Silver Posts Longest Rally in 45 Years on Rising Haven Demand

Silver posted the longest rally in at least 45 years on demand for an investment alternative amid concerns that the global economy will falter.

Today, reports showed U.S. homebuilder and New York manufacturing trailed estimates by analysts. The Bank of Japan boosted lending programs while sticking with a plan for unprecedented asset purchases to support a recovery. Commodities climbed to the highest in almost five months.

Silver has gained 13 percent this year as demand for coins and jewelry surged. Holdings in exchanged-traded products backed by the metal climbed last year as the spot price tumbled 36 percent, the most since 1981, amid a U.S. equity rally to a record. Spot gold has advanced 9.6 percent this year, while the dollar has dropped against a basket of 10 major currencies.

“The premium for gold and silver has increased as people are nervous about U.S. growth,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “The turmoil in the currency market has also pushed people toward precious metals.”

Silver for immediate delivery rose 1.1 percent to settle at $21.9348 an ounce at 5 p.m. New York time. The price climbed for the 13th straight session, the longest rally since at least 1968. Yesterday, the metal reached a nine-week high of $21.9791.

On Feb. 14, silver closed above the 200-day moving for the first time in a year.

‘Technical Buying’

“It has broken the downtrend, so there is some technical buying,” Meger said.

Silver futures for March delivery rose 2.2 percent to settle at $21.898 on the Comex in New York. Trading more than doubled versus the average in the past 100 days, data compiled by Bloomberg shows. The exchange floor was closed yesterday for a public holiday.

In the week ended Feb. 11, hedge funds turned bullish on silver with the net-long positions at 7,675 futures and options contracts, compared with 353 contracts in bearish wagers a week earlier, government data showed on Feb. 14.

Analysts including Morgan Stanley and Goldman Sachs Groups Inc. forecast a slump in silver and gold this year.

On Jan. 22, Morgan Stanley cut its 2014 forecast and predicted “more pain to come” for gold investors as investors shifted to equities.

‘Grind Lower’

Goldman analysts led by Jeffrey Currie, the head of commodities research in New York, said in a Feb. 12 report that gold will “grind lower” as the U.S. economy gains, reiterating a forecast for prices to reach $1,050 an ounce by the end of the year.

Gold prices plunged 28 percent last year as some investors lost faith in precious metals as stores of value amid the equity rally, subdued inflation and speculation that the Federal Reserve would reduce monetary stimulus, boosting prospects for the dollar.

Sales of silver coins by the U.S. Mint almost quadrupled in January to 4.78 million ounces from December. Today, spot gold reached $1,332.45, the highest since Oct. 31.

“The strength in the gold market and physical buying has helped silver,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “Worries about slowing growth will crimp the industrial demand and probably put pressure on prices, so it still remains to be seen if the rally can be sustained.”

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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