16 MAY, 2011, 12.42AM IST, BAKUL CHUGAN TONGIA & SKANDITA AGRAWAL,ET BUREAU 

Gold & Silver: Is it the right time to buy?

http://economictimes.indiatimes.com/features/investors-guide/gold-silver-is-it-the-right-time-to-buy/articleshow/8321385.cms?curpg=2

There has been heightened investor interest in select commodities such as gold and silver over the past few months. But the recent sell-off, especially in commodities after a long bull-run that started in 2002 has dampened investor interest to a certain extent. ET sought the views of experts to provide a global as well as local perspective on investing in gold and silver. Excerpts: 

Four experts: 

Jonathan Barrat , Managing Director, Commodity Broking, Australia 

Jayant Manglik , President, Religare Commodities, India 

James Moore , Commodity Analyst, The Bullion Desk, UK 

Lakshmi Iyer , Head ( Fixed Income & Product )), Kotak Mahindra Asset Management, India 

Following are the views of the experts: 


Near term outlook 

Jonathan Barrat: We expect prices to remain weak for now on account of liquidation, ahead of weak equity markets. However, with spiralling inflation around the world, prices might see a support. 

Jayant Manglik: We are bullish on gold for at least the next six months. While we are bullish on silver too, the convincing power here is not as strong as that in the case of gold. A year down the line, we expect gold to move up by 10-15% from the current levels. In the case of silver, the upside may be around 5-10% from current levels. 

James Moore: High interest in gold and silver is an outcome of the European sovereign debt situation and turmoil in the Middle East. At the same time, interest rates globally are at very low levels. We do perceive a genuine buying interest in gold and it may see an upside of 3-4% by the year end. As far as silver is concerned, the upside expected is about 10-15% from the current levels. 

Lakshmi Iyer: There is already a good correction in gold, as expected. We continue to be bullish as globally, people are looking to diversify out of currency to gold. Expect a CAGR of about 10-15%. Silver, has seen a steeper correction which may continue for some more time. However, there will be an upside and expect silver to return a CAGR of 15-20%. 

Silver outshining gold 

Jonathan Barrat: There is potential for silver to outperform gold. However this is a result of the industrial use for the metal. If economies around the world start to pick up dramatically, then silver has good potential. 

Jayant Manglik: Historically, over a period of 15 years, the growth rate in silver and gold has been quite parallel. However, silver is more volatile and tends to move up suddenly at an extremely fast pace. It is the trader's favourite. 

James Moore: Over a very short term period, we have seen silver outperforming gold and the gold and silver ratio currently is at its lowest level in the past 25-30 years. Over a long term, gold definitely is a better performer because of its stability and thus tends to attract long-term investment. 

Lakshmi Iyer: While gold is perceived as a hedge against inflation, silver has more of industrial usage. Nearly 80-90% of silver generated goes for industrial usage. So as long as we see a global growth, there will be industrial usage and it is difficult to perceive a correction. So silver can continue to outperform gold this year as well. 


Silver - A hedge against inflation 

Jonathan Barrat: Yes, silver can benefit from gold in this respect, as an inflation fighter. Although academically, it does not fight inflation, the perception is that it does. So as inflation picks up, gold should be supported and this will help support silver. 

Jayant Manglik: In the Indian context, silver may acquire a place closer to that of gold. But going by history, there are remote chances of silver replacing gold. The key consideration is that silver is much more easily found than gold. Gold is a more dense metal and is well reckoned as a store of value for over 5000 years. 

James Moore: Silver can certainly be a hedge. It has always been a monetary metal and historically has been used as a medium of exchange as well as a hedge against inflation. In many ways, the use of silver has been for the same reason as that of gold. A switch to silver is in fact a cheaper alternative. 

Lakshmi Iyer: No, it cannot. Historically gold has been tested as a store of value. Silver can never take that place, broadly because of its end use which is industrial. We cannot imagine central banks stocking silver instead of gold. 

For More GoTo
http://economictimes.indiatimes.com/features/investors-guide/gold-silver-is-it-the-right-time-to-buy/articleshow/8321385.cms?curpg=2

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