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By Melissa Pistilli-Exclusive to Silver Investing News

On Monday, gold‘s losses and the rebound in equities halted silver’s four-day rally.  A stronger U.S. stock market drew investors out of precious metals into the equities markets as the appetite for risk improved.

“Safe-haven flows seem to have ebbed out of the gold market,” said Jon Nadler, a senior analyst at Kitco. “People see the gains in stocks and they think, ‘Let’s take a little bit of money off the gold table and put it into where the action is.’”

Those firms that had been moving into gold over the past couple of weeks have turned to profit-taking.  “There’s a tug-of-war going on now between: Do we see an economic recovery and do we still see safe-haven flows,” said Nadler.

Regardless, many analysts say the threat of inflation and more economic woes still loom on the horizon and the impact of stronger equities on precious metals prices is not likely to last long. 

“The outlook for gold is a lot better than the outlook for the U.S. economy,” said Charles Kernot, Evolution Securities mining analyst. “There is still a lot of uncertainty in terms of the outlook for the global economy…People are now looking at it being a much slower recovery (than expected).”

Silver’s Recent Performance

Silver has outperformed gold so far this year. While the precious metal remains 35 per cent below its March 2008 high of $21.44 per ounce, its up 24 per cent compared to only 5.3 perc ent for gold. So far this month, the spot price of silver has risen 14 per cent.

On February 24th 2009, the aggregate trading in silver futures reached a high of over 81,900 contracts.

While this month has averaged only 20,000 contracts, “the lighter volume was associated with narrower trading ranges as the market was attempting to determine if it could get past $13.50 — which it did,” said John Gross, president of J-E Gross & Co. “Along with the higher price, open interest has risen some 7,000 contracts over the past week or so, suggesting that still-higher prices are on the horizon.”

Both Gross and Ralph Preston of West Heritage Futures, Inc. believe silver will post further gains based on increased investor demand. “Silver bulls have staged a dramatic May rally and appear poised for further gains,” said Preston.  He says “the market is on fire” and a close over $14.28 will signal more bullish activity. Trade below $13.42 will cast a shadow over this “bullish perspective,” but “until then, the bulls are free to roam.”

Over the medium to long-term the silver market is forecasted to remain robust. According to the Silver Institute’s World Silver Survey 2009, “Healthy investor interest in physical silver is expected to continue in the coming months, driven by continuing economic woes and uncertainty over the health of the financial services industry.”

Fresnillo-MAG Silver Take-over Bid Update

The world’s biggest primary silver producer, Fresnillo, has been entangled in a take-over standoff with TSX-listed MAG Silver since the mining giant announced its intention to put a cash bid worth $179 million before MAG’s shareholders last December. Fresnillo already owns a 19.8 per cent stake in MAG. 

The London-listed Fresnillo has charged MAG with attempting to delay the inevitable by refusing to submit an independent valuation which is required before an offer can be made directly to MAG shareholders.

Recently, Fresnillo reported that it has turned to the Ontario Securities Commission (OSC) to help force MAG to complete the valuation by setting a three-week deadline.

“If a valuation is not forthcoming in this time frame, Fresnillo has asked for an exemption from the valuation requirement, so as to enable (its unit) Fresbal to make its offer directly to MAG shareholders without further delay,” read a company statement released Friday.

In its defense, MAG says it cannot complete the valuation without the requested information it claims Fresnillo is withholding. Earlier this month, MAG said it had asked OSC to pressure Fresnillo to hand over the crucial information and had also submitted a formal request for arbitration to the International Court of Arbitration.

On Monday, shares of MAG Silver on the TSX were trading at $6.03, down from a 52-week high of $12.20.

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