Commodities: Silver Takes A $5B Hit in Crossfire

Silver is punishing investors amid diminishing trust in precious metals as a store of wealth and concern that growth is weakening, with $5.2 billion erased from the value of their near-record holdings this year.

Investors expected silver to be one of the biggest gainers in 2013, with a 33 percent return, a Bloomberg survey in December showed. Instead it’s leading a retreat in commodities with a 28 percent plunge to $21.84 an ounce, on track for its worst performance since 1984. While the median prediction from 14 estimates compiled last week is for a rally to $23.50 by Dec. 31, that would still mean a 23 percent drop for the year.

Analysts expected silver to surge because either turmoil would boost demand for precious metals as protection against inflation and currency debasement or accelerating growth would spur more industrial buying for everything from solar panels to batteries. The collapse of gold into a bear market, steady consumer prices and mounting concern about the strength of economies means silver’s allure is instead diminishing.

“Silver has been caught in the crossfire between being a precious and industrial metal,” said John Stephenson, a senior vice president and fund manager who helps oversee about C$2.7 billion ($2.65 billion) at First Asset Investment Management Inc. in Toronto. “Since investors were selling gold, silver also lost luster. We need enough economic growth to happen before people can start considering it as an industrial metal.”

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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