Silver dumps Gold, joins Copper in downfall

January 28, 2009

Commodity Online
NEW DELHI: Even as the world is running after gold, what is happening to silver in the time of global meltdown? It seems silver, which used to work in tandem with gold, has detached itself from the yellow metal and chartered a new course along with copper — towards a downfall.

When the global liquidity crisis hits most asset classes, including stocks and commodities, investors are bound to turn to safer assets like gold.

But, silver has failed to emerge as a safe haven for investors like gold. While among precious metals, gold is always believed to meet investors’ aspiration, silver was also seen as a store of value and considered to be one of the prominent precious metals.

From the beginning of latest commodity boom since 2003, there have been several instances when the wider swings in silver prices seemed to imitate the fluctuation in copper prices.

During the period, silver prices have lost nearly 50% and copper lost 55%.

But, gold has fallen by only 5% from its peak. This behaviour implies silver’s vast usage as an industrial metal.

Even as silver’s use in photography has witnessed a continuous decline against the backdrop of popularity of digital technology, industrial demand seems robust. In ’07, industrial applications contributed to more than half of the total demand. Traditional investment demand in terms of jewellery and silverware has shrunk by an average of 2-3 % in 2007.

However, retail investment through coins and bars has remained resilient, contributing nearly 5% to the total demand. Due to its excellent electrical conductivity, silver is widely used in electronic items such as switches, TV screens and circuit boards that are used for consumer items, as well as in coating of compact disks and digital video disks.

It is also extensively used in preparing catalysts, especially for the plastic industry, due to its unique chemical properties.

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