Sunday, July 4, 2010
Investing in Gold: Undervalued Silver Worth Investing in
Silver has long been a popular metal for investors in America. Many looking for metal investments like the prospects of silver over gold. Silver takes larger swings giving savvy speculators and traders more opportunities to cash in on the ups and downs. Many think that silver is undervalued compared to gold. To top it off silver always seems to have potential for a break out in industrial uses.
In the last year, silver has traded between $12.65 and $19.52 per ounce. In the last 10-plus years, the highest silver has been is $20.79, but there are many that feel silver is looking to go much higher. In 1980 silver reached nearly $50 an ounce on aggressive trading. That price was due to a speculator driven market. Although we are not likely to see that again, it does show how valuable the metal can become with trading pressure. And today many high level speculators are looking for silver to hit the $25 mark.
A ratio that many investors will use when talking about silver is 16 to 1, or the rarity of naturally occurring silver to gold (believed to be 16 ounces of silver for 1 ounce of gold). For many years silver was priced at 90 cents per ounce and gold at $20. Using this logic, one could value silver as one-sixteenth the price of gold. That would make silver about $75 with gold at $1200.
Obviously the investing world does not adhere to this ratio for rarity alone, but once again there is an argument that silver is being undervalued for its rarity at the moment.
One major reason for silver to increase is the industrial side of silver. For many years photography was the largest consumer of silver. Today the digital age has lessened that demand as we process fewer pictures (remember processing a roll of 24 exposures to only have about three prints be good, mine always seemed to be that way). Today by printing only the pictures you want, cuts the processing way down, and ink printing cuts it out altogether.
But with silver being much cheaper than gold, industries are always looking for ways to use silver instead of gold to become more cost effective. Imagine if every computer built required just one ounce of silver. One good application and the price of silver could double almost overnight.
Buying silver can be considered an investment as an alternative to gold or as a preference over gold. Either way silver has always been a popular choice, and speculators have more opportunities to catch swings in price.
Nevada has had a long rich history in silver and having our great state founded in silver gives us just one more reason to like it. In my article next week, I will address several ways to buy silver and the physical products available in today's market.