Further weakness could be seen and it is worth noting that gold and silver saw considerable weakness last December (see chart above) and both bottomed near year end on December 29th prior to strong gains in January 2012.
Support for silver is at $30.67/oz and $30/oz. Gold’s support is at $1,647/oz and below that at $1,600/oz.
Silver will rise as much as 29% to $40.25/oz, from $31.10/oz today, in 2013.
This is based on the median estimate of 49 analysts, traders and investors compiled by Bloomberg.
Global investment through silver backed exchange traded products reached a record 18,854 metric tons in November, or more than nine months of mine output, data compiled by Bloomberg show. Holdings are now valued at about $19.2 billion.
Bullion dealers all over the world report robust demand for silver and there has been a shift in many Asian and Middle Eastern markets from gold to silver - due to silver's relative cheapness and undervaluation versus gold.
According to Bloomberg, one of Singapore’s largest suppliers of coins and bars to retail investors, says sales tripled since October, part of a global surge in demand for silver that drove holdings to a record.
Silver almost tripled since the end of 2008, lagging behind only platinum in gains for precious metals this year as policy makers from the U.S. to China to Europe pledged more action to boost economies. That’s attracting investors betting that stimulus will stoke inflation and debase currencies. It’s also leading to diversification into silver by some who believe that economic growth will strengthen industrial demand for silver, 53% of which is used in everything from televisions to batteries.
Silver advanced 12% to $31.13 this year, compared with a 6.6% gain for gold and 14% rise for platinum. The Standard & Poor’s GSCI Index of 24 commodities dropped 0.3 percent and the MSCI All-Country World Index of equities jumped 14%. Treasuries returned 1.8%, according to Bloomberg.
Hedge funds and other large speculators increased bets on higher prices 12-fold since the end of June, to a net 34,862 futures and options, U.S. Commodity Futures Trading Commission data show. That’s about 50% higher than the average over the past five years, a period during which traders have never been bearish.
Equity investors also believe higher prices are coming.
Shares of Mexico City-based Fresnillo Plc (FRES), the largest primary silver producer, rose 25% this year. The company will report a 22 percent gain in net income to a record $927.1 million in 2013, according to the mean of seven estimates compiled by Bloomberg. Coeur d’Alene Mines Corp. (CDE) in Idaho, which gets about 65 percent of its revenue from silver, fell 6.3 percent to $22.63 since the start of January and will reach $31.89 in 12 months, the average of analysts’ predictions shows.
Investors bought 1,464 tons through ETPs this year, data compiled by Bloomberg show.
Silver holdings in the IShares Silver Trust, the biggest exchange-traded fund backed by silver, were unchanged at 9,871.29 metric tons as of Dec. 19, according to figures on the company’s website.
Prices could go lower should economic growth slow because it would curb demand for consumer goods. A car contains as much as 30 grams and a mobile phone about 0.25 gram, according to the Washington-based Silver Institute.
However, investment and store of value demand for silver looks set to continue to grow at a steady rate in 2013 and this should compensate for any decline in silver industrial demand as it has done in recent years.
The silver market remains a very small market and this continuing global investment and store of value demand should lead to silver reaching a real record high, inflation adjusted, of over $140/oz in the coming years.