China Helping Silver to Ascend
The Year of the Golden Tiger in China began in February and along with it came a surge in Chinese demand for precious metals. According to the World Gold Council, China was among the strongest retail investment markets in the world. Demand increased by 121%, also doubling the demand for bars and bullion coins. With demand surging and supplies being pinched, China is requiring fresh imports of bullion to meet this positive demand. Chinese citizens have been prospering due to the strength and exponential growth of their GDP. With a growing economy comes a higher standard of living for Chinese citizens, and extra capital to invest. According to the WGC, Chinese demand for precious metals has grown at an average rate of 13% per annum over the past five years. This makes China the world’s second largest consumer after India, as the robust economy spawns jewelry demand.
Since implosion of the world markets in 2008, silver has been outperforming gold and is well below its all-time high of $50 an ounce. The gold/silver ratio narrowing, currently as 65:1, as institutions trim their gold holdings to acquire more silver. Compare that to 2008, when the ratio was 84:1 – the historical average is about 15:1 – leaving many investors optimistic that silver will continue to rise at a higher pace than gold.
Due to currency concerns, Investors also like to have silver in case they need to barter or use it as money. Bullion coins are extremely liquid, world recognizable as currency, and investors will be offered more for a coin than a bar.
Peter Schiff recommends a minimum of 5-10% of your portfolio be invested in physical precious metals (outside of ETF’s, mutual funds or mining stocks), 2/3 gold and 1/3 silver. Due to world-wide economic and political uncertainties, investors are increasing their allocation even more as other asset classes, be it stocks, bonds or cash, are losing their appeal.