Poor Mans Gold | Why The Demand For Silver Will Continue its Rise

Silver has often been called the “poor man’s gold,” but it might be the better investment, according to a wide spectrum of precious metals analysts. Why the change of preference? Here are several reasons why silver is a better-than-ever bet for your investment dollar:

Far more affordable than gold

The idea that gold is the “sure thing” in times of economic uncertainty is losing credibility. The poor mans gold is attracting more attention because it, too, is a metal that has scarce quantities, and it is far more affordable to the average consumer who might be breaking into the investment market. Thus, when people want to put their money into something solid rather than paper, they are turning more to silver than ever before.

Analysts see a continued rise in silver prices

Between 2009 and 2011, for instance, silver more than tripled in the U.S., selling for $49.82 an ounce in April 2011, an all-time high at that date.  It has cooled down in value since then, but many analysts believe that the price of silver will again rise faster than gold in the next decade.

Many industrial application for silver

Part of the reason for this expected rise is the growth of the solar power sector, which will continue to be quite healthy. Silver is used as a reflector in solar power cells, one of many industrial applications that it will be mined for in years to come. As a result, the ratio of silver to gold has dipped from 70 to 1 to 35 to 1. As the demand for silver by industry continues to rise, this ratio will decrease further, increasing silver’s value relative to gold.

Until the creation of the Federal Reserve……

Gold is estimated to be 15 times more rare than silver, yet it is about 50 times more expensive. Eventually, gold’s value will be closer to 15-to-1, which means a healthy increase in silver’s value. Again, industrial demand for silver will push much of this equilibrium. Many of those in the know believe heartily in the research of a prominent bullion dealer who has researched the value of gold to silver over the past 225 years. He found that gold was usually 16 times more valuable than silver until the creation of the Federal Reserve. Many analysts believe that silver’s value will return to this historical mean eventually, which means a healthy jump in the next several years.

The ‘Poor mans gold’ has many more industrial applications than gold, which will further equalize the reserves of each metal, bringing the price of silver up. Silver is an excellent heat transfer agent, a great conductor of electricity, a strong catalyst and alloy, an effective lubricant, etc. Silver is used in every process from soldering to making mirrors, from cell phone production to making bearings and batteries. It also is found in almost every electrical appliance available due to its low resistivity. Silver is even going to grow in use in the clothing field because it kills bacteria that cause odor, and the medical field is constantly researching how to use this quality in its applications as well.

The very strength of gold in recent years heralds its slowdown in months and years to come. Who will buy gold at $2,000/ounce in India? Not many people. On the other hand, silver will still be purchased by manufacturers as long as it stays around $30-$40/ounce. The future of silver is brighter than gold, at least in the short term.

In summary, while buying a precious metal can seem like a very solid investment as confidence in the dollar and other currencies wanes, one should know that the market for both silver and gold can take drastic dips and upticks. That means the purchase of either should be considered a long-term strategy, not a get-rich-quick game.

That said, the demand for silver is not going to decrease because manufacturers are finding more and more uses for this metal. In other words, the value of silver will not entirely be determined by private investors who are simply looking to make money off of it. Silver is actually needed in many types of production, some of which will boom in years to come (e.g., solar power sector).

That makes silver a sound short- and long-term investment for many today. Many analysts recommend buying some of both metals, but silver has at least as equally promising a future as its big brother.

Recommended book on Silver Investing: Rich Dad Guide to Investing In Gold and Silver.

If you are interested in investing in silver or any other commodity check out these articles to learn how.

Why Should You Invest in Commodities?
Why Do People Invest In Gold?
The Glittering Appeal of Investing in Gold
 

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2 Comments

  1. dojo says:

    The only issue with silver, if you want to ‘bank’ it for the future, is that the value is less than when it comes to gold. An ounce of gold is way more expensive, so this means it ‘locks’ more value. 5k worth of gold is around 3 coins (one ounce coins), if you keep it in silver, it’s already more metal to be ‘stashed’

    Both are great things to buy though.

    • Jim says:

      Thanks Dojo, I agree that the value of gold is higher and therefore allows you to “lock in” more value. This can be good and bad, in that if you ever need to use gold in the event of a disaster, it would be hard to make change from a gold coin worth $1000 dollars. Perhaps, Silver is a better diversification hedge.

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