Time to switch from gold to silver?
Posted on 18 January 2011 with 3 comments from readers
Everybody is starting to talk about gold prices and how best to buy gold. Very few people talk about silver. The Financial Times left it out of their best investments of 2010 review, although it would have come top.
Now Rich Dad books’ author Robert Kiyosaki is trying to persuade gold bugs to swap their yellow metal for silver. He has actually been plugging away recommending gold and silver since 2005. Then gold was $600 an ounce and silver $10. Today gold is up by 125 per cent and silver prices have tripled.
Mr Kiyoski has appeared in many places promoting silver. Here is on ArabianMoney last year (click here). His argument does not change, only the price of silver goes up, and it is going up by a higher percentage than gold.
However, at the time of writing precious metal markets are in retreat. So the logic of buying silver over gold is reversed and for the moment gold will be the better buy as it will fall by less than gold.
Volatile ride upwards
You can argue about the greater volatility of silver. Indeed, it is more volatile than gold. But not about its overall price outperformance. There are complicated reasons for this as the brilliant economist Ted Butler has patiently explained (click here). It is all to do with a massive short position in the silver market, that is now starting to crumble.
Buying a lump of metal is not a very exciting investment, except when it ends up making you rich. For if future price estimates for silver are right (click here) then this is definitely the place to be when precious metal prices start to rise again, and will deliver a far greater return than gold.
Next month’s edition of ArabianMoney will be looking at silver investment vehicles and how best to buy and hold this heavy and bulky metal, or whether to own its paper derivatives (click here to make sure you get your copy).
3 Comments posted by readers:
Speaking of Ted Butler (arguably the most knowledgeable, when it comes to the silver market!), here is what he had to say recently about whether the JPM cartel will be able to drive the silver prices down more than they already have over the past two weeks.
“Can the commercials rig prices lower still at this time? That is always possible, given how corrupt they are and how negligent the regulators have been. The precise price bottom is always defined at the point at which the commercials can’t induce any more speculative selling. It’s not a matter of how many Comex silver contracts the commercials would like to buy; it’s strictly a matter of how many contracts the commercials can trick the speculators into selling. Considering the low level of potential speculative selling remaining, my guess is still that we are close to an important bottom. While I may be wrong in the short term by a bit, I don’t think I will be wrong that the inevitable rally, whenever it commences, is very likely to be explosive in nature.”
Please note that the boldface above is mine.
Like I had said before. All commodities that are consumed widely by China will drop until after Chinese New years. We will see Copper and Silver drop until about the 1st week of February.without Chinese demand there is not too much demand out there lol.. Silver will rally back up after Chinese New Years and so will Copper until then enjoy making money by buying PUTS.
A 21 January Update:
While I agree with Andy that the precious metals markets may continue to ebb (maybe until the end of next week), it’s interesting to note that silver is now in backwardation, and somewhat surprisingly, gold demand is up sharply in India as well as China.
James Turk and Ted Butler both believe that silver is poised to make a big move up very soon; Turk also feels that gold will move sharply higher as well. Go here for Turk’s comments:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/21_James_Turk_-_Silver_in_Backwardation%2C_Set_to_Explode.html