Silver’s split personality feeds steep price drop
Silver’s split personality as an industrial and precious metal contributed to a steep drop for the second quarter, as the metal’s economic demand prospects and safe-haven appeal duel for investors’ attention.
“Silver had more froth in the price to work off versus other commodities,” after its “’bubble-esk’ run up in 2011, where it almost doubled over the course of three months,” said Elliott Orsillo, co-founder and portfolio manager at Season Investments LLC.
But Julian Phillips, a South Africa-based editor at SilverForecaster.com, believes that silver is “moving with gold as a monetary asset, despite not being recognized as such.” Industrial demand for the metal is “strong because its uses fall into the ‘need’ category,” where it’s used in electronics, solar panels and the medical field, Phillips said.
“With the monetary stresses now and for the next few years at current levels, there is little reason why prices should fall,” he said. “Gold will react more and more as a monetary metal and the silver prices will move with it, not with economic conditions.”
In fact, silver's industrial component may not have any influence at all on the metal’s price at these levels, said Brien Lundin, author of the Silver Bullet Strategy report, published by Gold Newsletter.