From Chinese Press

Silver loses its lining

(China Daily)
Updated: 2011-05-18 07:46
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This month began on a crazy note for silver, with its price falling from a record $49 an ounce to $33. But last week's slump in silver price was inevitable given its unprecedented and abnormal rise, says an article in Beijing News. Excerpts:

The price of silver had been increasing for the past year and touched a record this month as the world economy recovered and inflation increased. But last week, it fell drastically. This sudden change in the metal's price and investors' fortunes occurred because silver cannot compare with gold as a secure investment.

Besides, the prices of gold, crude oil and cotton have also dropped recently, which implies there is a potential price ceiling for bulk commodities. In fact, last month Goldman Sachs advised its clients to "end (their) CCCP commodity investment portfolio". CCCP commodities comprise crude oil, copper, cotton, platinum and soybean.

Last week, commodity futures markets experienced the biggest weekly decline in two years with a potential market capitalization loss of $100 billion, which may indicate the beginning of another business cycle.

Commodity futures markets will prosper whenever influential factors such as economic recovery and primary inflation are present, reflecting the same growth pattern: continuous fall in output, increasing demand and higher inflation.

So there is no guarantee of permanent stability and growth when it comes to commodity futures markets.

(China Daily 05/18/2011 page9)

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