Precious metals, especially gold and silver metal labels received a solid boost last fiscal year when the Fed announced an open ended mortgage backed securities purchase program up to the tune of $40 billion a month known as QE3. While it is true that the move resulted in rocketing gold and silver prices initially, the prices now have fallen substantially, especially over the final quarter of fiscal 2012.

Although both gold as well as silver do belong to the precious metal labels asset class, investments in silver are quite different (if not completely different) from that of gold which acts like a value store investment proposition and an ultimate safe haven.However, considering the investment case for silver, what makes this white metal so unique as well as weird is its dual nature of serving two purposes. Firstly, like most precious metals silver investment is considered to be a store of value, and secondly, due to its vast industrial usage worldwide silver also has a high correlation to the broader economic sentiments.

What this means is that silver prices receive a boost every time industrial activities pick up during positive economic conditions. This is mainly because strong economic fundamentals facilitate growth which in turn increases industrial production. Due to the industrial usage of silver its consumption demand increases thereby raising its prices.Surprisingly, even gold metal labels have exhibited a positive correlation with the equities, just like its white counterpart. The correlation between gold and equities tends to increase during times of stock market surge. However, the strength of this positive correlation is stronger in case of silver than gold. One reason which explains this characteristic of silver is its high volatility. SLV has a volatility of 35.63%, compared to this GLD has a volatility of 17.5% and the S&P 500 18.52% in a similar time frame.

However, the positive relationship with equities and gold does not hold true in times of stock market plunge. The reason for this is the safe haven nature of gold investments. When equities go for a toss, investors actually buy gold as a safe haven investment thereby completely scrapping the positive correlation that these two asset classes which were in place when the equity markets surged.