The silver slide

For much of the current year, commodity markets courted the lustrous silver. Cheap, economical and an attractive alternative to gold, silver scored highs rarely seen before. However, the investors darling fell out of favour last month as it slipped more than any other precious metal did. Silver prices had been choppy since peaking out in May this year. After reaching a high of $48 per oz in early May, the poor mans gold took incredible beating during the third quarter of the ongoing year, declining by roughly 15 percent over the period. Resultantly, the precious metal lost all the gains it had accumulated since the start of the year. Meanwhile, gold - whose price trend is followed closely by silver - also took a downturn during the month of September, plunging from above $1,900 to below $1,600 per oz in a matter of less than three weeks. Silver once again proved more volatile than gold, falling by 27 percent compared to the latters 10 percent fall. Investors turned to gold as a store of wealth for most part of the year, as concerns over deteriorating global economic indicators and worsening sovereign and private balance sheets in the eurozone loomed large. So, what was it that transpired in September that led to the precious metals losing their charm as a safe haven? Apparently, poor US economic data and EU policy inactions led to a decline in bourses across the globe in mid-September intensifying into a freefall a week later. Investors scrambled to cover losses in the equity and currency markets by divesting some of their holdings in precious metals, primarily gold and silver, and found solace in the strong US dollar and paper cash. Since then, the precious metals have been taking cues from the US dollar and economic data. There have been recent rebound in gold and silver prices; however, commodity analysts aren reading too much into that as they await the US employment data to be released today (Friday). With the precious metals devoid of their bull-run, is there any silver lining for silver to look out for? There appear to be two divergent views. One group of analysts predicts silver prices to remain range-bound in the near-term, while taking cues from both gold and movement in the industrial metals. These analysts show restrained pessimism as economic issues linger on. With the industrial use of silver accounting for roughly half of the metals total demand, they anticipate silver to face downside risks due to expectations of slowdown in economic growth. Many large-scale manufacturers employ silver in production of many products including plasma TVs, solar panels, photography and silver cutlery. The other group of analysts is buoyant on silvers prospects and maintains a buy stance on the precious metal as it takes the current low prices as an outstanding buying opportunity. Based on expectations of loose monetary policy regimes to remain intact in the advanced economies, these analysts expect gold and silver prices to make a strong comeback. Perhaps, the movement of gold futures could provide a glimpse of things to come. Whether silver gets its sheen back or continues to remain lackluster, is a difficult thing to be predicted to ask as markets are mired in details and governments confused!