Silver Posts Longest Rally Since August on Rising Haven Demand

Silver futures posted the longest rally since August, extending a 2014 rebound after last year’s bear market sent the metal to the biggest loss since 1981.

Prices have gained 2.9 percent this year as turmoil in emerging markets, slowing economic growth and stimulus cuts by the Federal Reserve reignited demand for haven assets. European Central Bank President Mario Draghi reiterated today that the bank may take more accommodative action if money-market turbulence resumes. Borrowing costs stayed at a record low.

Silver has rebounded 9.7 percent from a 34-month low on June 28 as physical demand increased. Sales of coins by the U.S. Mint rose almost quadrupled in January, while gold purchases surged 63 percent. Almost $3 trillion has been erased from the value of equities worldwide this year.

“People are still looking for safe-haven assets,” Phil Streible, a senior commodity broker at R.J. O’ Brien & Associates in Chicago, said in a telephone interview. “Traders are starting to reposition, based on concerns over emerging-market growth.”

Silver futures for March delivery advanced 0.6 percent to settle at $19.928 an ounce at 1:38 p.m. on the Comex in New York. The price rose for the fourth straight day, the longest rally since Aug. 27.

“We remain firmly determined to maintain the high degree of monetary accommodation and to take further decisive action if required,” Draghi said.

‘Easy Money’

“Draghi’s statement is dovish,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “With concerns about global growth, it is becoming clear that it will not be easy for officials around the world to retract easy money that they have been pumping to stimulate growth.”

Gold futures for April delivery rose less than 0.1 percent to $1,257.20 an ounce on the Comex. The price has climbed 4.6 percent this year.

In 2013, silver tumbled 36 percent and gold fell 28 percent, the biggest declines in 32 years, after some investors lost faith in precious metals as stores of value.

A Bloomberg survey in December 2012 showed that analysts and traders expected silver to be one of the best performers in 2013, with a 33 percent return. Instead, prices plunged into a bear market in April as investors shunned the metal in favor of equities. The Standard & Poor’s 500 index of shares gained 30 percent last year, the biggest increase since 1997.

The Fed said Jan. 29 it will reduce monthly bond purchases to $65 billion from $75 billion, the second straight $10 billion cut. Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system.

Gold holdings in exchange-traded products backed by the metal fell 34 percent in the past year, erasing $70.7 billion from the value of the funds.

Holdings in silver ETPs have declined 0.2% in the past 12 months.

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