Lucky seven for silverLucky seven for silver
By: Gareth Tredway
Posted: '23-AUG-04 16:21' GMT © Mineweb 1997-2004
JOHANNESBURG (Mineweb.com) -- Coming off a strong July, the price of silver has continued to climb steadily in August. Kamal Naqvi, precious metals analyst at Barclays, reckons that we are now headed for $7/oz.
“Its fair to say that up until the last few days, the silver price had actually fared better than gold,” says Naqvi, “It is pretty clear that the funds that have appeared, have moved into silver rather than gold.”
He says the risks weighing on the dollar are definitely pointing towards an “upside rather than downside” for the silver price. “You will not see many exposed positions on the short side,” says Naqvi. “Seven is definitely the next target.”
The price retreated heavily after reaching a 16-year high of $8.29/oz on April 2, going as low as $5.51/oz by mid-May. At that time, Naqvi tipped the metal to rise from those levels.
The silver market is very illiquid, meaning that even a relatively-modest move in or out of the metal can cause a sharp price change. Although this bodes well for silver bugs who will be imagining a perpendicular price spike, the price can also go the other way just as easily and very quickly.
For now upwards seems the preferred direction according to Naqvi. Uncertainties in the US, including growth rates, high oil prices, and the upcoming presidential are keeping the dollar at the $1.23/euro level. Naqvi says that this will persist until election time in November, when he sees the dollar strengthening again.
The Barclays house view is that the dollar will end the year at $1.16/euro. This added to the assumption that oil prices will ease, and strong growth will be seen out of the year at the end of the year, means there will be a long liquidation out of metals at that time, according to Naqvi.
Speaking fundamentals, Naqvi says India, the metal’s biggest market, has been “dead for most of the year.”
The silver price lost ground on Monday, trading at $6.7050 by afternoon (SA time), down $0.1350/oz from Friday. This was on the back of dollar strength, up at $1.217/euro for the day.