Rising Silver Prices Have Analysts Optimistic

Analysts watching the silver market like what they’ve seen the past six months: a slow, steady growth in prices.

Silver closed at $5.62 per ounce Thursday in London markets - higher than it’s been since last summer, and a long way from last August’s low point of $4.62 per ounce.

“I’m kind of surprised that (the increase) didn’t happen sooner,” said John Lutely, senior adviser to the Silver Institute in Washington, D.C.

“I think the fundamentals for silver are so much better than any other metal,” he said, referring to depressed prices for gold, copper and other metals.

Analysts have been predicting a rally in silver prices for years, based on reductions in silver stockpiles and increasing industrial demand. A year ago this week, billionaire investor Warren Buffett announced that his company, Berkshire Hathaway, had quietly acquired 20 percent of the world’s known silver reserves.

Prices shot past $7 per ounce after Buffett’s announcement, but quickly tumbled.

A gradual increase in prices is better than a spike caused by speculative buying, Lutely says.

Last February’s rapid rise immediately priced many Asian countries out the market, including India, the world’s largest importer of silver. A gradual increase gives buyers time to adjust, Lutely said.

“There are real customers at the end of the line. … Think of the poor jewelry retailer,” he said. Last fall, the New York-based CPM group predicted that silver prices could double within three years, with prices rising as early as this quarter.

“We all hope this is a trend, and not another spike,” said Doug Silver, president of Balfour Holdings Inc., a mineral consulting firm in Denver.