Silver is leading all commodities this year, up more than 23 per cent. Gold, in comparison, has gained 12 per cent. All precious metals started re-establishing long positions after the fourth quarter of last year, when there was a severe decline as the euro dropped, equities weakened and commodities fell across the board. There was a lot of margin-related selling in silver as well as in other precious metals. From a high of $50 (Dh183.66) last April, silver crashed to $26 close to year-end, but since the New Year, the market has recovered well. Safe haven asset The rally in silver began at the start of the year. That, according to some analysts, is due to renewed investor demand, especially from those who see it and gold as safe-haven assets against devaluation of currencies arising out of loose monetary policies. The US Federal Reserve\'s comments last month on keeping the interest rate near zero until 2014 put downward pressure on the dollar, which in turn helped reinforce the rally in precious metals, including silver. And against continued weakness in Europe, gold and silver are still considered valuable hedges. Also, silver is undervalued not just relative to gold, but also, as some suggest, in terms of its demand and supply. Article continues below Silver investors might be wondering: what to make of last month\'s run? Does the rally have legs? Will it continue to be a lucrative investment? With regard to where silver prices could go this year, there are some who suggest a high of more than $50, but there seems to be consensus on the average price hovering in and around mid-$30s. Gerhard Schubert, head of precious metals at Emirates NBD, thinks it is too early to call for another bull run, but the signs for an extended rally are good. \"The sales of physical silver all over the world are very strong and the technical and industrial applications for silver are growing,\" he said. Amit Lodha, portfolio manager at Fidelity Investment\'s Global Real Asset Securities Fund, believes that one reason of the recent spike in silver prices is due to the rebound in the US economy, which is beginning to drive industrial demand for the metal. Bull run likely? But he also adds that it is too early to say if it marks the start of a bull run in precious metals as for that to happen there\'s a need for higher inflation rates in developed economies. \"Inflation is low due to the high levels of spare capacity currently being experienced as a consequence of low economic growth,\" Lodha told Gulf News in an email. To see a sustainable rally higher, Marc Ground, commodity strategist at South Africa\'s Standard Bank, feels China needs to work through its above-ground stock and the current signs are that it is doing exactly that. It may take a few months to work down the 6,130 metric tonnes of stock, he said. \"However, we believe investment demand is likely to rise,\" Ground said, in an email. Ground also added that the net speculative length is \"very low\" for this precious metal. The levels, as per cent of open interest, during the last week of January 2012 have been similar to those seen during January 2009. Standard Bank has an average price of $34.50 an ounce for the year, with quarters three and four forecasts of $36.50 and $37.50 respectively. The bank has put a fair value of $31.25 with good buying opportunity on approach of $29, Ground said. New York-based James Steel, HSBC\'s head of commodities, told Gulf News in a phone interview that the bank has a range of $28 to $38 this year. \"It will not rally as much for the rest of the year — that\'s because the difference between silver and other precious metals is silver\'s mine supply situation is quite buoyant,\" Steel said. \"Our average price is around $34 and we are looking for the market to remain fairly strong,\" he said. Steve Land, lead portfolio manager of Franklin Gold and Precious Metals Fund at Franklin Templeton Investments, said that as new primary mines are built, it would not be surprising if annual silver production was to double over the next five years. \"This rapid increase in supply and the relatively large amount of scrap silver available in the world makes us cautious on the medium term and leaves silver much more vulnerable to shifts in sentiment, such as we saw last year,\" he explained. Gold-silver ratio A notable factor in judging silver price movements is the level at which the gold-silver ratio is trading, Pradeep Unni, head of trading and research at Richcomm Global, Dubai, said. That ratio currently stands around 52.30, which means silver is about 50 times cheaper than gold. \"Every time the ratio reached this zone, we have noted significant selling of gold and accumulation of silver,\" Unni said. \"There is a close likelihood that the current rally in silver isolating gold is clear signal of this trade strategy. \"The trend looks convincingly strong at the current levels, but a close above the $35 is a necessity to provide further upside momentum,\" he added. \"Beyond $38, silver might head towards $50 and thereafter to our ultimate target of $70.\" Though Schubert believes silver has opportunities to go significantly higher during 2012 — even touching a high of $50 — difficulties remain in the form of the volatility displayed in the daily market trading ranges. His average price for the year is $36 an ounce, with a range between $26 and $52. \"The size of the positions deployed from the individual investor need to reflect the huge potential for volatility, meaning that purchases, as well as sales, should be staggered instead of putting all eggs into one basket,\" Schubert said. Twin role Pointing to the twin role of an industrial and monetary asset, silver tends to be more volatile than gold and this must be taken into consideration when investing in this product, said Unni. \"Correction to the tune of about five to 10 per cent is quite normal in silver and thus enough buffer needs to be kept to cover such adverse price movements,\" he said. \"However, if there is a correction in precious metals in the coming months, and given the option to invest in either gold or silver, the first preference would go to silver as the potential of gains is massive.\"