April 25, 2011: 73600/kg for Silver
May 12, 2011: Rs 49,775
September 6, 2011: Rs,66898
December 25, 2011: Rs.48700
February 2, 2012: Rs 61,387
May 16, 2012: Rs.51259
Since then silver has again climbed 15% to touch Rs 56,700.
So what accounts for the volatility of silver when traders say that silver is the most dangerous commodity to hold matched only by crude oil?
The point is silver is having an identity crisis.
Silver is primarily an industrial commodity. About 50% of silver demand comes from industrial or manufacturing sector ranging from sweets to photovoltaics. So when industrial demand picks up silver demand too picks up. But when growth slows, silver too would plummet; or at least that is what people think about it.
In contrast, silver is also an investment commodity. Investor demand too can take silver to dizzying heights and given that one can buy almost 50 times of silver with same money as that of gold, silver prices shoot up when global growth slows.
So slow down is good for investment silver even as it is bad for industrial silver. Bullish by half and bearish by the same measure.
Now take a look at certain research reports:
Barclays predicts that global silver supply is expected to be in a surplus of 4000 tons for the current year. Meanwhile, market honchos like Theodore Butler and others think that silver is terribly shorted. Gurus like Jeffrey Lewis think that there is a pent up silver demand as silver is mostly on paper only and not in a physical dimension.
Clearly these conflicting reports that reach the lay man investors account for some amount of volatility in silver.
Ultimately fundamentals decide the movement in any commodity. But when obscurity veils the fundamentals; the same gets covered in mystery and add to volatility.
Now, who would clear the air and importantly, how? Are the regulators listening?
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