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The price of silver is going to go much, much higher – much higher – over the
next decade [relative to gold according to Jim Rogers and I concur. Below are 5 solid reasons why I believe that is the case.]
By Ed Liston. The original article* was posted on SeekingAlpha.com under the title Gold Or Silver: Which Is Better For Investors?.
…[Below are a number of] factors to consider:
1. Growing Industrial Demand: …silver is an industrially useful metal. It does have a volume of industry demand. It is used in plastic design, batteries, mirror coatings, electronics components, medical instruments, water purifiers, solar panels, to say nothing of making silver bullets to fight against the impending werewolf invasion.
According to a Kitco report the amount of silver used for industrial purposes is forecast to rise to 665.9 million troy ounces by 2015, which would be a 36% increase from the 487 million used in 2010, according to a report from the Silver Institute.
The report identifies 11 still-new applications for silver, ranging from food packaging to radio identification tags to auto catalysts, which collectively could exceed 40 million ounces of industrial demand by 2015, said the Silver Institute.
The report also said that stronger silver industrial demand in the U.S. and Asia will be a key factor driving growth through 2015, with healthy developing-country demand especially in markets such as China and India.
Since silver has a substitution problem just like any precious metal – its available quantity is not unlimited – industry demand will put a premium on silver, unlike gold which has no industry demand worth noting and is priced on pure, ultimate human hype.
To put the industrial demand of silver in perspective, note that although most people think its primary usage is in producing cheap jewelry and cheaper coins, that actually accounts for only 30% of silver demand [with] the remaining demand coming from industrial use… As newer and broader applications of silver find their way into technology, that demand will only go upwards….
2. Greater Upside Potential: …Central banks do not own silver, they own gold, so silver is more volatile. When markets for silver/gold go down, silver generally goes more down than gold. However, for the same reason, when inflations occur or with rising industrial demand, silver, since it is more volatile, has potentially more short term upside than gold so if you are a risk-taker at heart, silver is a good choice. Its highs are very high, its lows are very low. If you can buy at a low and sell at a high, you win a lot. Gold, on the other hand, seems more stable, and it is an excellent hedge in troubled times.
3. Lesser Supply: …In the last ten thousand years, huge amounts of both gold and silver have been mined [but] almost all of the gold is still in the market in a purchasable condition [while that is not the case with] silver…Silver’s industrial refuse (silver scrap) is not usually recycled because costs are high compared to the price of the silver recovered. This makes silver more scarce than gold, and that scarcity is increasing…
4. Depressed Silver/Gold Ratio: …The so-called silver/gold ratio has historically… been roughly 15:1; that is, one ounce of gold trades for 15 ounces of silver. Right now, however, that ratio is approx. 71:1; in other words, gold is trading at almost 5 times the price it used to trade before with respect to silver’s price. [Interestingly], however, mints report that they sell almost equal dollar amounts of gold and silver which means that they sell 71 times more silver than gold. [As such, given that] demand for silver is larger by a big margin and that silver is undervalued right now from a historical perspective, [should the silver/gold ratio strengthen]…even by a small factor, silver’s price would increase substantially from current levels….
5. Less Potential Counterfeiting: …Millions can be made by counterfeiting gold but since silver is much less costly than gold, counterfeiting silver is not lucrative. Hence, when you buy silver, there is less risk of getting counterfeit bars and coins than there is for gold.
Caveats:
Silver, since it is more volatile, requires you to have a more cautious approach than gold does. You’d better be a trader rather than an investor if you are buying silver. It can fluctuate by more than 70% in a year, so if you are a long term buy-and-hold investor, silver is not for you.
[The above being said, however,]- silver generally outperforms gold during growth phases of the market when there is more demand for industrial silver and,
- when markets are depressed, demand from the industry scales down, and gold outperforms silver.
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*Original Source: http://seekingalpha.com/article/985701-gold-or-silver-which-is-better-for-investors? (© 2013 Seeking Alpha)
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