trading at near its lowest ratio to gold in a year, slipping to around the equivalent of 59 units per ounce of gold, just above September's low and down more than a quarter from the peak in late 2008.Signs are emerging of investors seeking an alternative to gold -- which hit a lifetime high of $1,048.20 an ounce on Wednesday, surpassing the previous record in March 2008 -- as a hedge against inflation and a falling dollar.India's HDFC Bank, a large seller of gold in the world's top consumer of the metal, is looking at offering silver bars for sale in some cities because of interest from investors, a bank executive said on Wednesday."If it does move higher, you'd expect silver to outperform. The last time gold hit its high, silver was trading at $20. It's got a lot of catching up to do," said Mark Hewlett, a commodity analyst at Cornhill Capital in London.Silver was little changed at $17.44 on Wednesday, moving closer to a 13-month peak of $17.63 in the middle of September but nearly 19 percent below its its record high of $21.24 from March 17, 2008, the same time gold last peaked.Unlike gold, investment into the world's largest silver-backed exchange-traded fund, the iShares Silver Trust, has flatlined for the past three months, while gold inflows have boosted ETF holdings to near record highs. Silver holdings were unchanged at 8,594.22 tonnes.But like gold, silver has also witnessed a surge in speculative long investment on the Comex futures exchange.Physical trading was muted in Hong Kong, with silver bars offered at a discount of 10 to 20 U.S. cents to the spot London prices, barely changed from last week."Physical demand for gold will definitely slow down because of the high prices. Platinum is still expensive, so probably people would like to buy silver because it's cheaper," said a physical dealer in Hong Kong."But I still have doubts because most investors see silver as an industrial metal," he added.