Silver plunges 28%, suffers $5-billion hit

LONDON: Silver is punishing investors amid diminishing trust in precious metals as a store of wealth and concern that growth is weakening, with $5.2 billion erased from the value of their near-record holdings this year. Investors expected silver to be one of the biggest gainers in 2013, with a 33 per cent return, a Bloomberg survey in December showed.

Instead it’s leading a retreat in commodities with a 28 per cent plunge to $21.84 an ounce, on track for its worst performance since 1984. While the median prediction from 14 estimates compiled last week is for a rally to $23.50 by December 31, that would still mean a 23 per cent drop for the year. Analysts expected silver to surge because either turmoil would boost demand for precious metals as protection against inflation and currency debasement or accelerating growth would spur more industrial buying for everything from solar panels to batteries.

The collapse of gold into a bear market, steady consumer prices and mounting concern about the strength of economies means silver’s allure is instead diminishing. “Silver has been caught in the crossfire between being a precious and industrial metal,” said John Stephenson, a senior vice president and fund manager who helps oversee about C$2.7 billion ($2.65 billion) at First Asset Investment Management in Toronto. “Since investors were selling gold, silver also lost luster. We need enough economic growth to happen before people can start considering it as an industrial metal.”

This year’s plunge in silver exceeds the 17 per cent drop in gold, which is poised for its first annual decline since 2000. The Standard & Poor’s GSCI gauge of 24 commodities fell 4 per cent, extending its retreat from last year’s peak to 14 per cent.