Carlos Sanchez, associate director of research, CPM Group (Sanchez): I think silver prices have always really been much more volatile than, perhaps, gold prices. Some expect silver prices to head much higher just because it’s much lower than its record high it hit in 1980, which was around $50. Norman: The silver/gold ratio right now is probably a little bit more than 50 to 1? Sanchez: Right. Norman: Historically, what has been the range? Sanchez: Well, the range has been from 40 to 70. But at the same time, that’s dependent … you know, many investors look at the ratio, but you have to look at the underlying fundamentals behind the silver market as well. So I wouldn’t really focus too much on that ratio. Norman: Silver then is more driven or governed by economic factors. It’s much more, you would say, an industrial metal. Many people say gold is money. Sanchez: Right. Norman: So it’s a sort of a currency in some people’s minds. I don’t know if I would buy into that. But for many people, that’s how they look at it, whereas silver, what you’re saying I think, is that there’s more of an economic fundamental driver behind that. Sanchez: Right. Silver’s seen as a hybrid sort of commodity. It has its financial roles similar to what gold is, but also an industrial metal. Norman: Right. Sanchez: And what’s been driving prices higher has been strong investor interest. But at the same time, what’s been capping prices is weak industrial demand, weak fabrication demand for silver. Norman: All right, what about some of the other precious metals? Let’s talk about platinum, let’s talk about palladium. How do those look? Still sort of a bullish outlook for those metals? Sanchez: We’re pretty bullish on all of those metals. For silver, we’re expecting prices to, perhaps, top $20 later this year; platinum’s already topped $1,400, and perhaps will test $1,500. And palladium, possibly $400. Norman: Now some of those metals – platinum of course, palladium – are very tied into the automobile industry. It’s used in the manufacture of certain components in vehicles. Automobile output has been weak because of general economic conditions. If we start to see that come back, that would be a supportive factor then I would guess. Sanchez: Yes, that would definitely be supportive. And auto production and sales are expected to come back. They are strong in developing economies. In developed economies, they’ve come off from prior years. But once the economy does begin to pick up, you should see demand increase as well. Norman: Let’s get back to gold for a second, because there have been some interesting new developments in the fact that we are starting to see some major central banks purchasing gold. Now historically, traditionally, central banks have been sellers of gold. Now they’re buying it. You have India; people say China could be next. You know, it was sort of a contrarian indicator when they were all selling heavily down when it was about $250 an ounce. You don’t take it as any kind of a contrarian indicator when they’re buying it at $1,100, $1,200? Sanchez: Well, you know, central banks aren’t really in the market to hedge or to speculate or to profit. They work more on a mechanical basis. So when they feel that they need to increase or decrease their amount of gold that they hold, according to, perhaps, the amount of foreign exchange holdings that they have, they’ll do that. They won’t look at the price, because that’s not what they do. | 
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