The two metals diverged in Wednesday trading, with physical demand and investors seeking a discount moving into gold, while bearish economic data hit silver.
Gold closed 0.2 percent higher at $1,160.40, while silver settled at $17.44, an unexpected drop of 1.1 percent.
Silver lost out today, with weak consumer demand for durable goods affecting the markets in general. As has been the trend for the last few months, markets appear to be more affected by short-term, day to day reports than any other factors.
In the long term, however, some investors see a bigger upside for silver than for gold, which has attracted extraordinarily strong investment demand but may finally be weakening. The SPDR Gold Trust reported a decline in its holdings of 0.3 tons, a sign that investors could be backing out of the gold trade.
If economic growth finally does resume strongly, silver could be better positioned than gold, as it retains many key industrial uses. If, on the other hand, economic conditions worsen sharply, gold might be the better play. Both metals, however, would serve as an effective hedge against inflation.
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