Silver Price Likely to Out Perform the Gold Price in 2008

According to Kotak Commodity Services Ltd (KCSL) silver is likely to outperform gold this year.

"We forecast an average gold price of $814 an ounce in 2008; while silver is more likely to average $17 an ounce," said KCSL in a report.

This would put silver in a higher ratio to gold than ever before (apart from some occasional spikes)

Over the last 7 years, gold and silver has grown at a CAGR (Compound Annual Growth Rate) of 14.41% and 17.34% respectively.

It has been considered that the silver price is likely to outperform gold price this year in line with the long-term declining trend of gold-silver ratio. This could mean that gold may witness a 17 per cent rise this year, whereas silver could increase by 27 per cent.

On Wednesday last (2nd January 2008) gold was up in Asian trade by $5 at $838.70 an ounce, while silver was up six cents at $14.85 an ounce. Last year, gold averaged $695.39, while silver was at $13.38.

This year, gold poses the downside risk and any upside surprise in the dollar would cap its rise. "Precisely for this, we are cautious." The report said, adding that the strategy should be commodity-specific. "Gold and silver should find a place in asset allocation. And for the traders, the strategy should be to time the market, while investors should accumulate these metals on any dips and correction." The report said.

Despite this it does not look likely the dollar will strengthen anytime soon and both are likely to rise. For some it is a matter of which will perform the best and silver is looking very promising to outperform gold in 2008.

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