Gold and silver fever grips investors

[WestVirginiaRebel]

Financial Times:

When Jean-Claude Trichet announced a quarter-point jump in interest rates this week, gold and silver prices dipped as the European Central Bank chief emphasised his inflation-fighting focus.

But the two well-known inflation hedges were only temporarily dented by the tough talk; on Friday silver pushed above $40 a troy ounce for the first time since 1980 and gold pushed to a new all-time high in nominal terms at $1,474.19.

The metals’ rallies have clear links to rising fears about inflation. But recent predictions for silver to hit $50 and gold to breach $1,500 are based on more than just these fears.

“Both markets actually have surplus supply. Demand for both is good – particularly industrial demand for silver – but this isn’t enough to absorb all the supply,” says Suki Cooper, precious metals analyst at Barclays Capital. “That leaves the rest down to investor demand.”

Investors have indeed been piling in. Holdings of gold to back exchange-traded funds – the popular way for retail investors to gain exposure – jumped 19.9 tonnes on Thursday alone in the biggest single inflow since late January, according to Barclays. On the same day, holdings of silver jumped 42 tonnes to another record at 15,554 tonnes.

Interest itself has been triggered by a range of factors, not least geopolitical tensions. After a weak January, prices of the metals spiked higher in February when the unrest that toppled governments in Tunisia and then Egypt sent investors scrambling for havens.

During the financial crisis, investor fear manifested itself in strong demand for physical holdings. In spite of recent turmoil, there has not been the same scramble to buy physical supplies this time round.

“The fear factor is not as key right now,” says Osvaldo Canavosio, a hedge fund analyst at Man Investments in New York. “At the height of the financial crisis, in precious metals there was a bit of a panic to hold physical.”

Yet the haven buyers were out in force again on Friday, watchers said, as investors braced for a potential shutdown of the US government if last-ditch talks between Republicans and Democrats fail to reach agreement.
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Suddenly, the idea of having extra gold on hand doesn't seem like such a bad idea...

[SrWoodchuck]

I'm way too poor for gold & silver fever........I can barely pay attention.