power to give investors good returns. And going forward, it is expected to outperform
gold in terms of price appreciation.
In fact, silver had been beating gold till recently. Up to 2008, silver outperformed gold in terms of one, two and three-year compound annual growth rate (CAGR). Last year on March 11, silver registered a three-year CAGR of 131% against 106% CAGR posted by gold.
Gold-mania hits silver price
In the last one year, gold prices have moved up sharply and beaten silver. Since March 11 last year, gold has appreciated by around 18%, while silver prices have corrected by around 12%.
This is mainly because of the global financial crisis and weak performance of most of the other
investment classes. Investors have been flocking towards gold, as it provides a hedge against uncertainty, which in turn fuelled gold prices to touch new highs.
Equity markets have become almost half in terms of loss in the index numbers in the last one year. NSE Nifty and BSE Sensex have lost 51% and 46%, respectively, in the same period. Diversified equity
mutual funds followed suit. Even best performing mutual funds are down by more than 30%.
For instance, as on March 9, Birla Sun Life Dividend Yield Plus — growth and UTI Dividend Yield
Fund — growth, registered a negative return of around 31% and 33%. Real estate prices have corrected by an average 25-30%. Concomitantly, the gold prices have gone up by around 17% in the same period.
Silver prices, though, did not appreciate as much as gold in the last one year due to low industrial demand. They have appreciated by around 35% from the lowest price of the year — Rs 16,168 on November 21, 2008. Gold prices have appreciated by just 22% from November 21 last year.
Fundamentally more intact
Silver has both industrial and investment demand. Also in terms of supply, 60% of the supply of silver comes from copper, lead and zinc mines in the form of by-product.
Silver and gold mines contribute the remaining 40% of the supply. This is one of the reasons that silver price movement reflects both gold and base metals’ price movement.
