Coeur d'Alene Mines Corp. (CDE)

[printmail01]

Silver May Advance to $20 as Dollar Drops, Bank of America Says
Share Business ExchangeTwitterFacebook| Email | Print | A A A By Kim Kyoungwha
http://www.bloomberg.com/apps/news?pid=20601012&sid=aiZxK2TRfPR8

Oct. 29 (Bloomberg) -- Silver may jump to $20 an ounce next year supported by a weaker dollar and increased industrial and investment demand, according to Bank of America Merrill Lynch, which dubbed the metal “the golden child.”

Silver, which traded today at $16.28 an ounce, has doubled from last year’s low as the U.S. currency dropped and central banks cut interest rates, Michael Widmer and other strategists wrote in a report received yesterday. “Looking forward, exchange rates are set to support silver,” the report said.

Investors have raised precious-metal holdings, including gold and silver, to guard against a gain in inflation and declines in the dollar. Silver held in ETF Securities Ltd.’s exchange-traded commodity products rose to a record 21.199 million ounces as of Oct. 22, according to the company.

“We believe that a spike towards $20 an ounce is possible in 2010,” the strategists said. Still, “after the recent sharp price rises, we are cautious on silver in the near term.”

Silver for immediate delivery rose 0.7 percent to $16.265 an ounce at 9:12 a.m. in Singapore, taking this year’s gain to 43 percent. The metal, which last traded at more than $20 in March 2008, has declined about 10 percent from a 15-month high on Oct. 14.

Emerging-market governments will probably continue to diversify their reserves out of the dollar, weakening the U.S. currency and boosting the euro, said the report, which was dated Oct. 23. The dollar may end 2009 at $1.50 to the euro, it said, citing the bank’s currency strategists. Today’s rate was $1.4704.

Some silver and gold investors “increase their exposure to these precious metals for similar fundamental reasons, such as a weakening dollar or an increase in liquidity,” the report said. “Given that silver is cheaper than gold, market participants can substitute into the less expensive alternative.”

Gold for immediate delivery, which rose to a record $1,070.80 an ounce on Oct. 14, traded today at $1,032, more than 60 times more expensive than silver. Spot gold has climbed 17 percent this year.

To contact the reporter on this story: Kyoungwha Kim in Singapore at [e-mail]

Last Updated: October 28, 2009 21:51 EDT