Silver Climbs Near 31-Year High
- By MATT WHITTAKER And DEVON MAYLIE
Silver prices neared 31-year highs on a brightening outlook for the global economy and as inflation concerns have revived.
Silver for February delivery rose 72.6 cents, or 2.3%, to settle at $32.2980 a troy ounce on the Comex division of the New York Mercantile Exchange. It was the metal's strongest close since March 1980.
"It's benefiting from optimism," said Ralph Preston, market analyst at Heritage West Financial.
Silver is a precious metal but unlike gold it has far more industrial applications. Because it is significantly cheaper than gold, which settled at $1,388.20 an ounce Friday, silver is becoming a popular way to hedge against rising prices, with inflation gaining in Europe and China. While inflation in the U.S. remains tame, some believe the Federal Reserve won't be able to control longer-term price pressures stemming from ultralow interest rates and Fed purchases of Treasurys to stimulate the economy.
![[SILVER]](http://si.wsj.net/public/resources/images/BF-AA561_SILVER_NS_20110218210906.jpg)
At the same time, the economic growth that is sparking inflation fears also is prompting a resurgence in manufacturing and consumer purchases.
Silver has gained 4.5% this year and 20% from a two-month low hit Jan. 25. In 1980, the Hunt brothers of Texas attempted to corner the silver market and pushed prices above $40 a troy ounce.
"It's a much more orderly market" nowadays, said Stephen Flood, director of Dublin-based bullion dealer GoldCore.
Commercial traders, like silver miners, have been adding to their short positions in futures contracts throughout February, a sign they are locking in prices. The commercial net short has risen to 50,796 lots in the week ended Feb. 15, from 44,340 lots at the start of the month, according to the latest data from the Commodity Futures Trading Commission.
Mexican company Minera Frisco SAB is hedging production as it seeks to bring previously unprofitable silver projects online, while miners such as Sweden's Boliden AB and U.S. Silver Corp. also set hedging deals for 2011.
The practice of locking in prices at current levels for future sales went out of vogue over the past few years as investors put pressure on precious-metal producers to gain more exposure to record prices. AngloGold Ashanti Ltd. and Barrick Gold Corp. spent much of 2009 and 2010 closing gold hedges.
Minera Frisco, recently spun off by Mexican billionaire Carlos Slim's conglomerate Grupo Carso, has a 70-million ounce silver-hedging program booked out to 2013 that it announced in January in a stock-exchange filing.
Boliden has 2.23 million ounces of silver hedged for 2011 and a total 6.78 million ounces hedged for the period to 2013 as part of its Garpenberg mine expansion. It also is hedging zinc, copper, lead and gold production from that mine, it said. U.S. Silver Corp. is hedging some silver production in 2011, for 500,000 ounces, or 20% of its output, although it has no plans to hedge further production after this year.
"With the recent run-up in silver prices and the extreme volatility we have witnessed, U.S. Silver believed it would be prudent to guarantee a portion of our future cash flow," Chief Executive Tom Parker said.
—Andrea Hotter and Tatyana Shumsky contributed to this article. Write to Matt Whittaker at matt.whittaker@dowjones.com and Devon Maylie at devon.maylie@dowjones.com
Silver for February delivery rose 72.6 cents, or 2.3%, to settle at $32.2980 a troy ounce on the Comex division of the New York Mercantile Exchange. It was the metal's strongest close since March 1980.
"It's benefiting from optimism," said Ralph Preston, market analyst at Heritage West Financial.
Silver is a precious metal but unlike gold it has far more industrial applications. Because it is significantly cheaper than gold, which settled at $1,388.20 an ounce Friday, silver is becoming a popular way to hedge against rising prices, with inflation gaining in Europe and China. While inflation in the U.S. remains tame, some believe the Federal Reserve won't be able to control longer-term price pressures stemming from ultralow interest rates and Fed purchases of Treasurys to stimulate the economy.
Silver has gained 4.5% this year and 20% from a two-month low hit Jan. 25. In 1980, the Hunt brothers of Texas attempted to corner the silver market and pushed prices above $40 a troy ounce.
"It's a much more orderly market" nowadays, said Stephen Flood, director of Dublin-based bullion dealer GoldCore.
Commercial traders, like silver miners, have been adding to their short positions in futures contracts throughout February, a sign they are locking in prices. The commercial net short has risen to 50,796 lots in the week ended Feb. 15, from 44,340 lots at the start of the month, according to the latest data from the Commodity Futures Trading Commission.
Mexican company Minera Frisco SAB is hedging production as it seeks to bring previously unprofitable silver projects online, while miners such as Sweden's Boliden AB and U.S. Silver Corp. also set hedging deals for 2011.
The practice of locking in prices at current levels for future sales went out of vogue over the past few years as investors put pressure on precious-metal producers to gain more exposure to record prices. AngloGold Ashanti Ltd. and Barrick Gold Corp. spent much of 2009 and 2010 closing gold hedges.
Minera Frisco, recently spun off by Mexican billionaire Carlos Slim's conglomerate Grupo Carso, has a 70-million ounce silver-hedging program booked out to 2013 that it announced in January in a stock-exchange filing.
Boliden has 2.23 million ounces of silver hedged for 2011 and a total 6.78 million ounces hedged for the period to 2013 as part of its Garpenberg mine expansion. It also is hedging zinc, copper, lead and gold production from that mine, it said. U.S. Silver Corp. is hedging some silver production in 2011, for 500,000 ounces, or 20% of its output, although it has no plans to hedge further production after this year.
"With the recent run-up in silver prices and the extreme volatility we have witnessed, U.S. Silver believed it would be prudent to guarantee a portion of our future cash flow," Chief Executive Tom Parker said.
—Andrea Hotter and Tatyana Shumsky contributed to this article. Write to Matt Whittaker at matt.whittaker@dowjones.com and Devon Maylie at devon.maylie@dowjones.com
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