Analysts have been thinking that silver will soar up in the environment of a recovering global economy adding to strong prices for gold, but the metal has so far failed to perform as well as many expected.

Silver “has the most potential of the metals and will outperform gold — but it will take time,” said Julian Phillips, an editor at SilverForecaster.com.

Analysts remain upbeat about the longer-term potential, but warn that the short-term journey will continue to be rough.

Late last year, analysts were touting the metal’s promise as a much cheaper investment alternative to gold that was poised to see higher industrial demand. Some even predicted a price climb above $20 an ounce by the end of 2009, but instead, prices dipped below $15 in February.

If there’s another deflationary crash and equities come under pressure again or if the U.S. dollar again be the trusted safe-haven currency in the world, silver could again fall, said O’Byrne a director at Gold Core, an international bullion dealer.

On that same note, the global economy would need to improve further in order for silver to move significantly higher, given that silver is used primarily as an industrial metal, as well as for investment purposes.

In the past year, the CPI has risen 2.1%. The core rate is up 1.3% in the past year, the smallest year-over-year increase in six years. If current trends continue, the core rate could drop below the Federal Reserve’s target of 1% to 2% for the first time since 1963, economists said, fueling some worries about deflation.

The CPI report shows very little inflationary pressure at the consumer level, giving the Federal Reserve the space to keep interest rates low in an attempt to stimulate the economy and boost employment.

Extending previous session uptrend, the greenback advanced further against the euro climbing to new multi-day highs of 1.3588 and 1.0649 versus the franc, compared to yesterday’s closing values of 1.3739 and 1.0543, respectively.

Against the British pound, the greenback traded higher and hit a high of 1.5219, which may be compared to Wednesday’s close of 1.5327.

After edging down to a 9-day low of 89.77, the dollar jumped versus the Japanese yen in today’s New York mid-day session. The greenback advanced to 90.81 versus the yen, compared to 90.32 hit late New York Wednesday.

The attention remains on the swelling budget deficit in Europe. The Euro-zone trade balance report for January was released. Amid the release of the report, the euro showed little reaction against other major currencies.

Presently, the euro is worth 0.8947 against the pound, 123.43 against the yen, 1.4477 against the franc and 1.3665 against the dollar.

The Canadian dollar edged lower against the US dollar and the Japanese yen as crude oil price fell for the first time in 3 days. The Canadian dollar, however, rallied against the euro.

Crude oil prices, which closed near US$83 a barrel on Wednesday after members of the Organization of the Petroleum Exporting Countries decided to leave their oil output unchanged, pared gains on Thursday in Asia as the dollar gained and an Energy Department report showed that U.S. crude inventories climbed for a seventh week.

Light sweet crude oil for delivery in April was down 0.68 percent or 0.56 cents at US$82.37 per barrel in the New York Mercantile Exchange at 2:40 am ET.

The Canadian dollar declined to 88.90 against the Japanese yen before recouping some of its losses around 2:00 am ET. This was mainly due to the Bank of Japan retained its economic view and said conditions are likely to continue improving, although the pace of improvement is likely to remain moderate for the time being.

The Japanese and U.S. currencies fell also affected by the Bank of Japan doubling its loan program; aimed at countering deflation and the Federal Reserve yesterday retained a pledge to keep its target rate “exceptionally low” for an “extended period.”

The pound rose to the highest in almost three weeks versus the dollar after a report showed U.K. jobless claims unexpectedly fell in February at the fastest pace since 1997.

“Risk rallies because there was some residual disappointment that the Fed didn’t do more. We’re seeing dollar and yen weakness across the board.” said Elsa Lignos, a currency strategist at RBC Capital Markets in London.

The yen fell to 124.07 per euro from 124.31 yesterday in New York. It slid to 90.02 per dollar from 90.31. The dollar fell to $1.3815 per euro - the lowest since Feb. 9 -from $1.3766. Sterling jumped 0.57 percent to $1.5376, after trading at $1.5382, the strongest since Feb. 25.

The policy interest rate has remained unchanged since December 2008. The central bank also said it will “encourage a decline in the longer-term interest rates by substantially increasing the amount of funds to be provided through the fixed-rate operation.”

Also as expected yesterday - Tuesday, despite a belief that the Fed interest rates need to rise from here, the FOMC announced decision on interest rates leaving it unchanged. A 9-1 vote, with Hoenig as the dissent vote, will leave the near-zero rate policy intact.

