silver new white golds ...2011
12:26 AM
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The precious metal is ruling around its peak, but that has not really deterred investors from buying more of it.
Silver doesn’t mean second prize any more. The white metal has beaten gold in terms of returns given to investors both last year and this year so far. Gold may have the glamour, but silver has the momentum right now.
The precious metal is ruling around its peak, but that has not really deterred investors from buying more of it. However, analysts say the metals demand has been rising more on account of rising demand for its industrial use.
Interestingly, the white metal has hit its peak way back in 1980 when in dollar terms it had touched $55 an ounce, which was followed by a brutal correction. The current peak is at $45.96 an ounce.
Silver prices have risen more than 60 per cent so far this year after a gain of more than 80 per cent in 2010.
While bullion rules the roost among investors, there is also a buzz in the market that these two metals have entered the bubble zone and are overdue for a major price correction.
While this view pales in the light of high inflation around the globle, a condition that favours investment in safe haven instruments such as precious metals, what emboldens the outlook for silver further is the trend of growing industrial demand for the metal.
For long, silver was used extensively in photography, it has lost ground in that segment over the year. But what more than made up for the shortfall in demand in photography is in its other industrial uses.
In 2010, 47 million ounces of silver was used by the photo voltaic industry, 36 million ounces by the automotive sector, 22 million ounces in the production of computers, and 13 million ounces in cellphones – all of these are products that are in extensive use and are seeing very strong demand in the market.
Today, silver is also used in a variety of products beginning from face creams, washing machines, flat screen TV sets, water purifiers, food packaging, to even socks. One study projects silver demand to touch 665.9 million ounces by 2015 from 180 million at present. Thus it is a net clear winner from new technology over the past 10 to 15 years.
What more so far there is no substitute for the metal that the industrial sector can rely on. That’s quite a bullish outlook.
This offsets the fears and explains the rush to buy physical silver even at record prices even amid a forecast that there could be a possible surplus in silver production this year.
Retail investors have fewer choices to invest in silver in India. What more, silver is much more volatile than gold, and hence, it's considered more of a traders' play.
"The strong volatility of silver makes it a destination for traders who would look at quick price gains. The more volatile the metal the higher is the probability for short-term risks too. Gold is quite different. A steadier and more stable behaviour can be expected of gold. Gold preserves value and it is a store of value. That is not precisely the function of silver,” says K Joseph Thomas, head of investment advisory & Financial Planning at Aditya Birla Money.........more
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