Heightened concern over renewedinflation is feeding the rally in silver and the upward move
could drive the inflation hedge metal this year to as much as
9.00 dlrs per troy ounce, Mike Boswell chairman of Sunshine
Mining Co told Reuters in an interview.
    "The anticipated higher inflation is being manifested in
silver rather than in gold which is the traditional choice of
inflation hedgers," said Boswell.
    The strength could put silver in a range of "8.00 to 9.00
dlrs even without any material swings in supply/demand,"
Boswell said.
    The buying interest for silver on the New York Commodity
Exchange (Comex) continued strong, with prices rising today to
a September 1986 high of 6.465 dlrs per ounce. However gold
lagged at 426.30 dlrs, the strongest price since late January
this year.
    Boswell said silver has been "under-valued for so long
relative to gold but it's closing up the price gap."
    He noted that silver last year held at the depressed level
of 5.00 dlrs while gold was soaring to more than 400.00 dlrs on
concern over the heated political unrest in South Africa. "The
strength was not filtering down to silver last year. Now
we're seeing a delayed reaction," the Sunshine Mining official
said.
    Almost a year ago, U.S. producers shut down two of their
largest silver properties, Sunshine and Hecla mining companies,
both located in Idaho.
    Boswell estimated that the closings slashed U.S. silver
production by 10 mln ounces last year to less than 40 mln
ounces.
    "Low silver prices and high labor costs made it
uneconomical to keep the mines opened," he said.
    Increased imports from Mexico and Peru have made up for the
loss of production in the United States which consumes 160 to
170 mln ounces annually, Boswell said.
 Reuter
