WASHINGTON (Commodity Online): The last decade has witnessed the emergence of silver as a major investment asset for all classes of investors due to supply/demand fundamentals, safe haven status against the backdrop of economic and financial crisis sweeping across the globe, according to a new report, The Silver Investment Market- an Update by The Silver Institute, USA.
The growth of institutional investors have been the key driver of silver prices in recent times- hedge funds and mutual funds have increased their exposure to silver futures, ETFs attracted by volatility in prices and with the desire of short team goals. Unlike in gold, where pension funds have played a major role, according to the report.
Private investors and high networth individuals have played their part in boosting silver demand and prices with private investors investing more in bullions and bars as a measure of wealth preservation and safe haven play. On the other hand High Networth individuals (HNW) have opted for OTC trading while the less richer lot have opted for exchange traded funds and physical purcahsing.
Rising prices of precious metals have attracted institutional investment in recent years but collapse of Lehman Brothers led to unwinding of positions by hedge funds and mutual funds to raise funds in 2008 which continued until early 2009 but resumption of net investment started again thereafter. Unlike in gold ETFs whre instituitonal investors rule the roost, it is retail investors who invested more in silver ETFs. The prime reasons-- due to ability to trade silver easily as security and the fact that already they were priced out from the gold market due to rising prices. The exchange traded funds also provide low cost access to physical silver bullion in a manner hitherto available only to large players.
Hedge fund activity rose in silver on strong supply-demand fundamentals and silver's dual role as industrial and precious metal. The sovereign debt crisis also provided the right incentive to invest in safe haven assets although the funds reduced their exposure to the metal after the April/ May price surge they could make a come back the Silver Institute report said.
Retail investment has also become a major dirve of world investment demand due to distrust of the banking system and rising inflation that encourages investors to go for silver bullion as a measure of wealth preservation. In Germany, the largest physical investment market in Europe, the demand for bars and coins have surged despite high sales tax as Europe debt crisis continues to haunt investors.
The traditionally strong silver markets in India and China remain strong in 2011 also. Indian market has witnessed a move from jewellery to bars and coins with total silver demand to exeed 900 tonnes as in 2010 while China physical investment and futures trading have grown tremendously and silver demnad is expected to rise to 250 tonnes in 2011 compared to 160 tonnes in 2010.
