Last week, silver hit new highs at $38, but despite its strong fundamentals, a growing number of investors think the silver price could be heading for a fall.
The simple supply and demand picture justifies a relatively high price for the metal: demand for the precious metal remains high, while supply is tight. But there is more to the story than that.
On the industrial front, the silver price has been benefiting from an increase in demand as a result of the global economic recovery. Meanwhile, on the investment front, silver-focused ETFs have gathered huge assets, further taking supply out of what is already a tight market. The world's largest silver ETF - iShares Silver Trust ETF - now holds more than 11,000 tonnes of silver, for example.
Leading commodity fund manager Georges Lequime from Earth Resource Investment Group is among those now growing cautious on the metal's short term prospects.
'The industrial demand coming through is quite strong and in the medium to long term you can build a strong case for silver, as they are just not getting the supply,' Lequime, who manages the Earth Gold Fund UI fund said.
'But investment demand is driving the silver price right now and I feel a squeeze is taking place at the moment,' said the Citywire AAA-rated manager. 'Of course, it could run quite a bit higher before pulls back and I can see why the investment demand is coming through. But it is difficult to see who the buyers are, it is quite an opaque market - which in itself brings quite a lot of risk. I am always worried about any illiquid and opaque market.'
'I'm cautious about silver, I am sitting back and I am wary of a pull back. I can understand the longer and medium term picture, but the short term is a concern,' he said, pointing out that if there is a pull back in the gold price, silver - which is more volatile - will fall even further.
Patrick Pittaway of Swiss resources boutique URAM is similarly cautious on silver. 'We’ve stayed away from silver through much of the rally,' the manager of the Share Gold Cap fund said. 'It has always looked a bit too bubbly to us. It's not particularly overbought, but where its sitting now it looks like there is more risk to the downside than the upside.'
At the time of writing on Wednesday, the silver price was at $37.5.