Four Reasons for Silver to be 2008's Best Performing Precious Metal

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James Turk, founder of GoldMoney, said in his annual forecast that the U.S. economy "will get much worse in 2008, making gold the premier asset of choice, but not the best performing precious metal. That honor will go to silver, which I expect will clear $30 in 2008."

Silver prices have vaulted an extraordinary 106% in the past two and a half years.

More impressive, silver prices have gained 33% since mid December...

James Turk, founder of GoldMoney, said in his annual forecast that the U.S. economy "will get much worse in 2008, making gold the premier asset of choice, but not the best performing precious metal. That honor will go to silver, which I expect will clear $30 in 2008."From silver’s current price of $18.33 an ounce, $30 an ounce would be a 63.7% gain.

And here are four reasons why that’s more than probable:

Supply and Demand: Silver, quite simply, has better supply and demand characteristics than gold. For 18 straight years now, we’ve consumed more silver above ground than we’ve been able to extract from below ground (compared to only four to five years for gold). That’s because only a portion of silver demand comes from investors. Commercial demand for silver is growing, whether for jewelry, electrical conductors, photographic film or disinfectants. And the rate at which industry finds new, unique uses for the white metal is staggering compared to gold.

Above Ground Supply: Unlike gold, which has been hoarded by central banks for decades, there’s no appreciable above-ground supply of silver. Therefore, whatever is needed must be mined. And there’s very little threat of central banks selling large tranches of silver into the market, which is always an overhanging concern with gold.

Emerging Markets: Despite fears to the contrary, robust industrial demand for silver will continue even if the United States slips into recession. That’s because the true driver toward higher commodity prices, in general, is emerging markets like China, India, Russia and Eastern Europe. China’s expansion alone can be compared to the industrial explosions that took place in Japan in the 1960s and the United States at the turn of the last millennium.

Market Capitalization: The silver market is much less capitalized than the gold market. Fewer dollars trade daily on the silver exchange than on the gold exchange. As a result, every dollar spent on silver will have a greater impact on the silver market than dollars spent on gold will have on the gold market. To visualize this concept, consider the relative impact of a rock tossed into a pond versus the same rock being tossed into a puddle.

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