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Tuesday, September 1, 2009

Gold's Fall Has a Silver Lining

By The Wall Street Journal

Designer Jewelry

Silver has enjoyed greater price gains than gold so far in 2009, and that was the case again Monday as it benefited from hopes an economic recovery will jump-start industrial demand.

Nearby August silver gained 3.1 cents to $14.191 an ounce on the Comex division of the New York Mercantile Exchange, while most-active December gained 3.2 cents to $14.231. By contrast, most-active December gold lost $10.90 to $942.30 an ounce.

Silver often follows gold, although sometimes with greater moves since it is a less-active market and thus more prone to volatile price swings. But so far in 2009, December silver has risen 26%, while December gold is up 6%. "Silver sort of has a dual personality.

It has a role as a precious metal and is sometimes referred to as "poor man's gold," often bought with gold as a hedge or safe haven against factors such as dollar weakness, inflation fears and geopolitical disturbances, and conversely selling off with gold when these supportive influences abate.

But silver has a more significant role as an industrial metal because of such uses as in electronics and batteries. Thus, silver also sometimes tracks base metals like copper, which rose Monday. Copper prices have more than doubled since their December lows mainly because of strong Chinese demand but also amid expectations of economic recovery elsewhere.

It's the risk-appetite theme, based on the expectation that the economy is going to recover. Silver, having more industrial applications, is benefitting from that.

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In other commodity markets:

SOYBEANS: Prices rallied amid strong demand for dwindling supplies and speculation an early frost will curb harvest. Soybean development is one to two weeks behind normal in much of the Midwest, leaving the crop vulnerable to an early frost that ends the growing season, analysts said. Chicago Board of Trade September soybean futures rose 57 cents to $10.80 a bushel. November soybeans, which represent the fall harvest, rose 34.50 cents to $10.0750.

NATURAL GAS: Futures settled higher Monday, rising off a seven-year low on bargain buying and strength in the equities markets. Gas for September delivery on the New York Mercantile Exchange settled floor trade 11.9 cents higher, or 4.2%, at $2.923 a million British thermal units.

CRUDE OIL: Futures danced up against $75 a barrel but didn't cross the line in a day of light and relatively quiet trading. This follows last week's torrid gains, when prices rose more than 10% over four days. Nymex light, sweet crude oil for October delivery settled 48 cents, or 0.7%, higher at $74.37 a barrel.