Silver outperformed gold in 2012 in the domestic as well as international markets on resumed stockists’ demand amid expectations of a revival in global industrial activity. The trend is likely to continue in 2013.
While gold offered returns of 12.54 per cent so far this calendar year in Mumbai’s Zaveri Bazaar to close at Rs 30,600 per 10 gm on December 24, silver jumped 14.38 per cent to Rs 58,300 a kg. In the global markets, too, silver offered higher returns of 8.4 per cent in 2012, compared with 6.33 per cent for gold.
“Silver has been outperforming gold for the last five-six years. But the year 2013 is set to be full of variables. Hence, the movement of precious metals would depend on lots of ‘ifs and buts’. Also, the ratio of bullion price movement always favours silver. Hence, the price growth momentum is likely to be more in the white precious metal than gold,” said Gnanasekar Thiagarajan, director, Commtrendz Research, a Mumbai-based commodity research firm.
| BRIGHTER PROSPECTS | ||
| Average forecast for 2013 ($/Oz) | ||
| Agency | Gold | Silver |
| Barclays Capital | 1,815 | 32.50 |
| BNP Paribas | 1,865 | 39.05 |
| Commerzbank | 1,950 | 40.00 |
| Morgan Stanley | 1,853 | 35.00 |
| Societe Generale | 1,800 | 34.00 |
| TD Securities | 1,895 | 40.52 |
| UBS | 1,900 | 36.80 |
| Goldman Sachs | 1,810 | -- |
| Scotiabank | 1,700 -1,750 | -- |
| Source : Kitco.com | ||
Currently, the gold-silver ratio works out to around 50:1, which was 80:1 in 2003. This means, silver has more potential to rise, especially when world leaders are working to bring the global economy back on track. Around 65 per cent of the world’s silver production finds use in industries.
| Glittering silver | |||
| Dec30, ‘11 | Dec 24, ‘12 | Change (%) | |
| Domestic | |||
| Gold (Rs /10 gm) | 27,190 | 30,600 | 12.54 |
| Silver (Rs /kg) | 50,970 | 58,300 | 14.38 |
| International | |||
| Gold ($/Oz) | 1,563.70 | 1,662.68 | 6.33 |
| Silver ($/Oz) | 27.84 | 30.17 | 8.40 |
| Source : BS Research Bureau | |||
Concerns of the US fiscal cliff are shadowing the global economy. If the issue is not averted, automatic spending cuts and tax hikes would be implemented, which could push the US economy back into recession. This would lead to a scenario where gold prices would see a spurt. If the issue gets resolved, then more investible funds in the hands of common man would increase infrastructure spending, resulting in lower demand for precious metals, and consequently, lower prices.
Meanwhile, World Bank has forecast that China’s economic growth would accelerate to 8.4 per cent in 2013 from 7.9 per cent this year. US industrial production jumped the most in two years in November this year and the number of building permits rose to a four-year high. Also, economists anticipate that the 17-nation euro area’s economy would start growing again in the third quarter.
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Meanwhile, Bank of Japan expanded its asset-purchase programme for the third time in four months, which boosted the asset- purchase fund by 15 per cent to 76 trillion yen ($906 billion). The US Federal Reserve added to its stimulus programme by making another $45 billion of monthly treasury purchases.
“More than world economies, it’s the inflation and its impact on the global economy which would matter most that the world leaders would concentrate on in the first half of 2012. In the second half, if the global economy moves on, gold price would surge by 30 per cent from the current level to $2,300 an oz and silver to double at over $60 an oz,” said Thiagarajan.
Whatever the case be, silver would move faster than gold in any direction in 2013, he said.
According to Erica Rannestad, a commodity analyst at CPM Group, silver held up this year despite a recession in Europe, an economic slowdown in China and a low-growth environment in the US. The metal performed better this year than most analysts had expected because of higher investor demand. Globally, average gold price is set to end this year at $1,670 an oz.
Analysts forecast the global economy to recover in 2013, particularly in the second half. If that happens, industrial demand would go up, which will benefit silver.
C P Krishnan, wholetime director of Geojit Comtrade Ltd, forecasts bullion, especially gold, will outperform in the coming year. In the first half of 2013, gold may probably take a dip, but consolidate later and drift higher. In the international markets, gold is expected to trade in the average price range of $1,600-1,900 levels an oz broadly. In the Indian market, gold will possibly trade in the range of Rs 28,000 – 33,000 per 10 gm through the year.
Similarly, spot silver looks firm, but major rallies are hardly expected. Prices are most likely to be congested inside the $25-36 an oz region throughout next year. In the domestic market, silver might trade at an average at around Rs 58,000 – 68,000 per kg, he added.