All that glitters is not gold: Is silver set to outshine gold?

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Bars of 1000 gram silver are seen in this picture illustration at a precious metal refinery in Istanbul. Photo - Murad Sezer/Reuters

Predictions of gold hitting $5000 an ounce came as early as 2009 when, Peter Schiff, President of Euro Pacific Capital, voiced his explosive forecast while commenting on the sharp surge in the precious metal?s price early in an interview with Fox Business News in?October that year.

While it was shrugged off as a mere speculation back then, recent market trends have forced investors, exasperated from the economical turmoil of the past few years that has swallowed their investments, to stand up and take notice of the then-outrageous prophecy.

As economic crisis continued to come hit markets one after another – the US debt ceiling crisis, the Standard & Poor?s US credit rating downgrade, the implosion of European economies, and asset markets such as real estate and equities refusing to pick up, the impossibility of precious metals soaring to unimaginable heights is no longer being taken for granted.

Nevertheless, while gold continues to set new records, it is its oft-neglected sibling that seems to be gaining momentum among the masses, especially as silver?s price tears ahead of its more popular counterpart.

In fact, the price of silver has multiplied at a much quicker rate than that of gold. Between the periods of January 4, 2010 and June 30, 2011 alone, silver became 100% costlier, while within the same period the price of gold increased by a relatively quaint 34%.

With double-digit value of silver getting pale compared to the quadruple-digit cost of gold, experts increasingly warn not to underestimate the lesser-valued metal, offering a compelling argument as to why silver could- or rather would- be the new gold.


The most obvious reason to invest in precious metals is the level of security they apparently provide during the uncertain times that currently plague the world economy.

As more traditional investments collapse and even the once-invincible US treasuries lose their worth, the need for more tangible ?solid? investments is greater than ever.

And both gold and silver promise to offer just that. This ?security? is furnished by both of the essential factors that determine their market value- restricted supply and an ever-expanding pool of demand.

However, that?s also exactly where the case for silver is claimed to get stronger. While gold is traditionally valued more than silver, the potential strength of demand for the latter is suggested to possibly outdo that of gold in the longer term.

For even as investor demand continues to fuel the vicious ?bull run? of either precious metal market, demand for silver is further set to boost by the expanding arena of its industrial uses. Statistically speaking, markets have been unable to satiate the demand for silver for the last 15 years. From iPads to medicine, scientific and industrial advancement is only expected to catapult commercial demand for the metal, and hence pull up its price from the ?modest? figures it currently saddles within.


If the prospect of silver outperforming gold hadn?t yet drawn gasps, then surely the idea that the cheaper metal, which currently trades at an average of $40 an ounce, could be rarer to find on Earth than gold, that currently sells at around $1880 an ounce, has definitely caused jaws to drop.

Even though Theodore Butler, a silver analyst at Butler Research, first suggested this hypothesis as early as 2006, it is only recent scientific analysis that has actually moved to back that claim.

A 2009 online report by Galmarley, a UK-based precious metals market expert, set a rough estimate of 4-5 billion pounds for the amount of gold reserves that are yet to be exploited on the planet. In comparison, statistics project that only a maximum of a billion pounds of silver yet remain, suggesting that the gray-white metal could be as much as five times rarer than gold.

Such a grave discrepancy between market conditions and scientific facts has prevented these findings from gathering steam. More recently,, a website dedicated to investment analysis, backed these findings in an analytical review that pitted the known value of reserves against the output of the metal in recent years.

The report further echoed the newfound wisdom of economists and asset market experts, highlighting the ever-expanding demand which is exhausting severely limited supplies, particularly since silver has been in commercial use long before gold was actually even discovered.

Once supplies run scant, much of the world?s silver is expected to come from two principal sources- the world?s waste dumps and, perhaps even more significantly, investors.

D?J? VU?

The precious metals trade isn?t entirely devoid of its own hazards and drawbacks, particularly as gold and silver remain to be volatile, unpredictable markets – regardless of the gush of optimism their current bullish trend has induced.

Even as it is alleged that a major advantage of dealing in gold and silver is the impossibility of market manipulation, authorities on the subject warn otherwise.

In fact, the history of the silver market is chartered with periods of steep, sudden crests and troughs, most often stimulated by external conditions such as the general economic climate, and even artificially created demand.

The most memorable event that best provides evidence of such market distortion is the Hunter-brother episode of the 1970s, which saw silver climb to the yet unbeaten record-high of $50 thanks to a pair of billionaire brothers with deep pockets and an insatiable appetite for the metal. However, the price of silver eventually sank quicker than it had gathered momentum as the brothers? wells of wealth ran dry and their manipulative ?conspiracy? became publicly known.

Skeptics argue the current ?silver-boom? could be much the same scenario, though instead of the Hunter-brothers, the world could really be looking at a ballooning number of ?microinvesters? chasing baseless speculation.

Daryl Guppy, an international financial specialist, echoed this prophecy in an article that appeared in the China Daily earlier this year. However, he did proclaim that silver could be an asset bubble that could well be exploited before it?s too late, for the trends in silver prices indicate that market conditions are just a bit different this time.

His argument was that silver has been on a gradual road uphill for the past decade, multiplying nearly ten-fold between 2000 and up till now, a relatively ?gradual? growth considered ?healthy? by many experts in the field.


It cannot be denied that the current boom in the silver market is not propelled by what many tout as ?unhealthy? forces, namely speculation, particularly as pools of hot money dabble in progressing markets, possibly distorting market signals.

Nevertheless, while perhaps it may be too far off to suggest the silver bubble is only set to expand, general consensus rests on the fact that the grey metal shall probably remain a safe bet for the coming few years, specifically as its true potential as an investment is yet to be completely realised suggesting that the world has yet to see the best?of the silver market.

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