One precious metals expert recently described the so called white metal as "The most bullish chart on the face of the planet". He went on. "In fact, it's the most bullish chart I've ever seen on the face of the planet".
Surprisingly, he wasn't talking about gold.
Twelve months ago to this date, silver price soared as high as $50 an ounce before experiencing a brief correction that took it back down to $30.
Unaware to so many, silver has outperformed its lustrous peer by 21 percent in the first quarter of this year, firmly placing it among the best-performing commodities in 2012.When silver last surged in 2011, the price tripled from around $16 an ounce to more than $49 an ounce in the space of 8 months. If that hasn’t grabbed your attention yet, let me put it to you another way. Wait for it – drum roll please – that’s a staggering gain of 206 percent in 8 months. That is 7.5 times more growth than the S&P 500 returned over the exact same time period.
As a professional trader, my number one priority is to make a profit. I normally favour gold and that’s not going to change. The factors driving gold price persist and are likely to do so for many years to come. But ignoring silver could wind up being a very costly mistake. Right now, in my opinion, silver is a better investment than gold. In fact it’s the greatest investment of this decade.
I know that's a big statement. But if you compared the performances of gold and silver from when the bull run began in 2001, up until now – you’ll find silver is the clear winner. Gold rose from $255 an ounce to $1,923 per ounce, for a return of 654 percent.
During that same period, silver moved from $4 an ounce to $49, for a gain of 1125 percent. Almost double gold’s return. Whilst I’m certain gold is poised for a bright future, silver may present an even better opportunity for investors.
I want to show three significant reasons why silver is set to outperform gold again this year:
* Firstly you can’t ignore the gold/silver ratio. This is one of the best indicators of how far silver prices can move. If you average out the price ratio between gold and silver throughout history, you land on a single magical proportion: 16 to 1. That implies that at $1600 per ounce gold, silver should be $100 per ounce. Gold is currently trading at $1640 an ounce and silver is at $30, which projects the ratio is now 54. Silver is massively undervalued right now and that gives it much more upside potential than gold.
* Secondly, the opening of The Pan Asia Gold Exchange (PAGE) in China next month could be one of the most significant drivers for commodities prices this year. PAGE will enable 320 million ordinary customers of the giant Agricultural Bank of China to simply use their saving accounts to buy gold and silver. That means there will be 320 million potential new silver investors hitting the market in June. This event alone could boost silver prices, especially when you consider, the average Chinese citizen saves close to 30 percent of their income every month.
* Finally, demand for the white metal is soaring in the Gulf. Last weekend the region’s first conference on Precious Metals took place at The Dubai Multi Commodities Centre. And guess who took centre stage? That's right, Silver.
Dubai’s leading financial institutions presented a clear ambition to develop the white metals markets in the region. The Gulf is a $1 trillion economy, growing at a rate of over 5 percent per annum. Dubai seamlessly connects the West and the East and therefore if this was to go ahead – it will add more volume and liquidity back into the global market. Dubai is also the gateway for precious metals going to into the world's two largest consumers – India and China. Who in line with their rapid economic growth, both have huge demand for silver.
In conclusion, silvers future is looking bright. The most important factor that has kept silver from really exploding is so little investor interest .
Up until now.
With 320 million potential new silver investors about to hit the market – silver is the single best asset you can own today. And when prices take-off again, you won’t regret buying at $30.
Nik is recognised as one of the leading authorities on gold and silver investing. He is the CEO of thegoldandsilverclub.com and a professional commodities trader and investor.
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