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« Silver Investment Summit in London | Main | Endeavour Silver Corporation: A Silly Season Buy? »

Silver versus Gold?

As you already know the team here are gold, silver and uranium bugs and we regard all three as precious metals. However in recent months a number of analysts have placed gold ahead of silver in terms of which will generate the best returns. Some of our readers have wrote and asked if we agree that gold will be the better performer?

The short answer is no we do not agree.

Firstly we will look at why they might think this way by bringing up this short-term chart of silver verses gold:

silver verses gold short-term chart 01sep07

It looks real bad for silver as you can see silver has been hit very hard. As investors who follow this on a day to day basis our minds are filled with the micro activity occurring on our screens by the minute so much so that last month appears to be a long time ago. Isolated instances such as these must not be seen as the ‘norm’ as you all know one swallow does not make a summer.

Now stand back and look at the longer-term history of silver verses gold. Wow, we now have a totally different picture with silver outperforming gold over last few years.

silver gold comparison six years 02sep07

Try to bear in mind that 51% of silver is used for industrial purposes and is therefore effectively taken off the market with little chance of ever coming back, the same cannot be said of gold.

We can also see that silver is much more volatile than gold which in turn provides us with both investment and short-term trading opportunities. We have recently given a number of buy calls on quality silver stocks (PAAS and SSRI) and also taken out a short term bet on silver itself in the London market (the silver spot price has risen 22 cents since our BUY signal and we are very happy with the progress so far) .

We are bullish and excited about the prospects for gold and anticipate excellent returns from both gold and it’s associated quality mining stocks.

The next chart is from Google trends and clearly shows the increased interest in silver stocks by the increase in the number of searches carried out for 'silver stocks'

Silver searches trend from google trends 02sep07

And finally a quick look at the chart for silver itself depicting the recent sell off, presenting us with a buying opportunity and also showing us that silver has already started on the road to recovery.

Silver chart 02sep07

Going back a little further we can see that silver lost around 1/3rd of its value in a sell off last year, however, the come back is persistent.

Silver chart two years 02sep07

We believe that silver will give us a hair raising, gut wrenching, white-knuckle ride, definitely not for the faint hearted. If you have some spare cash and you feel a little like Captain Jack Sparrow then come and join us in what we see as the most exhilarating ride at the starting gate right now.

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Reader Comments (1)

VERY nice work on this study: professional and complete.  Much appreciated, especially the charts which are definitive.    A possible addition might be pointing out the drop in Ag has been due to the lessened industrial demand, but that has all been discounted by the market.  The current rise might be due to a combination of two factors:    Reaction from an overly-large drop   Increasing concern regarding the long term prospects of the Dollar.

Another factor which is completely unrealized is the enormous capital gains posssible from holding precious metals shares during a monetary crisis. And I am not speaking merely of the Junior "producer" penny-stocks! During the last go-around, (1978+) it was not uncommon for quality producers to rise 20 to 30 times in price!

In fact, the all-time winner was the South African gold producer Hartebeestfontein, which had dropped to about $3+ and topped-put at $150+ ---but I didn't hold enough of that! So what else is new?

OK, here's what is new: If one views the present monetary situation, with trillions of US $ now being created, he has to deduce the biggest inflation of all time will soon become evident, This inflation will make the preceeding three inflations (since te 1970's) look like Monopoly games by comparison.

The result: look for every quality god - silver producer to rise 20X-30X-40X-50X from the present level!
History forecast: The present ridiculously- low prices of the prime producers of precious metals will be termed "The buying opportunity of the century.!"  

There, somebody said it.

Sounds overstated, if not nuts? OK, if you think Obama-Pelosi and all that spendthrift bunch in Washington DC will cut spending, balance the budget, cut taxes and cit over-regulation of industry---Henry will prove to be very-very wrong. Buy long-term Treasury Bonds instead. On the last go-arfound, the LT Treasuries dropped to 56! That's correct, 56 cents oin the Dollar!
Me? I'm raising as much cash as possible and buying the prime producers of precious metals--iuncluding some good mutual ffund which specialize in precious metals. Then, sitting back and watch the action! Oh yes, if one does so, get ready for some terrific ups and downs---but PROFITS at the liquidation point---maybe 2016--2017. HB

March 11, 2009 | Unregistered CommenterHenry J Bendinelli

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