By Melissa Pistilli-Exclusive to Silver Investing News

Since hitting the skids on October 10, the price of silver has edged higher to close at $10.96 in New York. No doubt the precious metal has had some help from the bounce in the equities and commodities markets this week. Indexes in North America, Europe and Asia were on the rise after U.S. Treasury Secretary Henry Paulson announced the government plans to help ease the credit crisis by purchasing equity stakes in the nation’s banks.

As fears of an imminent global financial crash eased off, investment began to flow back into the commodities sector. Although gold wasn’t as affected, silver rose along with other industrial metals. “Silver has been more of an industrial metal,” said Patrick Donnelly, a broker with Peak Trading Group. “The US dollar has been pretty weak,” said Donnelly, “and silver has been reacting more like a commodity than a precious metal.”

Although silver often tracks gold, its price is not solely dependent on factors that contribute to upward and downward trends in safe haven assets. Silver’s many industrial applications make its price susceptible to the same forces that drive trends in the commodities markets; hence, the ups and downs experienced recently in these times of financial crisis and economic slowdowns.

In his Monday Kitco commentary, senior analyst Jon Nadler presents what he terms “a fairly bullish take” on silver by Barron’s Allen Sykora. Sykora points out that although industrial commodities took a huge hit last week silver remained “a bright spot” in the metals sector.

Silver futures may have dropped 46 per cent from its July high in recent weeks as global markets near implosion, but many silver bugs and analysts are remaining positive. “Numerous haven-seekers bought gold in the past month,” said Sykora. “But many more investors can be expected to seek silver.” Gijsbert Groenewegen, managing partner of Gold Arrow Capital Management reminds us why silver is known as the poor man’s gold: it offers investors a cheap alternative to gold and a chance to participate in the precious metals sector.

While prices in the paper markets may give the impression that overall investor demand for silver has weakened in recent months, the physical market proves otherwise. The growing demand for silver bars and coins is so feverish dealers can’t match investor demand. Even the U.S. Mint has announced it is rationing its American Eagle coins.

The strong demand for coins and bars is “setting up the metal for a rally through next spring,” said Sykora. The inability of dealers to meet investor demand will continue “because the economic problems the world is facing . . . are probably going to get worse,” said CPM Group’s Jeffrey Christian. “Sooner or later, physical trumps paper [markets] and the price of silver goes back up sharply.”

When the global economy eventually “turns around,” silver will gain more grown as its industrial applications once again play into increased demand. According to Sykora, analysts are predicting the silver price will “rise to between $14.50 and $24 by the end of next year’s first quarter.” Merrill Lynch recently reported silver will average $17.63/oz in 2009 and $22.25 in 2010. “A combination of strong growth in investor demand and its strong link to gold should see silver remain well supported over the coming year.”