Silver Set to Outperform Other Metals This Year

January 10, 2013 at 09:15

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Amid expectations of a rebound in global industrial activity, silver is set to outperform other metals this year.

With the global economy expected to expand 3.4 per cent this year, against 3.1 per cent last year, investors have now started focusing on silver as an alternative asset class. Last year, against net returns of 13.04 per cent from gold, silver provided investors 13.46 per cent returns. This year, returns from silver are estimated at a staggering 34.8 per cent.

“For decades, investors have perceived gold as the best investment. However, the movements in the bullion market in 2012 and 2011 have led many investors to change their focus from the yellow metal to the white metal….Silver has the potential to outperform, with 34.8 per cent returns, against about 13 per cent of other metals in 2013,” said Sugandha Sachdeva, head (metals, energy and currency), Religare Retail Research.

About 67 per cent of the global silver production is used in industries, especially in the mobile, photography and electrical sectors. Jewellery and investment account for about 28 per cent. US-based Silver Institute estimates the use of silver in industries to rise about seven per cent to 484 million ounce this year. In 2014, it expects this to rise six per cent to a record 511.6 million ounce.

Silver is set to hit Rs 65,000 a kg and face strong resistance on the immediate higher side. Once the price sustains above this, significant upside could be expected at Rs 70,000-72,000 a kg. Proportionately, in the global market, the price may stand at about $35.5 an ounce.

This year, gold, too, could hit a record high due to the soft monetary policy and fewer risks of a split in the Euro zone. Buyers in India are expected to record higher prices, owing to increased duties on gold imports and a weak rupee. Also, an expected economic upturn in China might mean more demand from that nation. Global central banks are likely to remain net buyers.