Silver is punishing investors amid diminishing trust in precious metals as a store of wealth and concern that growth is weakening, with $5.2 billion erased from the value of their near-record holdings this year.

Investors expected silver to be one of the biggest gainers in 2013, with a 33 percent return, a Bloomberg survey in December showed. Instead it’s leading a retreat in commodities with a 28 percent plunge to $21.84 an ounce, on track for its worst performance since 1984. While the median prediction from 14 estimates compiled last week is for a rally to $23.50 by Dec. 31, that would still mean a 23 percent drop for the year.

Analysts expected silver to surge because either turmoil would boost demand for precious metals as protection against inflation and currency debasement or accelerating growth would spur more industrial buying for everything from solar panels to batteries. The collapse of gold into a bear market, steady consumer prices and mounting concern about the strength of economies means silver’s allure is instead diminishing.

“Silver has been caught in the crossfire between being a precious and industrial metal,” said John Stephenson, a senior vice president and fund manager who helps oversee about C$2.7 billion ($2.65 billion) at First Asset Investment Management Inc. in Toronto. “Since investors were selling gold, silver also lost luster. We need enough economic growth to happen before people can start considering it as an industrial metal.”

Gold Slump

This year’s plunge in silver exceeds the 17 percent drop in gold, which is poised for its first annual decline since 2000. The Standard & Poor’s GSCI gauge of 24 commodities fell 4 percent, extending its retreat from last year’s peak to 14 percent. The MSCI All-Country World Index of equities advanced 5.8 percent since the start of January and a Bank of America Corp. index shows Treasuries lost 1.6 percent.

Investors are maintaining their belief in silver even as they lose faith in gold. While the amount of silver held through exchange-traded products is little changed this year, and within 5 percent of the record reached in March, gold holdings dropped 19 percent, data compiled by Bloomberg show.

Silver investments stand at 18,918 metric tons, valued at $13.3 billion and enough to meet global demand for jewelry and silverware for almost three years. The value of gold ETP investments slumped 33 percent to $94.9 billion this year.

Investors for now are treating silver more like a precious metal than an industrial one, with its 30-week correlation coefficient to gold at 0.85, from 0.68 in 2011. A figure of 1 means the two move in lockstep. Silver also tumbled into a bear market in April and is now 56 percent below the record $49.8044 reached in April 2011.

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