Silver Volatile, May Pick Up Steam

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Silver prices have turned volatile.

Silver prices have turned volatile since April due to the metal's conflicting consumption character. In the last couple of months, silver prices have moved wildly. Prices may rise for some time before declining.

A month ago, on May 12, silver touched a high of $19.54 an ounce, a level not seen since April. But, after gold fell $40 (3.5%) from its peak, silver lost nearly $2, or almost 10%, although it has recovered since then and is currently trading at $18.40, which is 6% lower than its peak seen a month ago. Silver's all-time high in the international market was $20.81, seen in May 2008, and Monday's prices are still 17.4% away from the high.

On Monday, in Mumbai, gold declined Rs 125 per 10 gm to close at Rs 18,615 while silver was down by Rs 5 from Saturday and closed at Rs 29,665 a kg.

According to bullion analyst Bargav Vaidya, "Silver is expected to trade in the range of $20-$17. It has some upside left." In the Mumbai market, the demand has fallen significantly and imports have reduced to half due to volatility and high prices. He said in the second half of 2009, nearly 1,400 tons of silver was imported, which has come down to 700 tons till date.

Silver prices are more volatile because of its conflicting nature of demand. Half of silver's consumption is for non-investment or industrial purpose. Hence, silver was falling whenever there was concern on growth, while gold gained on such concerns.

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