Just how long can the latest silver boom last?

During the good times 'volatile' silver can generate returns gold bulls can only dream of, but last May investors in the precious metal endured such a painful crash that investors remain bitten.

However analysts believe it may be time for these investors to get back in the game, before the opportunity to cash in on silver's recent rise dies away.

While the metal has never been a bet for the fainthearted, commodity experts argue there is still some upside, but only for the next few months.

Following its sharp decline in May - then again last September - silver marked the start of 2012 with a 23% rebound. While still a long way off last April's peak, silver's bounce-back makes it the best year to date performer of all the metals bar tin.

Short covering has been one of the main characteristics of this rally, and strong physical demand has also given it an extra push. The key question now is can its rise persist?

'The collapse that silver's price suffered in May left investors with a sour taste. Many continue to stay away from the metal, and for very good reason,' said Royal Bank of Scotland (RBS) commodity research head Nick Moore, who argues that although silver's returns can at time rival gold's, it is prone to crashes which can wipe out portfolios within days.

'In our opinion, in addition to its inherently volatile nature, silver should be viewed with caution due to its problematic fundamentals,' Moore said.  'The market remains in a supply surplus.  Above-ground inventories have increased by 14,000 tonnes since the start of 2008 (including exchange traded fund holdings), equivalent to six months' global industrial demand, and we expect an excess of another six weeks' demand to be generated this year.'

However acting alone, supply surpluses are not enough to call time on rallies in the metals sector. History has shown excesses, like the one in 2008, can still come in conjunction with sharp price rises. 

In 2008, broad oversupply came simultaneously with a 10-fold price rise, and as for gold, if silver demand is strong enough the metal's climb can accelerate regardless of supply and a bull market can be maintained.

The problem with silver's structural oversupply is that if investors' demand changes, there will be little left to support its price.

For the next few months, RBS' Moore expects investors attitudes towards silver will stay positive.  Beyond this, the bank has its doubts.

'Loose monetary policy should feed into gold and silver's perceived inflation-hedging attributes and the more general euphoria towards risk that seems to be in place should also help. The backdrop of the European sovereign debt crisis has offered silver physical investment demand in the continent support....further ahead lie challenges for the metal.  At $3,4/oz, it is already richly priced.'