Sure, gold costs a lot more and gets most of the attention, but its white-metal sister could be the better buy today. Investors might soon realize that silver is the real treasure. Silver is still cheap, trading around a 70th of gold’s price, even though it climbed 49% in value compared with gold’s rise of 24% in 2009. www.themetalsreport.com;
By: Myra P. Saefong, Market Watch
In further edited excerpts from the original article* Saefong goes on to say:
Volatility Favors Silver
Silver is highly correlated to the safe haven of gold and is, in effect, a leveraged sister of the precious yellow metal and, as such, informed investors use gold more for wealth preservation purposes than silver in order to make a return. That’s particularly important to keep in mind as investors change the way they perceive the paper-asset markets. As stocks, currencies, bonds and other paper assets have begun to disappoint investors, investor attitudes have been shifting and what begins as a trickle ends as a tidal wave when the panic peaks. When public revulsion at the U.S. dollar begins, the tidal wave will become a tsunami. Under that scenario, silver, far more volatile than gold, will benefit most.
Silver or Gold?
Forced to pick just one, Chris Mayer, the editor of Agora Financial’s Capital and Crisis, said he’d rather own gold, though other people disagree. “Silver does not have the same appeal as gold,” Mayer said. “What did India’s central bank buy in record amounts . . . (and) what did China double its reserves of this year? They bought gold. They didn’t buy silver and when the global industry remains mired in a slow growth pattern, the market is not going to see sky-high prices for a metal whose “lion’s share of demand comes from its industrial applications,” said Jon Nadler, a senior analyst at Kitco Metals.
Silver as a Hedge
The investment figures show that “Silver’s allure as an investment is ever more appealing as a hedge against fading fiat currencies that are getting inflated into oblivion,” said Scott Wright, an analyst at financial-services company Zeal. This is “measurable via skyrocketing investment demand” for physical bullion and exchange-traded funds.
Going, Going, Gone
While some analysts agree that the benefits of silver’s precious-metal characteristics have outweighed the pluses from its industrial uses, the industrial label might soon turn out to be of lesser hardship. “The industrial uses for silver are numerous and generate substantial additional demand for silver outside its precious-metal usage,” said Patrick Kerr, the managing director at Amerifutures Commodities & Options. True, silver is suffering from a decline in demand from the photography world as consumers turn to digital technology, but industries are finding other uses for the versatile metal, including medical applications, and actually consuming supplies as they use them.
“Silver is consumed and gone forever in most applications,” said Julian Phillips, an editor at SilverForecaster.com. On the other hand, “huge efforts are made to recover gold, so essentially it is not consumed.” Gold’s much higher value prompts those efforts to recycle it. In fact, “all the gold mined in the world over time is still with us, but a huge amount of silver has been used in photography, mirrors and other industrial uses in the last 200 years,” according to the GoldCore report. “Silver’s relatively low price makes recovery and recycling uneconomical, it said, so industrial demand has been outstripping mining supply for most of the last 20 years, driving above-ground supply to historically low levels and silver production has been flat in recent years while demand has been increasing. As a result, refined-silver stocks are near an all-time low, with stocks dropping from about 2.2 billion ounces in 1990 to about 300 million ounces today”, the report said.
How High can it Go?
“At one time, silver was more expensive than gold, but that was in the days of Egypt’s pharaohs,” Phillips said. Although no one wants to say that will ever happen again, most analysts expect that silver prices will soon react to gold’s recent gains.
“Ultimately, silver tends to exhibit its largest spurts in the latter stages” of a major rise in gold, said Zeal’s Wright. “Once speculators and investors start to get excited about this metal, it can really fly — and fast.”
GoldCore expects to see prices at well over the nominal high of $50 an ounce and, eventually, surpass the inflation-adjusted high of about $130 per ounce in coming years.
Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)