Despite the dip in price, Silver has a lot of blue sky in its future….
With gold pushing through new highs, Silver has yet again taken a back seat of late. Followings its dramatic pullback from the $50 mark in April, investors perhaps understandably have been weary to engage what is certainly the more volatile precious metal of the two. Myra P. Saefong of Market Watch presents the argument that silver, however, is a worth rival to gold and shouldn’t be overlooked by investors.
The white metal is also 40 times cheaper than gold. It doubles as both a precious and industrial metal and most of the silver used in industrial applications is consumed rather than recycled. Silver is known as a “poor man’s gold,” so as gold prices rise and begin to price out many investors, “silver becomes a good and cheaper alternative,” said Mark Leibovit, chief market strategist at VRTrader.com.
World investment demand for silver climbed to 279.3 million ounces in 2010, up around 40% from 2009, according to data from metals research consultancy GFMS. That compares with a rise in industrial demand of about 20%, to 487.4 million ounces in 2010 from the year before.
Gijsbert Groenewegen, a managing partner at Silver Arrow Capital Management, points out that gold was confiscated under President Franklin Roosevelt in 1933 during the Great Depression, and gold, because it’s held in central bank vaults, is most likely to be used in order to back up a new monetary system. If that happens, “silver would become the safe haven of choice investors could still freely invest in,” he said.
Silver could also see growth in investment demand from uncertainty in the financial system as well as industrial consumption from expanding economies.
“If you believe that the worst thing we will have now is massive inflation from all of the monetary printing, silver will be a fantastic buy,” said James Carrillo, account executive at precious metals investment firm Swiss America Trading Corporation. But “if you believe there will be another stock market meltdown, I would wait on silver.”
Historically, silver prices have traded around 16 times less than gold, according to David Laidlaw, president of Clarus Wealth Management. Silver is currently trading 40 times less. If silver returns to the multiple that has existed historically, the white metal should be trading around $100 so with prices of around $40, silver’s a good buy, he said. “Gold will always be king, but silver certainly has a lot more potential for increasing in price.”