Tarnished silver will shine again

Has silver lost its shine? Despite price falls after hitting its 25 year peak, there are many reasons why the silver price should rise again.

Has silver lost its shine? On the surface, you might think so, given the precious metal's 15% price collapse this week, shortly after hitting a 25-year peak of $15.17. Since its high, it has been caught up in the global downdraft in equities and commodities and at one point dipped back below $13.

Sudden plunges like this show that these are "highly speculative markets" that have been driven as much by momentum as the fundamentals, says Philip Coggan in Investment Adviser. It's all down to unjustified inflation fears, he says, which have led investors to load up with commodities. Not only that, but it's a symptom of the large pool of liquidity that has caused other asset prices (such as residential property) to soar in recent years. Commodities are merely the "latest bandwagon" to climb aboard.

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