Silver demand reaches record highs

The gold price continues to be supported by the crisis in the Ukraine, weakness in equities and higher-than-expected U.S. inflation readings. However, positive U.S. economic data continues to put pressure on the price. Yesterday last month's U.S. producer price index saw its largest increase since September 2012.

We have previously commented on the impact tensions in Ukraine will have on the price of gold and the silver price. We believe that until there is a civil war or energy supplies for Europe are threatened, then the impact of the current events will be minimal on the gold price. Should war or gas shortages come into play, then we will see real safe-haven demand kick in. However, with U.S. data continuing to portray a brighter picture it is likely that gold-buying will pick up on the dips, but there will be little to drive it significantly above $1,300 should the situation in Ukraine not change significantly.

Holdings in the SPDR Gold Trust were yesterday at their lowest since January 2009 at 780.46 tonnes.

Buying in China has reportedly eased on gold according to the Chinese Gold and Silver Exchange Society. Golden Week, a national holiday, saw demand drop by 30%, which was expected. However, buying in China has declined overall this year. For instance, gold and silver sales fell by 30% in April compared to last year. According to the president of the CGSE, buying patterns are returning to those seen in 2012. Whilst people are still buying gold, they are spending less in each transaction.

Silver demand reaches record high

The Comex silver price settled at its highest in a month yesterday, seemingly supported by the news that the London Silver Market Fixing company will end its silver-price fixing in August this year.

Yesterday the Silver Institute released its 2013 industry report. The demand for physical silver hit new records; 127.2 million ounces of silver bars were bought which was more than double the previous year and an all-time high. Purchases of medals and silver coins also hit a record of 118.5 million ounces.

Platinum and palladium, still bullish

Platinum and palladium prices eased yesterday due to some profit taking. Palladium is still near August 2011 prices and platinum remains steady after yesterday’s highs, not seen since March.

Analysts remain bullish on PGM prices as they are so bearish about the outcome of the strike action in South Africa. The strike is now being described as "South Africa’s longest and costliest strike ever." Whilst the return of some workers to the mines may be negative for PGM prices, the long-term outlook remains bullish for both metals due to tensions in the world’s top producers; Russia and South Africa.

About the Author

Jan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment.