Silver linings in silver

The belief that gold and silver act as a store of value in inflationary times has existed since time immemorial. The recent spark in metal prices, however, comes from growing political and fiscal uncertainties in a world marked by rising population that has increased its sheen to blinding levels.
Over the past few years, gold has made the most headlines amongst the precious metal family. But of late, silver has been winning the race by some margin. Even in the calendar year to-date, silver prices rode past that of gold - rising 40percent since January against a 6 percent hike in gold prices.
Similarly, the Shares Silver Trust (SLV) - the worlds largest silver ETF - witnessed net buying, withholdings peaking to a record high of around 11,242 tons last week against 10,921 tons at the start of the 2011. At the same time, holding in the SPDR Gold Trust, the worlds largest gold-backed exchange-traded fund, edged down to 1,231 tons from around 1,280 tons at the start of the year.
To no ones surprise, silver has gained around 300 percent since start of 2009 against the 70 percent growth in gold prices. The factors driving demand for precious metals are largely same. However, silver is gaining more attention for its traits of being economical and of being a cheaper alternative to gold. And for the same reason, several of gold jewellery buyers have been shifting to silver ornaments.
The poor mans gold also enjoys wide acceptability in technological goods. The industrial sector alone accounted for 46 percent of the total silver demand in 2010, as estimated by GFMS Ltd, a metals research consultancy. This ratio is very high compared to around 11 percent of total gold demand generated by the industrial sectors, including dentistry and electronics, in 2010, according to the World Gold Council.
GFMS Ltd has also painted a bullish picture for the prospect of silver, predicting silver industrial demand to reach 665.9 million oz in 2015 from around 487.4 million oz in 2010 - a view shared by commodity analysts.
"We do see a lot of demand for silver from China, so we think silver used in solar panels have increased. We think China will have a lot of demand for silver in the medium to long term," Natalie Robertson, commodities strategist at ANZ in Melbourne told an international news agency earlier this month.
Yet as silver has been compensating its investors with higher returns lately, the market expects that it exposes investors to downside threats as well. And knowing that historically silver has exhibited more volatility than gold in eight out of the past ten years, , the silver bears aren really out of the race yet.