Precious metals investors are trying to figure out if silver prices are next heading to $50 an ounce or $30 as the metal falls 4% on Wednesday morning amid news of progress on the U.S. debt ceiling.
Silver exchange traded funds crashed this spring partly on tougher margin requirements for futures contracts that removed some of the speculative froth from the market. However, silver ETFs are perking up again as global debt jitters and industrial demand help boost prices for the metal.
Silver prices climbed above $40 an ounce earlier this week but were pulling back on Wednesday. Futures slipped below $39 in morning trading.
Fund manager Eric Sprott believes silver prices may continue to climb and bring the gold/silver ratio back down over the next five years as the global debt crisis continues to worsen, according to The International Business Times.
The gold/silver ratio fell to multi-decade lows earlier this year as silver outperformed the yellow metal, but the ratio hit bottom this spring and bounced. The ratio recovered in May because silver fell much harder than gold in the spring correction in precious metals. Higher margin requirements added to the ferocity of the sell-off in silver. The chart below shows the ratio of a gold ETF versus a silver ETF.
Sprott projects silver prices will cross $50 an ounce by the end of the year, arguing that confidence in global currencies is receding, while industrial demand is also expected to boost silver prices.
The metal was stopped in its tracks in late April right around $50 an ounce, silver’s nominal all-time high.