Silver: the "poor man's gold" getting richer
No wonder many investors are looking at the shiny white metal with new eyes.
Silver generally grows in a pattern similar to gold, because their prices are driven by many of the same factors. The U.S. and global economic recovery in the wake of the 2008 sub-prime mortgage crisis has been sluggish, and many markets remain volatile. The U.S. Federal Reserve's quantitative easing programs have loaded over a trillion dollars in U.S. government debt onto the U.S. dollar, raising fears of currency devaluation and runaway inflation. Historically low interest rates have stripped the profit out of many previously lucrative forms of investment. And over in Europe, two nations have recently required a bailout due to unmanageable debt and several more economies are in trouble, raising the specter of debt contagion across the eurozone. All of these factors benefit gold and silver in roughly equal measure, as softening currencies and other paper assets motivate investors to buy hard assets such as precious metals, both as a shelter from bearish currency markets and as a lucrative investments in their own right.
Spooked by the prospect of their hard-earned cash being gutted, many less wealthy investors entering the precious metals market are turning to silver—which, like gold, can be bought and traded in bullion and coin form, as well as traded as shares in exchange-traded funds (ETFs)—not only because it's substantially cheaper to buy than gold, but because the returns these days are substantially better. Given silver's fantastic 2010 track record—its percentage growth has been almost triple that of gold this year—smart silver investors are making out like bandits for a fraction of gold's per-ounce outlay.
The price of silver, however, is more influenced by industrial demand than the price of gold—silver is used in solar panels, electrical wiring and water-purification systems, for example—making it a substantially more volatile investment metal than gold. Increasing demand from silver-consuming industries is a big part of the reason why silver gained so dramatically this year—if demand dramatically falls due to a downturn in the global manufacturing sector, the price of silver can plummet while gold remains relatively stable.
And so the investor is faced with the classic dilemma of risk and return: smaller gains in exchange for less risk, or potentially huge gains in exchange for substantially higher risk?
At Friday's close in Toronto, the March silver contract traded at US$29.035 per troy ounce, while the February gold contract traded at $1,370.00 an ounce.
Questions and Answers
We have suggested that junior metals mining, exploration and producers stocks are a very good place to invest currently. A recent phenomenon, while not unexpected, has drawn more interest to this sector.
To make a long story short, I feel the market (stocks, bonds, currencies and commodities) are about to see another major shift that will either make you a boat load of money or you lose a lot of money if you are not positioned properly. So the big question is "Which direction will these investments move?" Let's take a look at the charts…
Virtually all mining CEOs are predicting higher spot prices for gold and silver in 2012. Mitchell Clark predicts that the buying and selling of whole precious metals companies accelerates in anticipation.
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Investing in precious metals like gold, silver, platinum and palladium is the best thing to do right now. Precious metals markets are experiencing an unprecedented boom since 2000. This bull precious market is expected to continue for many more years as governments all over the world are printing money to dampen the effects of the global recession. This inflationary environment will make the prices of precious metals to soar even further!
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