Investors' desire for precious metals is deepening after the European Central Bank's $1.3-trillion (U.S.) stimulus drove gold to a five-month high and silver to the brink of a bull market.
Their buying helped boost the value of exchange-traded products backed by gold and silver by $8.94-billion this month, the most since September, 2012, data compiled by Bloomberg show. Hedge funds and other speculators in futures are the most bullish on gold in two years and have bet more on silver in all but two weeks since the start of November.
At a time when the price of almost every other commodity is sinking, silver and gold are having their best start to a year in more than three decades.
"Silver is tied to gold, and they move with trust," David Rosenberg, the Toronto-based chief economist at Gluskin Sheff & Associates, which oversees C$8-billion ($6.4-billion), said. "There's an increasing number of global investors who are starting to lose trust in the world's central banks."
Gold rose 1.2 per cent to $1,292.60 an ounce on the Comex in New York last week, after touching the highest since August. Silver jumped 3.1 per cent to $18.30 an ounce.
Silver's 17-per-cent advance this year in futures is almost twice the gain in gold. Even so, gold is still trading at 71 times the price of silver, compared with an average of 58 in the past decade.
Evidence of demand in the physical market is also apparent. China's silver imports climbed in December to the highest since February, customs data showed last week. The U.S. Mint sold a record 44 million ounces of coins made from the metal in 2014.
Goldman Sachs Group Inc. says low inflation and higher U.S. interest rates will drag down gold prices later in 2015. The bank forecast an average of $1,089 next year on Jan. 23, from a previous estimate of $1,200. Bullion dropped 29 per cent in the previous two years, and silver plunged 48 per cent as the American economy improved.
Weakening global growth will hurt industrial demand for silver, used in solar panels and electronics, according to Jessica Fung, a commodities analyst at BMO Capital Markets in Toronto.