A Readers View: Why Silver?
Thursday, November 22, 2007 at 01:48PM
Silver Prices in Other

We are always pleased to recive feedback from out readers and especialy when one takes the time to write a piece for our website.

One of our readers, Paul Trevethan, has an interesting view on silver and his piece is shown below.

If silver were a person it would be an up and coming rock star
. He’s had a pretty tough couple of decades growing up, but now shows some real talent and is just about ready to explode onto the world scene. At home we often see up and coming artists doing small gigs at intimate venues. A few years ago JET were playing at a small bar near my hometown. ‘Maybe next time’ I thought. The next chance I got to see JET they were playing a 50 000 seat stadium and tickets cost $130! Like JET silver too is on the rise.

Silver gets a bad rap! ‘Poor mans gold’ suffered a drawn out bear market from the 1980 crash when the Hunt brothers tried disastrously to corner the market. I guess 22 years in the investing wilderness is long enough for almost everyone to lose interest. Detractors question its precious metal status and feel silver is primarily for industrial purposes. They will remind you of its diminished use in photography due to the rise of digital technology etc. etc. Make no mistake, silver is money and it will come into its own during times of rising inflation, stock market volatility and geopolitical uncertainty.

Silver becomes even more exciting when we look at its price comparison to bigger brother gold. Historically sixteen ounces of silver buys one ounce of gold. For example in 1980 gold peaked at around $850 and silver $50 approximating the 16-1 ratio. Today gold closed at $803.20 and silver $14.76 for a ratio of 54-1. Silver is due for a catch up rally and in fact has been outperforming gold with an average 36% yearly gain since 2002. This compares to gold’s 26% average gain during the same period.

Silver finally broke the $15 dollar barrier on 6th November and has since retracted back under those levels. With gold threatening its all time highs, at some point soon the penny will drop and silver will make a catch up surge. It is unlikely to take it to $40 where it belongs but even $20 would be profitable for all concerned.

Governments continue to debate whether inflation is controlled. Precious metals given free reign do not lie and with gold around $800 they scream the truth. Inflationary times are upon us. Silver is still being given away under $15 and although its place in history is second in line to gold, as an investment it may still be crowned king.

Hope this opinion useful.

Have a great week!

We are of course also very bullish on silver and we are looking to add to our positions and buy more silver when we see this correction coming to an end. There is a strong possibility that silver could outperform gold and silver and the industrial demands that the yellow metal does not. However, it may take another Nelson Bunker Hunt to replicate the amazing performance we saw in the run up to 1980.

Article originally appeared on Silver Prices (http://www.silver-prices.net/).
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