Tom Bukacek asked:
What is the better investment in today’s economy, gold or silver?
Most people would probably answer gold, but the precious metal with the greatest upside may be silver. Silver is more volatile than gold is, and with expected inflation and increase in demand, Silver has a potential to increase in value more than Gold.
Now the purpose of this article isn’t to talk you out of investing in gold as it is a solid investment. Rather, the goal is to educate you on the history of silver, what influences it’s price, and what it’s future looks like so you can decide if investing in silver is better for your portfolio.
Before I attempt to predict the future, let me first discuss the past performance of silver compared to that of gold.
In 1970, the price of gold averaged $35.94/oz. By the end of the decade, its average was $306/oz, or an increase of about 1000%! Not a bad return. In 1970, the price of silver was only $1.63 per ounce. By the end of the decade, it had risen to almost $22 per ounce! This was an increase of around 1400%.
Would you rather invest a smaller amount and receive a higher return? These past results make the future of silver attractive.
Right now, silver prices are hovering in the range of $17 per ounce. Just imagine, silver prices skyrocketing to around $225 per ounce in the next year.
Why use examples from the 1970′s in regards to gold and silver? Many people, including former Fed Chairman Paul Voelker, admit that the current economy is acting like it did in the 1970s, with higher food and energy prices, instability in the stock market, higher unemployment, and a lower performing dollar. Also Voelker, according to Forbes Magazine, recently told the Joint Economic Committee that while the economy obviously does not have the full-blown, double-digit inflation crisis that finally appeared in the 70s, ‘there is an underlying tendency to inflation.’ Given the similarities between now and the 1970′s, the price of silver may be ready for a sharp increase again.
The second reason why silver may be a better investment than gold in this economy is that silver has many more industrial applications than in the past. And, like gold, silver is in a limited supply. So as demand increases and supply does not, the price of silver will go up!
What are some of the products that use silver? Batteries, flexible and solid plastics, and electronics are traditional uses for silver that keep demand alive for it. But the following are some newer uses for silver that will keep increasing demand:
• Mirrors & Coatings – Silver can be polished to 95% reflectivity. While mirrors have been around for centuries, silver is being incorporated in different coatings to reduce sun exposure to the eyes with an eyeglass application. This usage is also being applied to glass buildings in order to help keep buildings cool in summertime and thus reduce energy dependence.
• Medical – It has only recently been discovered as to how silver’s anti-bacterial abilities work. One area of development includes using Nano-silver particles as a delivery mechanism for silver ions, which are being incorporated into many new antibacterial products. For example, silver ions are being incorporated into paints and coatings to inhibit surface germs and fungus.
• Water Purification -Silver ions are now being used in all sorts of water purification processes. Example customers are hospitals, community water systems, pools, and spas.
• Solar Energy – Silver paste not only increases the efficiency of solar energy collection as electricity, it can also be used in solar farms that use the collection of the sun’s rays as heat to produce steam powered generators.
Finally, collecting silver coins is collecting massive popularity as well. The U.S. Mint sold more Silver Eagle Coins in March and in the first quarter of 2010 than ever before. A total of 9,023,500 American Silver Eagles were purchased in the first quarter of 2010, the highest amount since the coin made its debut in 1986! Many investors are starting to awaken to the benefits of investing in silver.
According to the London Bullion Market Association’s Forecast 2008 report, the silver market looks bullish over the next couple of years. Silver’s price gains can be attributed to solid demand-side investment, and that appetite looks set to continue in the future as the race between the old world and the emerging economies to corner the world’s natural resources intensifies… be it a mine or simply physical metal. Given the economic factors, the historical surge due to these factors, the increase in industrial demand, and the increased popularity in coin collection, silver may be a safe investment for investors to bully their portfolio than other types of assets and investments.
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