Silver's appeal and exceptional performance will likely be driven by three factors. The first being an increase in demand by investors; the second, an increase in industrial demand; and finally, the supply for the precious metal is slowly diminishing away.
Many metals experts state that silver is not considered to be overbought when compared to gold and in fact, valuations are highly attractive when compared to gold, making it more attractive to investors.
As economies around the world continue to grow and emerge out of recessions, the industrial applications of silver will likely add to its attractiveness. In fact, the latest data suggest that nearly 55% of total silver fabrication is used for industrial purposes.
From a supply perspective, the United States Geological Survey states that silver is nearly twice as rare as gold in the long term because it is not recycled at the same rates as gold. Also, at current consumption rates, all of the silver that is in the earth's crust will diminish away in the next 25 years. This will likely put supply pressures on the price of the metal.
A combination of these factors will likely provide support to silver prices; the following ETFs should reap the benefits:
- iShares Silver Trust (SLV Quote), which physically holds silver bullion and closed at $18.27 on Wednesday.
- PowerShares DB Silver Fund (DBS Quote), which holds futures contracts in silver and closed at $33.16 on Wednesday.
- PowerShares Ultra Silver (AGQ Quote), which seeks to gain twice the performance of silver bullion and closed at $68.06 on Wednesday.