The note was there that fed fund rates will stay exceptionally low for an extended period. As far as the Fed’s exit strategy, the Fed will end the mortgage purchasing on March 31.

The FOMC gave many notes that include many positive impacts. The major was that economic activity all over the United States has continued to strengthen. Labor markets are stabilizing, but hiring decisions are reluctant.

The fed also added that household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.

Finally, it concluded that inflation is expected to remain subdued for some time; and financial markets remain supportive of growth.

Canada’s first recession since 1992 ended in the third quarter last year and the economy expanded at its fastest pace since 2000 in the fourth quarter.

“The market is trading this as a good news story,” said Stewart Hall, an economist at HSBC Holdings Plc in Toronto. “I’m surprised, because I thought we would need something bigger to get the market rolling.”

The country gained 87,700 jobs over the past 12 months, supporting comments by policy makers that the labor market has stabilized. From the employment peak in October 2008, Canada has lost more than 250,000 jobs.

The Canadian currency strengthened immediately after the report. It traded at C$1.0153 from C$1.0240 yesterday, which is considered a Fresh 19-Month High Below $1.02.

For the U.S. dollar, it fell versus major rivals, with the euro breaking through resistance after a stronger-than-expected rise in industrial output.

The Japanese yen also strengthened versus the dollar, after initially losing ground in Asian hours after Japanese Prime Minister Yukio Hatoyama told parliament the yen was too strong.

Expectations show that the sector will continue to rise in the upcoming period, in case the dollar does not depreciate severely against majors in the upcoming period along with the ability of global economies to hold its growth and continue expanding in the upcoming period.

The FOMC interest rate decision will be released on Tuesday. Markets will not be expecting a tighter policy to be signaled, but there will be speculation that the language will be adjusted and there is also likely to be a more optimistic tone on the economy in the Fed statement.

Given these expectations, the US dollar should be able to make limited headway ahead of the decision with a EUR/USD move to the 1.3580 area realistic. The high number of existing short Euro positions will make it difficult for the US currency to extend gains.

There was speculation that San Francisco Fed President Yellen would be nominated for one of the vacant Fed Governor positions and this maintain some speculation over a more dovish FOMC and potential battles with regional Fed Presidents.

Fed could never ignore the brightening economic picture. Reaching this brightening picture was the reason why the fed kept benchmark rates near zero since December 2008.

Economic recovery has shown signs of growing and markets will look closely at how the Fed characterizes the outlook for any signs that policy-makers may modify the low rate promise at the central bank’s April meeting.

Still, Senior Fed officials have said in recent appearances that the recovery continues to be tepid and suggested rate increases are far off.

“Notwithstanding the positive signs, the job market remains quite weak,” Bernanke said in semi-annual monetary policy testimony before Congress February 25.

The Fed is also likely to note it plans to let its asset-buying programs end at the end of the month, but could leave the door open to more such purchases in the future.

The vast majority of primary dealers do not see any change in the Fed’s “extended period” language until April at the earliest. Most do not see an interest rate increase until the second half of this year.

But there were no proper mechanisms for enforcing those limits, or for preventing the bankruptcy of a country that fell into such difficulties.

Since the birth of the euro 11 years ago, an additional problem has appeared. Well-run, highly disciplined economies such as Germany keep their inflation rates low, their productivity growth high and their wage costs under control. These economies gradually become more internationally competitive and run balance-of-payments surpluses.

At the other end of EU’s economic spectrum, Europe’s Mediterranean countries turned out to have much less discipline. Even before they joined the Euro zone, these countries had relatively high interest-and-inflation rates. The advent of the euro gave them low real interest rates, particularly as their domestic inflation continued and productivity growth remained low.

The result in Spain, for example, was a gigantic housing bubble. Speaking about Greece, since it joined the EU in 1981, it has been much poorer than other member countries, and so has treated the EU as a never-ending source of free handouts.

That brings us back to the EMF proposal. It would be possible to design a fund that solves this problem.

“The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac.

The research firm admitted that severe winter weather may have slowed some foreclosure activity. If the data is largely true, it could indicate that federal programs to modify mortgages are having some effect and that banks may be slowing their foreclosures because they cannot find ready buyers for homes.

The one piece of especially bad news from RealtyTrac is that foreclosures are still running highest in the states that have been most severely damaged by the housing crisis–Nevada, Arizona, California, and Florida.