Gold and Silver Snips

ORONTO (miningweekly.com) – Whether the gold price eases or moves higher, silver will likely do the same, but to a greater degree, analysts at VM Group said in a report on Wednesday.

“Silver is singing to gold that old refrain: 'anything you can do, I can do better,” VM comments in the September issue of its BNP Paribas Fortis/VM Group Metals Monthly report.

“So if gold shifts higher, then silver will continue to outperform.”

However, if gold goes down, “so will silver, and by more”.

VM expects a retreat in silver prices in the short term, but then further gains in the medium term, as gold resumes its upward path.

“Whether silver can take out its 2008 high of over $20/oz is debatable, however; at current relative prices it will probably require a gold price in excess of $1 100/oz,” the VM analysts said.

“Not impossible, but unlikely to be seen in a hurry.“

In the three weeks to September 17, gold's dollar price climbed 8%, while silver rose an “astonishing” 22,3%, to $17,38/oz over the same period.

This reduced the gold/silver ratio down to 58,57, the most it has been in favour of silver since mid-August 2008.

However, compared with the March 2008, when gold last rose above $1 000/oz, silver is still relatively undervalued – it was above $20/oz at that time.

“The explanation is that this time last year silver plunged, when an outright global economic depression appeared a real possibility, and it has yet to fully recover,” VM said.

In a report on Wednesday, RBC analysts Michael Curran and Cailey Barker also predict that gold and silver prices will pull back over the next month or two, followed by renewed strength later in the year.

The believe silver will likely retreat to the $14/oz to $15/oz range, but could reclaim the $20/oz level in the next round of strength, if gold tests the $1 050 level.

RBC maintained a silver price forecast of $13,25/oz for 2009 and $13,50/oz for 2010.

“While our 2009 forecast looks a little light, as year-to-date spot silver has averaged $13,60/oz, we are waiting to see if our forecast of a pullback in the next month or so proves accurate,” the analysts said.