Archive for the ‘Commodities’ Category
Best Of Both Worlds?
June 30th, 2009
Mukesh Dedhia
The rising industrial usage of silver as well as a rebound in investment demand portrays a positive scenario in the long term. However, due to its positive correlation with copper price volatility could continue
SINCE mid-2008, silver expereinced a huge dip of –57% while its precious metal counterpart, gold, remained resilient at –26% during the global commodity selling frenzy. The reason: a rising correlation of the white metal with base metals like copper — which declined by 67% during the period — and a rise in the industrial use of silver in the last couple of years. The premise held true for the subsequent run in the price of silver since December 2008. Against a gain of 31% in gold, silver appreciated 58%, almost tracking an over 70% rise in copper. The behaviour ofsilver highlights a pattern of following the price trend in gold, however, with increased price swings due to its correlation with copper. This is clear from the first chart that shows the average monthly price range as a percentage of the previous month’s closing price for benchmark silver, gold and copper prices since 1999. The price rangeis the difference between the monthly high and low prices for the metals. A comparison of the price range with the previous close indicates the monthly pace of change in the prices. As is obvious, the price range of silver follows the directive moves of the price range in gold whileits value is closer to that of copper.
