Silver prices plunged 8 per cent yesterday for the third time in two weeks as China released weaker than expected industrial output data for the month of April.
The volatility in the prices of the white metal, which had enjoyed a dream run in the past 12 months, rising to a 31-year-high of $49.25 an ounce in April and fell to a low of $33.70 per ounce in early trade today, is making investors wonder if the metal is really the safe haven it was being pegged to be.
“The price of silver is down more than 30 per cent from when I invested in it last month,” said a Dubai-based retail investor. “I was hoping for it to give me some returns, but now it’s clear that it won’t even give me the inflation hedge that my investment advisor was so vocal about,” he shrugged. “I wish I had stuck to gold,” he said, adding that he had liquidated some of his gold holdings to enter the silver market.
Gold prices, on the other hand, have seen a limited decline in the past couple of weeks, and are still about 3.3 per cent up in the last 30-day period while silver is down about 11.3 per cent in the same period.
The recent slumps in silver, first triggered by New York’s Comex exchange hiking up margin money requirements by almost 84 per cent, have resulted in bullish sentiments in the metal taking yet another hit.
Analysts believe that while there may be some eager bargain-hunters who may emerge at these dips, others may take a more cautious approach and await further signs that the correction is over before entering the market.
Therefore, a further weakness in silver prices in the near term cannot be ruled out. However, on a long basis, investment demand for silver, which is viewed as a cheaper alternative to gold, is likely to return.