By Melissa Pistilli-Exclusive to Silver Investing News

Silver managed to keep its last week gains to open at $14.30/oz Monday morning. After a brief dip to $14.09, the precious metal was testing highs of $14.66.

The markets are still reacting to doubts over the U.S. government’s ability to pull itself out of financial freefall even with a $787 billion dollar life line. “Many figure this problem is so large that even that amount of money really isn’t going to solve the problem,” said Fred Ketchen, equity trading manager at Scotia Capital.

The economic woes in the U.S. aren’t the only factors sacking investor confidence. Canada, too, is having its share of problems. The Loonie has fallen to around .79 cents to the US dollar; Canada Mortgage and Housing Corp. has reported a 7.5 percent drop in housing starts for 2008 from 2007 and even lower levels of starts are expected over the next two years; existing home sales are forecasted to drop by 14.6 percent this year with the average price declining 5.2 percent.

As investors seek the shelter of gold, silver also benefits as it, too, is seen as a safe haven asset. This renewed interest is pushing silver out of its slump. IBT Commodities and Futures believes “silver is gathering enough momentum to breach the critical resistance around 14.70-14.85 areas.” As long as the $13.90 resistance level remains intact the intraday incline is expected to continue with a trading range for Monday between the key support at $13.50 and key resistance at $15.00. For now, the general trend is to the upside with a target of $16.50 as long as support at $12.00 holds.

Still trading more than 40 percent below its March 2008 high of $21.25/oz, silver is still ripe for a great rally.  And according to Bart Melek, senior economist at BMO Global, the fundamentals are still strong enough “to keep the silver bull running for the next three years.”

Although much of silver’s price determination in the market is usually based on its role as an industrial metal, in times of financial instability it takes on the precious metal attributes of gold. “Silver’s recent outperformance suggests that the market may be starting to see it as it sees gold-as ultimate money,” explained Melek.

BMO predicts the silver price to average $12.00/oz in the first half of 2009 and $13.50/oz in the second, increasing to an average of $14.00/oz in 2010.

The silver supply growth over the next two years is expected to be limited by cutbacks in base metal mining brought on by the economic downturn, said Melek. “In fact, an analysis of lead/zinc curtailments points to a decrease in silver supply of over 15 million ounces in 2009 and 8.75 million ounces in 2010.” For now, the amount of physical silver available for investment is very small, “likely 50 million to 100 million ounces at most” and given that the “turbulent times” are creating demand for safe have assets, Melek sees silver prices holding firm.

Silver Wheaton Sees Growth Opportunities for 2009

Silver Wheaton [TSX: SLW], which purchases silver at pre-contracted prices from miners and then sells it at the current spot price, is expecting 2009 to be a positive year. The state of the markets and increased interest in silver “provide us with the best growth prospects we have ever seen,” said the company’s president and CEO, Peter Barnes.

The Vancouver-based company completed four new agreements last year and foresees even more opportunities for growth through 2009 and well into 2010. The company managed to raise C$287.5 million this month in an effort to bulk up its treasury in preparation for acquisition opportunities.

Despite the nosedive silver took late in 2008, Silver Wheaton remains “more bullish on long-term silver prices than ever, in light of the world economic climate,” said Barnes.  The company expects silver sales this year to be between 15 million and 17 million ounces and to 30 million in the next 4 years.
Shares in Silver Wheaton were trading at $9.22 Monday, down from a 52-week high of $19.30.