Silver has returned to its greyhound form this week, once again outpacing its more respectable cousin, gold.
 
Spot silver prices are up almost 5%, this week, as the US debt crisis and renewed eurozone fears send investors scurrying for the safety of physical assets. Traders have remained unfazed by the seemingly unending rise in the white metal’s price, as the prospect of an even bigger US budget deficit replaced the threat of a full-scale default by the world’s largest economy. The fact that the debate itself veered so close to the 2 August deadline also did little to reassure investors about the political situation in Washington.
 
Meanwhile, in Europe, the sovereign debt crisis has exploded into life once again. Italian and Spanish bond yields are above 6%, and Spain has brought forward its general election. Political and financial instability is once again back to the fore in many investors’ minds, and this has meant that physical assets such as gold and silver are in demand. In addition, poor US economic data is making investors nervous about a possible new recession in the US. July’s ISM manufacturing got dangerously close to contraction, with the figure of 50.9 hovering above the line that separates expansion from contraction. As a result, investors must now cope with the possibility that the US will go for more quantitative easing. Given that the last round of stimulus saw silver (and indeed gold) race to new highs, more easy money could push physical assets higher yet again.