Is a Silver Bull Market Underway?

Silver bars U.S. Mint West Point gold commodities precious metals investing trading
Scott Eells/Bloomberg via Getty ImagesSilver bars sit in a vault at the U.S. Mint in West Point, N.Y.
By Katie Holliday

It is silver's time to shine after the precious metal climbed for seven straight sessions to notch gains not seen in nearly five years, and analysts say its winning streak is far from over.

Silver prices rallied to almost $23 a troy ounce Thursday, after logging collective gains of 17 percent in over the past seven sessions, as a surge in gold prices and a more positive outlook for global industrial production boosted sentiment.

"It's something that you can't really ignore at the moment ... There is plenty of talk about silver being in a bull market now, after the recent gains, it does look like it is in really good stead," said Stan Shamu, market strategist at trading-firm IG Group.

Silver prices, which are closely correlated to gold, have followed steep falls in the yellow metal this year. Silver plunged 40 percent from the highs of at the start of the year to lows of $18.19 in June 28, while gold dropped 29 percent during the same period.

Demand for the precious metals, which are viewed as safe havens, waned as investors grew more confident over a more stable global economy. However, prices have recovered in recent weeks as Fed dialogue suggested tapering plans could be delayed and a flare up of violence in Egypt renewed appetite for the safe haven assets.

Analysts say the better than expected industrial output data from China last week, which stoked optimism for industrial metals, also helped sentiment.

"One of silver's biggest components for use is industrials and we think that that's really what has given silver a decent shovel off," said David Lennox, resources analyst at equity-research firm Fat Prophets, referring to better than expected industrial output in China recently and signs of a recovery in the eurozone.

Lennox said the factors that helped spur silver's rally will continue to push the metal higher this year, and said it could hit highs of $30 to $35 before the end of the year.

Furthermore, silver's dramatic rally over the past week is bound to attract investor attention and help fuel further gains, added.

"There is one good way to get yourself on the radar, and that's to have a good price rally, all the speculators pick up on it and it then become self-feeding," he added.

IG's Shamu forecasts that silver will reach $24-25 an ounce in the short term, and highs of $28 by the end of the year.

"It looks like the trend in the short term for gold and silver is upwards they've broken through some key resistance levels," said Shamu.

Andrew Su, CEO of Compass Global Markets, said he expects silver to hit $25 over the next month on the back of a rally in gold and to surge to around $28 at some point in October, once Fed tapering has begun.

"The fall below $20 was overdone and we are seeing the early stages of a sharp and strong reversal," he said.

Su said the only scenario that could derail silver's rally, in his view, would be if the U.S. economy posted spectacular growth figures and consequently faster than expected tapering.

"This would see gold once again come under pressure and would translate to price pressure of silver," he said, adding that this wasn't his base case.

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Aside from the short lived blip in the late 1970's when the price was manipulated by the Hunt brothers' attempt to squeeze the market and drove the price to around $50/oz., the metal had been in decline as digital photography replaced film which had been its main industrial use. After the Hunt fiasco, silver lost 75% of its value. It eventually sank to under $4/oz. Today the world is awash with electronic gadgets, virtually all of which rely to some extent on silver for its excellent conductivity. That and the widespread replacement of "hard" currency with fiat money will enhance its value in years to come.

August 19 2013 at 2:43 PM Report abuse +1 rate up rate down Reply
Robert & Lisa

I think it is time for all the precious metals to shine. Over 3 years left of an Obamanation Presidency and if the economy picks up at all inflation will soar.

August 19 2013 at 12:23 PM Report abuse +2 rate up rate down Reply

The rich suck. It no longer matters. Take it all away from them and put them in prison in Cuba.

August 19 2013 at 9:14 AM Report abuse -1 rate up rate down Reply

Silver's better than 's CD's and bonds by a long shot, Especially due to the ability for cash out quickly at high prices.

August 18 2013 at 10:13 AM Report abuse +1 rate up rate down Reply

Now the $18 level was not realistic? Everyone was saying silver was just a rock...not worth anything...Silver is the most under valued commodity in the world. It should always mirror the price of a gallon of gas. 1/10th of an oz should be $3.50 or near the national average. $35 per oz.

Back in the 50s the silver dime in your pocket would buy a gallon of gas. It cannot do that today at $1.80 a 1/10th oz. We are all being ripped off. Buy gold and on yourself.

August 18 2013 at 9:58 AM Report abuse +1 rate up rate down Reply

There, wolf. There, castle.

August 18 2013 at 9:46 AM Report abuse -1 rate up rate down Reply

The silver and gold medals are so manipulated by people holding Paper silver and gold. HOLD on to your medals!

August 17 2013 at 9:55 PM Report abuse rate up rate down Reply
1 reply to projectoak's comment

You do mean METALS right?

August 18 2013 at 8:17 AM Report abuse +1 rate up rate down Reply
1 reply to collectiblespluskelsey's comment

Maybe he is a decorated war veteran.

August 19 2013 at 9:11 PM Report abuse rate up rate down

I was buying up silver bars, ingots and silver eagles when it was at $6.50 oz. It's going to be a nice inheiritence for my daughter.

August 17 2013 at 5:22 PM Report abuse +2 rate up rate down Reply

Take advantage of the prices today. It is an opportunity that was missed before. For those of you who bought higher thats unfortunate and yes the price was manipulated and the opportunity to buy more is now here at a cheaper price. Ask yourself why you bought in the first place. Nothing has changed.

August 17 2013 at 4:25 PM Report abuse +2 rate up rate down Reply

I keep hearing gold and silver are not commodities,,,,,,,,but our cell phones computers and other electronics are not possible without them????????

August 17 2013 at 3:07 PM Report abuse +4 rate up rate down Reply