With the current global market scene it cannot be ignored that the rising inflation rate and fiat money devaluation has already started to take toll. While these things are happening, a smart investor will not ignore this signs of economic instability, he will find ways to secure his assets
One of the popular means of hedging against this economic crisis is through investing in precious metal such as silver. Unlike stocks, precious metal is more tangible, and has a strong market demand that is why investors prefer to invest in silver and gold to hedge against inflation and its effects.
Here is Will Bancroft to give us an assessment of what has transpired in the silver market last year, and investors hope for a better Future of Silver this Year.
Future of Silver this Year
In this article about the silver price, Will Bancroft takes a look at what the last year has delivered for silver investors, and what the future of silver investment might hold.
Volatility is part and parcel of silver investment, but silver investors have not been rewarded this last 12 months with the price appreciation they might have hoped for. The gold silver ratio now sits just below 52.
It is true that sometimes gold leads and silver follows more erratically behind. For large parts of 2010, and early 2011, silver led gold. Some commentators wait for gold to move into a new trading range higher before the silver price will be able to push through technical resistance in the mid $30 per ounce range. It would be good to see silver spend some time trading with conviction above $40/ounce. The last time silver ran at $50/ounce it went too fast and too early.
Given China’s claimed role in silver price moves from $16/ounce to the price levels of today, it was interesting to see some recent market commentary about a recent lack of buying activity from China over the short to medium term.
A familiar face to the silver market, Walter De Wet, Standard Bank’s London based strategist, commented that “as long as China does not import silver, the price is unlikely to rally on a sustainable basis”. Mr De Wet continued that the bank’s estimates suggest Chinese warehouses hold enough silver to supply industrial activity for 15 months, having risen from 12 months in 2011. This contrasts to Chinese stockpiles of only 4 months of industrial demand in 2009. The takeaway is that Standard Bank believes Chinese silver stockpiles need to fall below 10-12 months industrial supply “in order for demand-pull pressure to build.”
Whilst the silver price bides its time, silver remains a legitimate part of a portfolio. Gold and silver can still be considered some of the most rational investment assets in this type of fracture financial environment. Precious metals are no one’s liability, and this attribute continues to make them stand tall. Silver is still underpriced in historical terms, and the gold silver ratio has some way to go before returning to the long-term average of 15.
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As the performance of gold and silver along with its growing demand from different world markets the future of silver is looking good, and is predicted to double in price by the end of 2012