Silver Vs. Gold Investing
Gold has a unique mystique. A Goldman Sachs research report referred recently to the "special status" of gold as, "A perceived store of value and a symbol of wealth." Silver, thus, is sometimes seen as the second precious metal, the bridesmaid of metallic investments.
There are some analysts, though, who believe that the bridesmaid has superior attractions as an investment.
Other People Are Reading
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Follow the Leader
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A generalization is that silver follows gold in the markets. It is true that for certain periods silver prices tend to follow gold prices. Gold rose in the summer of 2009, for example, and silver rose in the fall. Both metals fell late in the year, again with silver lagging. As analyst Adam Hamilton has said, "Over the decades as silver traders watched gold for silver-trading cues, naturally silver's behavior converged to mimic gold's ever more closely."
The Silver/Gold Ratio
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Silver and gold investors are waiting for other shoe to drop. Nonetheless, advocates with a preference for silver reason that there is a lot less silver than there is gold, and that miners are not finding more of it as rapidly. In December 2009, James Altucher wrote in the New York Post that, "Demand for silver [had] outpaced the amount of silver mined" in each of the preceding 15 years.
Altucher acknowledged in this column that, "Gold has heavily outperformed silver" in recent years, but he also said that silver will be the "safer bet" in the near future.
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Uses for silver
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Dentists use silver for fillings. The demand for gold is partly an investment matter, partly a matter of providing the raw material for jewelry. Silver has both of those sources of demand as well, but it has others as well. It is a very effective conductor of electricity; and a common filler in dentistry.
Butler's Theories
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The next bull market may be for silver. One analyst in particular, Theodore Butler, has attracted a lot of attention with outspoken views about the price of silver.
Butler believes that there is a supply deficit relative to demand for silver that should in the normal course of events have pushed up the price of silver, but that this price has been kept artificially low for many years, and that the downward manipulation of this price will soon unravel, creating a buying opportunity.
Anyone considering the relative merits of gold and silver, then, may want to wade into that controversy and decide whether Butler is right.
On the Other Hand
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Arguments over metals can get intense. In 2007, the VM Group of Fortis Bank put together "The Silver Book," discussing the investment significance of this metal in some depth. The authors disputed the contention of Butler and others that there is a "persistent deficit" in the supply of silver relative to demand. Fortis believes, for example, that recycling of silver used in photograph "has always been more efficient than claimed," and that this along with other data distortions have resulted in the faulty appearance of a deficit.
The only "bottom line" has to be that no theory, however glittering, can trump careful research and a balanced portfolio.
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References
Resources
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