People have always undervalued silver compared to other investment avenues such as gold and stock market. But, the white metal has given 'golden' returns in the last year.

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This year silver has burst the myth surrounding it not giving higher returns. Compared to stock market and gold, silver has given the maximum returns throughout last year.

On September 30, 2010 silver closed at Rs33,935 per kg. When compared to last year's closing on the same day, the price of metal has increased by 28.54% which is quite a high. Similarly, in the past nine months, the appreciation in silver prices has been the highest compared to gold and two equity indices.

However, in the past three months, equity market's performance is better compared to precious metals. Gold has seen a mere increase of less than 2% while silver has been up by 12% but both equity indices - Sensex and Nifty are up by more than 13%. Even during the period between July and September 2010, the difference in growth of silver and equity market has not been so much.

Biren Vakil, CEO at Paradigm Commodity Advisors Pvt. Ltd believes that the current bull run seems to be propelled by continued liquidity in the market. "The hedging in various currencies like dollar, yen, and euro seems to be a major factor behind the movement of the commodities. There is an unknown regulatory risk following the precious metals and especially those with high ETF trading can be expected to see a slide.

Gold is expected to fall by around 15% and silver by 30% if the risk stands true. But on the other side, we can see Sensex and Nifty touching new highs of 27k and 5k in the first half of 2011," said Vakil.

Sensex has gained 2,604 points - 14.91% since 31st December 2009 from the level of 17,464.81. Nifty too posted a15.94% gain - a rise of 828.90 points at 6,029.95 level on 30 September 2010 from the level of 5,201.05 nine months back. In the nine months, FIIs have invested over Rs89,500 crore in the Indian equities.

Shardul Kulkarni, Sr.Technical Analyst, Angel Broking Ltd said, "On the upside, indices are likely to touch all-time highs. Sensex is expected to reach a height of 21,206 and Nifty a high of 6,357 once the immediate resistance of 20,500 and 6,185 is crossed with good volumes. On the downside, 19864 - 19770 / 5962 - 5932 remains crucial support."

Ahmedabad-based bullion trader and analyst, Girish Choksi said, “The rally in silver was expected with gold touching new highs. People should take the advantage and invest in these metals.”