Investors are talking about gold, and why wouldn't they? During the past 10 years, the gold price has climbed more than fivefold from less than $300 to more than $1,500 per ounce. A $10,000 investment made in June 2001 would be north of $50,000 in value today. But guess what? Silver has actually done quite a bit better, rising from less than $5 to nearly $40 per ounce—good for an approximate eightfold price gain over the previous decade.
Why It Will Get Even Hotter
While gold may be in a cooling phase, silver could be set to soar for several reasons:
- Industry and investor demand are set to rise: These groups may both want to bulk up their silver holdings, but for different reasons.
- Silver's popular in emerging countries: While the U.S. and other Western economies have been struggling, China, India and many other emerging countries have been expanding by leaps and bounds; their industries need lots of silver. Also, the number of investors in emerging countries is rising, and many of those investors value PMs like silver for the same reasons we do.
- There's a threat of higher inflation: Significant inflation isn't here yet, but it could be on the way (we've all seen food and gasoline prices rise). The government has been printing billions of dollars to cover its huge debt, creating more new money, in the past few years, than at any other time in U.S. history. This sets the stage for higher inflation by diluting the money supply and reducing the value of the dollar.
The economy is at a crossroad—there are signs of recovery, yet conditions are ripe for inflation. In this situation, silver may be a better investment than gold because there are two sources of demand—investors and industry.