Investors Stampede into a Modern-Day Silver Rush

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"The relative affordability of 'the poor man's gold' has helped polish silver's current allure."

Kristen Hammond didn't have to think too long about a suitable investment to give her three young children to mark their birthdays this year.

Bypassing such traditional ideas as a U.S. Savings Bond or a share of blue-chip stock, she decided to give each child a 1-ounce coin of pure silver.

Whether they know it or not, the Hammond offspring are participants in a modern-day silver rush. Stoked in part by voracious demand from small investors, the gray metal has rocketed 46% since the end of December, the biggest gain of any major commodity.

Worried about the U.S. government's soaring debt load, the Federal Reserve's easy-money policy and the slumping dollar, investors have flocked to silver and gold as "hard money" refuges. Buyers such as Jeff Lindsay in Neenah, Wis., say they fear that the government's finances are spiraling out of control and figure that precious metals offer at least the hope of holding their value if stock and bond markets unravel again.

For the economy, "The worst-case scenario is too depressing to talk about," said Lindsay, 51, who last year sharply boosted his retirement-account bet on rising silver prices.

Although gold traditionally takes the spotlight as a hedge against global calamity, silver in the last year has been the metallic star.

That relative affordability—silver's nickname is "the poor man's gold"—has helped polish its current allure. For the cost of a single 1-ounce American Eagle gold coin issued by the U.S. Mint, an investor can own about 33 of the Mint's 1-ounce silver Eagles.

The Mint has sold a record 15.2 million of those silver coins this year, up 31% from the same period last year. By contrast, sales of 1-ounce gold Eagles have edged up only 3% to 342,000.

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