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Euphoria over investment potential of silver dies down

 

Investors use price correction to buy gold; not many takers for silver As crude held back precious metals, investors such as George Soros dumped millions of dollar worth gold, silver in May

HAS the recent price dips in gold and silver impacted the investor sentiment?
The answer can be `yes' and `no', respectively.


While Indian investors found the price correction as an opportunity to buy gold, they lost the confidence in silver.

Though precious metal prices now have moved up from their low levels in the month of May, silver still does not have many takers.

The poorer cousin of gold has been on a bull run since last year. From the beginning of this year, silver prices have appreciated more than 75 per cent as the fund houses were busy accumulating the metal.

In the aftermath of Al Qaeda chief Osama Bin Laden's death, commodity markets suffered a mild shock. As crude oil prices held back precious metals, investors like George Soros and John Burbank dumped millions of dollar worth gold and silver in May. Silver prices fell 32 per cent in rupee terms and gold dipped seven per cent. While investors saw this an opportunity in gold, but not silver.

The industrial demand for silver may remain, but the euphoria over its investment potential has died down.

At the lower levels gold saw some bargain hunting, but the confidence of the investors in silver has been shaken. The sharp decline has actually shooed away investors and this is quite visible in the investment enquiries we receive.

Look at the changed investment pattern at National Spot Exchange, which has both e-gold and e-silver contracts. Till May, of the daily investments over 65 per cent used to go into e-silver and the rest into e-gold and now hardly 20 per cent goes into the silver contract.

According to Suresh Hundia, president of Bombay Bullion Association, investors are no more interested in silver. Investors had left the market when silver prices fell.

Now when the prices have started moving up, there are people coming to Mumbai's Sarafa Bazaar only to sell their silver,' he said.

The import figures for the month of May too tell the same story. In April the country imported 400 tonnes of silver and in May it halved to around 200 tonnes. Till June 7, the silver import to the country has been nil.

However, the decline in gold prices has been just another opportunity to accumulate the metal.

Benchmark Gold BeES ETF's assets grew from Rs 1,800 crore at the end of March to Rs 1,980 crore by April-end and it has grown in May also to Rs 2,150 crore. It has seen a net inflow in May too.

The gold-silver ratio, at present at 43 up from 33 levels, also indicates that now silver cannot move sharply up.

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1) DSP BlackRock Mutual Funds:

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6) UTI Mutual Funds:

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9) IDFC Mutual Funds:

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