(Source: Money Marketing)The volatility in the price of silver and other commodities over the past few weeks has made investors sit up and pay attention. Questions have already begun to be asked as to whether or not the commodity super-cycle is over-played and exchange-traded funds have come under fire, used as scapegoats for the pull-back in commodity prices. However, resources managers believe the long-term fundamentals for the sector remain sound and that recent price falls represent a good buying opportunity. They say silver may be experiencing a rocky time but the fortunes of one precious metal are not linked to others, particularly gold. The price of gold also fell back in early May but its relatively modest 5 per cent drop has already proven short-lived. Some are even forecasting it could soon hit even greater highs. Bradley George, head of commodities and resources with Investec, says: "The retreat of oil, gasoline and diesel prices, which was significant, could improve already strong margins for gold equities." Overall, the sharp sell-off across commodities in the opening weeks of May was the sector's worst correction in two years, says George. There were many reasons for the correction, such as the European Central Bank's decision not to raise rates further, but George attributes it mostly to fears of an end to the Fed's second bout of quantitative easing. He says: "We doubt the end of QE2 will lead to a shift in interest rates and growth expectations in the US. Consequently, we believe composure will return to commodity markets as underlying long-term fundamentals remain bullish in our view. "Furthermore, we see China as holding the key to the end of the current period of resource stock underperformance. Once it becomes clear China has successfully engineered a soft landing and the end of the Chinese tightening cycle is in sight, we expect Asian risk appetite to return and, with it, investor interest in resource stocks." Whatever the ultimate cause of the commodity falls, there is no doubt they were severe and have shaken investors, with some pundits talking of a commodities crash. The poster child of the story has been the rise and dramatic fall in the price of silver. Just over a month ago, the metal saw its highest price since 1980, having risen incredibly rapidly in less than 12 months to hit almost $50 a troy ounce. In 2010 alone, the metal's price rose some 70 per cent, making it one of the best-performing commodities last year, outstripping gold even as the latter hit new all-time highs. It was said that gold had lost some of its lustre and it was time to invest in silver.

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