Silver: The New Magic Bullet for Investors?

Many investors have their eye and money on gold as the asset class to watch in the near future as global money printing has its inevitable effect on inflation, crashing bonds and hiking interest rates.

In this environment, gold will soar as a money of almost fixed supply. It takes only a tiny shift of cash from bonds to gold to begin an enormous price spike for gold.

Investors can be forgiven for being a little skeptical after the recent modest price performance of gold, although even the anti-gold bugs concede that gold has been a good store of value through the early stages of the global economic crisis.

Future prospects

You really have to look forward, however, and think how major asset classes are likely to perform from here.

Do equities look a good bet with profits diving and real estate prices falling? Do bonds look attractive with governments planning huge issuance programs? And which currency will devalue next?

Gold offers protection against devaluation and an over supply of bonds, as no government can print gold. Equity rallies in a bear market are temporary and easy to misjudge. Shorting stocks is also a matter of market timing which can be got wrong.

Besides you need to catch the next big thing to succeed in investment, not jump of previous bandwagons that might show some signs of new life.

Add all the global stimulus packages and bank rescues together and you have a massive requirement for governments to create money, either issuing bonds or printing money. That will happen, and that will create inflation, and that will mean a higher gold price.

It is just a matter of waiting patiently long-of-gold until it happens. But if you want to leverage your precious metals, then there is a growing body of precious metal insiders that tip silver as the better option.

Silver bullet

The world’s stock of silver is one hundredth that of gold and the current price makes this metal arguably the most depressed commodity of all. It has never traded at even half its 1980 high, although it has recently come close to the average price for that year.

When the gold price lifts off then the silver price should take off by at least a factor of two, and the gold:silver ratio drop. This is also the historic pattern, with silver the better performing metal in a boom, albeit with higher volatility than gold. So if you are looking for a magic bullet to boost your portfolio, silver should be your asset class of choice.

Comments

[DONE_SONZ:]

Silver is a good bet as well in my opinion.Copper isnt looking to shabby either.Any thoughts on Platinum?

May 04 07:10 AM

[JGL:]

copper is (was) influenced by China. Price will drop when they stop buying and until the economy starts again .
I ^have read several times that the Silver market can, and is, easyily be manipulated by only a few players.
Any thoughts as I am no expert?

May 04 09:28 AM

[yellowhoard:]

Couldn't agree more. Platinum and palladium have the wind in their sails as well.

May 04 09:29 AM

[DONE_SONZ:]

Copper is seen as a sign of inflation or lack there of.If world economies do pick up,copper will move up too.I see copper as more of an industrial metal than a prescious metal,but still one none the less.

On May 04 09:28 AM JGL wrote:

> copper is (was) influenced by China. Price will drop when they stop
> buying and until the economy starts again .
> I ^have read several times that the Silver market can, and is, easyily
> be manipulated by only a few players.
> Any thoughts as I am no expert?

May 04 09:59 AM

[Hot Richard:]

Silver manipulation is possible, but you don't have to sell when it drops (via manipulation by key holders in acquiring mode). Learn from oil as few things are more manipulated than the price of oil.

I'm hesitant on platinum (and its cousins) and copper. Still doing my research.

The recent gold opportunity was nice while it lasted. I expect another chance this year...but then sub-900 will exist only in our memories.

"...no government can print gold."
No, but they can come to your house, put a gun in your face, and take yours. Socialism 101 is that wealth confiscation and redistribution is morally good for the people.

May 04 11:42 AM

[kohalakid:]

"The world's stock of silver is one hundredth that of gold"


Really???? Where the heck did the author pull that figure from??

May 04 01:12 PM

[5142152-337:]

Excellent!

May 04 02:01 PM

[doubleguns:]

I thought it was 1/5th.


On May 04 01:12 PM kohalakid wrote:

> "The world's stock of silver is one hundredth that of gold"
>
>
> Really???? Where the heck did the author pull that figure from??

May 04 06:07 PM

[djk!:]

Peter,
When you say "Equity rallies in a bear market are temporary and easy to misjudge.", I think you are correct. Way to easy for you to misjudge. And life itself is also temporary. So leave it at that. Meanwhile, while this temp equities rally has helped people regain principle or create a whole new small fortune, the precious metals folks have pretty much gone nowhere in the same period of time. Then again, you are correct that gold has been a good *store of value* over the last year. But a 4.25% CD probably would have been a better store of value during the same time frame. And should silver hit $35US to $50US there most likely will be a large sell off that will send it right back to the high teens. Pretty much the same with gold if it reaches 1500US, the sell-off will send it right back to sub $1000US. At that point you can start your predictions all over again.

May 04 11:48 PM

[secmaven:]

Hope springs eternal! Meanwhile scrap gold is coming in by the ton! The common man is dumping his precious metals. Is that an indication of higher prices in the future?

May 05 02:26 AM

[GMiki1:]

People are selling scrap gold because they need the money. However, I think it's a good thing for gold bulls as when gold soars, a lot of the scrap will be out of the way.

As for silver, since it's an industrial metal, paper silver won't do for the end user and manipulation is only possible when paper can be traded. Physical supplies are also a byproduct of base metal mining and some of that has been shut down.

Copper is being bought and stockpiled by China. It might not keep going up right now, It might correct. But eventually copper will run up in price.

Platinum ran up on South African concerns and then sold off with the economic crash. But platinum is used to reduce pollution and has big auto and industrial uses. Maybe cars aren't selling in the U.S., but they are selling in China and India.

Which brings us to oil. Those cars use gasoline.

May 05 11:55 AM

[Dana H.:]

"The world's stock of silver is one hundredth that of gold"

I don't even know what this statement means. Is this by weight, or by dollar value? If the former, I don't believe it for a minute.

And to repeat another comment: Where the heck does this "one hundredth" figure come from?

May 05 11:59 AM