Will silver now outperform gold?
Posted on 14 February 2009 with no comments from readers
The closing price for silver this week is $13.70 while gold is at $941 per ounce. Precious metal prices are clearly in a rally, and a fairly gentle and sustainable one, rather than a price spike.
And yet silver is out performing gold. By my approximate calculations silver has risen about four times faster than the yellow metal over the past few weeks.
Downside
Of course, we have also seen this volatility work in reverse as recently as last spring. Then silver suddenly lost more than half its value while gold proved more resilient and rebounded more quickly.
However, the idea that silver will lag along way behind gold – due to its status as an industrial metal hit by the recession – and then catch up at sometime in the future, looks disproved.
Indeed, the message is surely that if you think the current gold rally has further to run – and the long list of financial experts jumping on this bandwagon now appears worryingly like a consensus view – then you might do much better to buy silver instead.
Certainly historical precedent is on your side if you do as the gold:silver price ratio always tends to narrow in a financial crisis. One reason is that silver stocks are less than a hundredth the size of gold stocks and so there is the simple play of supply and demand on the price relative to the supply and demand of gold.
Cheap
Gold bugs hate to admit this obvious truth and can reasonably point to the volatile trading history of silver which has a nasty habit of catching silver-bulls out. Yet silver is currently trading at a lower absolute price per ounce than 30 years ago, and any suggestion of over-valuation is laughable.
It is also true that the silver futures market is the most manipulated in the world. That makes serious trading activity impossible, and buy-and-hold the only sensible strategy.
However, there has been plenty of evidence recently to suggest that the control of the spot price of silver by the future market is about to breakdown. And when that happens silver prices will go to the moon.
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no Comments posted by readers:
So far silver has been doing well. It has bounced off its lows it recently tested. I am now looking for some Silver ETF’s to trade.
regarding etf’s be careful:
1. because people can short them
2.http://jsmineset.com/index.php/2009/02/12/where-do-all-the-gold-etfs-get-their-bullion-from
Peter,
Agreed. I hold silver and gold bullion at a ratio of 1:70, but may put yen and Pound Sterling into more silver.
Andy,
ETFs are dodgy. Buy physical metal or gold/silver stocks. Just a thought. Good luck.
I love silver, love it more the gold but only the real thing i don’t trust paper silver.That’s the problem in dubai and most of aisa.you can walk into the gold souk sell gold and walk out with cash try that with silver. no chance.As quick as silver price rise and fall i can’t fly to USA to sell.[don't want to they might confiscate by then]… Any one know a place in dubai??????????
Silver and platinum are simply buys with spot prices where they are. Youc ant find paltinum coins except for ebay at 200 over spot. silver is the lower risk play and holding long through the inflation and possible recovery seems like a sound financial plan.