Silver: A Nice Complement to Gold

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Includes: EPU, GLD, SLV
by: Carl T. Delfeld

As a hedge on inflation and currency markets, my hunch is that silver may be your best bet right now and preferable to gold at current prices. Why not add a bit of a silver (NYSEARCA:SLV) to your portfolio?

Adjusted for inflation since 1980, silver prices should be trading at roughly $128 an ounce. Silver is open to substantial market manipulation but this can cut both ways and investment demand from booming coin sales and ETF investors is increasing steadily.

With global silver production projected to barely grow this year, there is a good likelihood that silver prices should firm up and get to the $20.78 March 2008 high of $20.78 an ounce. This price is still way below its all time high of over $49 when the Hunt brother tried to corner the market.

According to the consultants CPM, 12 billion ounces of silver existed in 1900 and this has fallen to about 690 million ounces in 2008 according to the Silver Institute. This represents a 95% fall over the last century in above ground supply.

Peru is the largest supplier of silver in the world with a 17% share followed by Mexico, China, Australia and Chile. As an aside, the Peru ETF (NYSEARCA:EPU) has been red hot and the world’s best performing market but seems very expensive to me.

Catalyst: There is a need for the gold/silver price relationship to get back to historical norms.

Risk Factor: medium to high – suggest 8% trailing stop loss.

Tip: Consider pairing SLV with GLD so have you have precious metal in both of your saddlebags.