What can be expected for silver?
Silver Investing Won't Be in Vain
"UBS believes that the outlook for silver prices is positive and expects the upward trend in prices to continue in the medium term, although with continuing high volatility.
We expect that investment demand, driven by U.S. dollar weakness and gold strength, will continue to support higher prices. UBS forecasts that silver prices will average just over $12.00 per ounce in 2006, and will increase to an average of $15.00 per ounce in 2007.
The dramatic increase in silver prices through the second half of 2005 and start of 2006 was largely driven by speculation that the approval of a proposed silver exchange-traded fund (ETF) would result in increased investment demand and support higher silver prices.
After reaching a high of $15.20 per ounce in May, silver prices corrected down on profit-taking following the ETF approval, and on a general pullback across the precious metals complex. Silver prices are currently trading near $11.00 per ounce.
The silver market is substantially smaller than that of gold or base metals. Identified global silver-bullion physical stocks have been declining for over a decade and are currently equal to about one year's worth of demand (compared with gold physical stocks at about 16 years of demand).
As a result, silver prices are more volatile than gold prices, usually by about 10% to 15%.
While this increased volatility does pose additional risk, it also creates the potential for higher returns. While continuing volatility in silver prices makes identification of a good entry point difficult, we believe that the potential upside from current levels is attractive."