For many decades, gold has been considered the best investment. But
during the last few months, the price of silver has shot up drastically,
making investors contemplate whether silver has overtaken gold as the
best precious metal investment.
To put this into perspective, gold is the only precious metal
investment that increased in price every year for the last 10 years.
Then again, silver prices have more than tripled since June 2009 to post
an all-time high of US $49.82/ounce in April 2011. In addition to being used along with gold as a store of wealth,
silver has other industrial uses – the main among which is in the
emerging solar power sector. Silver is used exclusively as a reflector
in solar power cells.
The silver to gold ratio has fallen from 70:1 to around 35:1 in just a
year. And this ratio is expected to lower in the long run due to huge
industrial demand for silver.
One of the most common and basic theories used to analyse silver prices
is the silver/gold ratio. This ratio calculates how many ounces of
silver it would take to buy an ounce of gold. This relation is based on
the assumption that the quantity of silver found in the Earth’s crust
is 17 times the quantity of gold. This essentially means that the
silver/gold ratio will theoretically not fall below 17:1.
After hitting its all-time high of just below $50 (U.S.), the price
of silver has snapped back to around $35 (U.S.). This trend is
noticeable with any investment that rises exponentially over a short
period of time. However, it is widely accepted that the prices of
silver will continue to rise faster than gold in the near future
prompting analysts to label silver as the investment of this decade.
Even though gold continues to rise steadily and reach the US $1500
per ounce level, gold is a safer investment and may even be beyond the
reach of most people. Silver, on the other hand, has a reduced price
and hence, will be more attractive to the general public. The only
problem being that the prices of silver will be more volatile than the
stable haven provided by gold.
The increasing demand for silver combined with the expectation for
the silver/gold ratio to decrease further, and almost a constant
increase in the price of gold means that it is reasonable to lay your
bets on silver price to increase considerably in the near future.
