Silver, the New Gold

Precious Metals prices are moving north really fast recently. Even a rising dollar couldn’t stop gold and silver prices from climbing yesterday as investors bid up the precious metals in light of economic woes in Europe and military conflict in the Koreas. Experts are all around commenting that gold could at least reach $2,500 and some are looking for more than 100% ROI for possibilities of it to hit $5,000.

While it is no secret that we are at a precious metals bull run right now with the price of gold so unbelievably high, I believe that silver is a more affordable way for me to take profitable advantage of the precious metals bull run!

First, let’s take a look at why people invest in gold?

Gold is considered as the most reliable hedge against inflation. Every time the value of dollar declines, the value of gold increases. The bad news is inflation is ever increasing and the value of our currency can only move downwards.

With the central banks all over the world shoring up their reserves, we are talking about rich countries like India, China, Russia, economic analysts believe that gold could go as high as $5,000 per ounce.

However, one of my favourite investor of all time, Warren Buffett said, “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

While it’s somehow possible for Buffett to be right on the yellow metals, I believe he was definitely right about silver because he once owned 129,710,000 ounces of silver which he later sold off and it ended the SEC probe on General RE.

So, why do I say that Silver Is The New ‘Gold’?

The following are 5 Very Important Facts that You Must Know about Silver.

1) Gold Silver Ratio

The Gold Silver Ratio is the price of gold in dollars divided by the price of silver in dollars. As of right now (24th Nov 2010), that would be 1374/27, which is 50.

The historical range is said to be 16/1. If we were to adjust the price of silver with Gold Silver Ratio of 16/1, silver should worth about $86 today!

If gold soars to at least $2,500-as industry experts like UBS, Peter Schiff and James Dines all believe-silver could rise to $156!

2) Even though there’s about 8 times more silver mined each year than gold, there is far less silver than gold available. For every 3 ounces of investment-grade gold on the market, there’s only about 1 ounce of investment-grade silver.

3) Industrial Demand

There is industrial demand for silver compared to gold. Silver remains the best electrical conductor known to man, and it is an excellent thermal conductor as well. Silver is needed practically every electronic device being made today-from iMac to iPod to iPhone and to iPad. The demand for these portable devices in insatiable and they are going to drive the demand for silver through the roof.

That’s not all; the industrial demand for silver continues to increase as silver’s use in solar, water purification, and food processing/ preservation. This will continue to increase dramatically over the next decade.

4) Economic Silver in the Ground

According to the USGS (United States Geological Survey), there is more or less eight years’ worth of economic silver in the ground; in other words, peak silver is roughly a decade away.

So far, there is nothing to say that another breakthrough of new mining techniques could take place and extend the mining of minerals further into the future.

This boils down to the basics of demand vs supply.

5) Massive Printing of Money

We all know that our world is now swimming in debt and so far the solution is to borrow more money which increases the debt even further. All indebted nations are holding interest rates low so their debt servicing is “manageable” but in reality it is almost impossible to service the debt but very few in official roles (government) will ever admit this startling fact.

The gold and silver enthusiasts believe that one day; the world will go back to use the money that once was utilized before paper money or currencies were born, Gold & Silver. However, in an interview at the New Orleans Investment Conference on November 7th, 1993, Nobel Laureate Milton Friedman said, “The major monetary metal in history is silver, not gold.” I believe what he meant was the fact of monetary history, gold is money but silver has been used as money even more often, in more places, and by more people than gold ever has.

So, if you think gold is good, think again.. Wait till you see Silver.

Source by Jonathan Quek

Silver, the New Gold