Veteran investor and an early spotter of the commodities bull market, Jim Rogers says if he could only invest in one precious metal this summer it would be silver. Why is that?
Silver prices are more volatile than gold. And over the past five years gold has actually been a slightly better performer. The central banks hold gold, not generally silver.
Money printing
As an investor you always look at two things: upside and downside potential. So if you are optimistic about the outlook for precious metals – and with all the central banks of the world with their fingers on the button to let the printing presses roll this is a logical conclusion – then does gold or silver have the most upside?
It does just have to be silver. Consider this: silver is the only major commodity not to have reached a new all-time high in this bull market; silver is still cheaper than it was 32 years ago, prices are astonishingly depressed.
Then you can consider the impact of an economic slowdown on silver. Yes its industrial use will go down but so will its production because that is linked to the output of copper and zinc mines.
Investment demand for precious metals will take over in any case from industrial demand. And once the gold price heads up then silver will follow. You get 50 times more silver for your money than gold.
Historically it was 12 to 15 times the amount of silver for gold, so that also looks like a correction just waiting to happen. Why is it that silver has become so cheap by historical standards?
It goes back to the price collapse of 1980. Prices then got to such a huge spike due to the cornering of the market by the Hunt Brothers that production was ramped up and huge stocks were accumulated. The Hunts market manipulation invited a similar response from global central banks.
Once silver prices slumped from $50 there was a 20-year bear market with enough oversupply to keep prices down for two decades. Silver’s recovery since the millennium has been spectacular, from $3 an ounce to almost that previous all-time high 15 months ago.
Autumn season
But the best is yet to come. Will it be this autumn when the central banks turn on the printing presses to maximum to save the world economy? The Fed with QE3 and the others following?
Or will there be a 2008-style financial market crash with Greece as the next Lehman? That would be bad for precious metal prices as it was in 2008, although they made a spectacular recovery very swiftly.
You never can be guaranteed success in investment. Patience and a lack of borrowing always buys you time and that is the greatest asset of all. But we think those who stick with silver over gold will get their pay day soon.
The next edition of the ArabianMoney subscription newsletter will consider how best to invest in silver (subscribe here).
The silver prices are destined to rapidly increase or to put it another way the dollars buying power will rapidly decrease. The dollar is set to collapse.
ReplyDeleteThe problem with people they are stuck in the paradigm of having to have income generating assets. They love to beleive they are part of owning a bankrupt company, and sitting in board meetings listening to a CEO justifying why he should get a big pay rise and axing thousands of peoples jobs. Now all these stogies will have their day of reckoning. The dollar will collapse, the stock markets will collapse.
The banks are preparing for this. The only refuge for these stogies is to run to the bank and take out all their money and merrily go and buy gold and silver as much as they like.
The mistakes of thinking like this is, in a financial collapse, the banks will freeze the accounts to stop the bank run. Even if you do have the cash and go to the Perth Mint, they will close the doors because of the over demand as they did in 2008 when they stop taking bullion orders.
With the Perth Mint producing say about 1 million ounces of silver coins per year, how quick will this be sold out if there is an outbreak of buyers. How on earth can 10 million Australians buy 1 million ounces all at the same time. Thats $3 per 1/10th of an ounce each. If you do get the 1/10th of an ounce, thats all your savings is worth whether you have $100,000 or $3 in the bank. Your paper worth is worth as much as the figment of your imagination.
There is no time to wait and see what will happen.