As silver nears $50 an ounce, coin merchants report short supply

Filed under Financial

Silver prices are at record levels and could climb higher as the economy recovers, experts said.
With silver prices soaring, some Chicago  merchants are struggling to keep coins and bars in stock. Photo by Jamie Coughlin.

By Jamie Coughlin

— Medill News Service

The economy’s recovery has boosted demand for silver at local merchants as prices continue to rise. 

Silver closed  at $47.15 an ounce Monday, up 2.4 percent, though the gains retreated after a record showing in the morning, CNNMoney reported. Silver hit $49.82 per ounce early in the day, surpassing the all-time high closing price of $48.70 set 31 years ago, CNNMoney said.

Some saw the slowing after the morning gains as an indication that prices might have reached a ceiling, while others predict silver will hit $75 an ounce within a year, CNNMoney said.

Silver futures climbed 8.2 percent  to $49.82 an ounce at one point Monday, before retreating to close at $47.15 an ounce, the Wall Street Journal reported. Gold hit a record closing price of $1,509.10 an ounce Monday, up 0.4 percent, after reaching an intraday high of $1,519.20, CNNMoney reported.

Demand three times as high as last year

Fueled by a weak dollar and inflation fears, high silver prices have spurred a buying spree. Area merchants said silver coins are difficult to keep in stock. “Demand for silver is very high, almost three times as high as this time last year,” said Anil Shah, president of World’s Money Exchange Inc., a dealer of silver and gold coins and bars in Chicago’s Loop.

“Silver eagle coins are the most popular. Silver bars are hard to get right now. Demand cannot keep up with supply,” Shah said last week.

The sluggish economic recovery has been good news for silver investors, as silver prices generally rise as the value of the dollar falls. “Silver’s price is reflected by the value of our currency,” said James DiGeorgia, editor of goldandenergyadvisor.com, an online newsletter analyzing metals and energy. “There is no way for the price to go down unless there is economic growth and the dollar strengthens.”

Silver prices often predict industrial recovery

While investors also have used gold has a hedge against currency devaluation because it is a tangible asset, silver has industrial value, so investors look to silver when they expect manufacturing to pick up, experts said. It is commonly used in solar power generation, flat screen TVs and other electronics, batteries, silverware and photography.

During the recession, gold climbed faster than silver because it wasn’t tied to a slowdown in industry, said Mike Bisceglia, president of Stauer LLC, a print catalog and online jeweler based in the Twin Cities. “As long as the economy is decent, silver will go up faster.”

But not all analysts are bullish on silver. Some say the commodity could stumble. “Silver prices are extremely extended at this time. I wouldn’t suggest going into silver right now,” said Michael Arold, an individual investor and investment model manager at New York-based Covestor Inc., a trading services company.

Updated at 9:58 p.m. April 25, 2011

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