1998: Volatility in white metal

In the beginning of the year, silver witnessed wild swings. Silver skyrocketed to $7.95 on February 14 when US-based investment guru Warren Buffet declaimed his investment in silver. Buffet said in a dramatic announcement that his company Berkshire Hathaway had bought 129 million ounces (Oz) of silver. Silver prices zoomed after the announcement. However, towards the end of the year, silver dipped to $4.58 and closed at $5.05. Buffet failed to buck the trend. Domestic prices remained in the range of Rs 7,000 to Rs 9,150 per 1 kg. In the gold prices remained weak in tandemwith global prices. Gold fell to Rs 3,950 per 10 gram then recovered to Rs 4,200 at the fag end of the year. Sentiment was bearish for the gold.

In the global market, gold dipped to an 18-year low of $276.50 due to fund selling. It recovered to $288 at the fag end of the year. Switzerland had announced that it had planned to sell 1,300 tonnes of gold by the end of 2001. It will weigh on the market in the near term, feel analysts.

Technical Outlook

Mega bear market in gold is puzzling many a chartist. Since August 1995, prices are falling. Prices fell from the peak of $395 to $276.50 in last may. In the larger frame, prices are falling since 1980, when gold touched $740 an Oz. Since then prices are sliding. Noted technical analysts Frost and Fresher had written in their book - Eliot Wave Explained - that gold could fall to $125-200. It had been forecast in 1987 and they proved almost correct.

According to Satish Khandelwal, analyst with Vadilal Financial Services, gold may dip below $250per Oz. Technical outlook is still bearish and $300 seems a strong resistance. As far as investment is concerned, gold is no more attractive, despite inflation and weakening of rupee, return is still negative on investment on the gold.

As far as trading is concerned, there was shift in the pattern. In Ahmedabad, traders preferred trading instead of taking delivery. In such transition, deals can be settled by paying or receiving the price difference. One can avoid making or taking delivery. Technically it's forward trading, but not reconsigned by authorities, said an insider. In the absence of hedging, traders had resorted to such pretties, he added.

1999: Prospects dull for gold, silver may remain volatile

In 1999, gold may test a fresh low. Sentiment is bearish. Gold has become a mere commodity from being a financial vehicle. If funds go short on gold, prices may fall further. Some analysts feel it could fall as low as $250 per Oz. However, one school of thought differs. According to an analyst,the decade long bull-run of Dow Jones, the barometer of US economy, is likely to end in the current year. The coming crash of Dow would be far more terrible than 1987. It would re-ignite the fear of deflation. That can help gold recover as it is the safest and most liquid asset. Flight to quality, is likely to remain the buzzword.

So far as silver is concerned, the base metal price would be useful to decide it's direction. Silver is a byproduct of copper, zinc, lead and nickel. Approximately 62 per cent of it's output comes as a byproduct from base metals. Prices of base metals like copper and nickel fell to almost decade lows, and that will led to production cuts. Demand for silver is already exceeding supply. If producers cut production of the base metal, supply will decrease. Funds may go long anticipating future demand. It would be safe to buy on dips rather than sell on top, quipped an analyst.