The bubble of silver seems to have finally burst. Silver prices fell steeply on Monday, reflecting the panic of the investors. Silver, along with gold, no longer seems a secure haven against the economic turmoil in the world today.
Fear of a global recession has sent stock markets and commodity prices tumbling down. Investors now prefer to park their money in the US dollar and treasuries instead of investing it in gold and silver. Gold and silver have lost their lure as a safe bet against inflation. The debt woes in Europe are expected to strengthen the dollar making investors pass over the silver. However, the logic behind this trend is held in doubt by some analysts. Investments analysts argue that it is insane to invest in the US treasuries when the economy is tottering on its feet. Unemployment seems rampant, the housing system is in a mess, and the automotive industry is in shambles.
Silver prices suffered a dual blow, as silver acts as both precious metal and metal for commercial applications. The fall of silver as a precious metal coupled with the low silver demand in industrial applications due to a weak global economy dealt silver prices a heavy blow.
India and China are large markets for gold and silver, and most of the demand comes from the middle class. The high inflation prices have crippled the purchasing power of this middle class which was thought of as a steady market for precious metals for years to come.