Wednesday, January 12, 2011

Silver Rush: Investors pile money into silver

LONDON (Commodity Online): Gold has been the hottest commodity that people from India to the United States are piling their money into. Gold’s poor cousin silver is emerging as the most luring investment option for traders and common people these days.

What is driving the silver boom? What is it that fascinates investors to silver that used to be the first currency in China centuries back?
Like gold, silver is topping the investment charts these days. In the US, sales of the silver bullion coins have recorded historic high in 2010. A latest commodity report says that silver is the most attractive investment proposition for the people in Australia. In fact, in Australia, people are buying more silver coins than gold coins.

In the last one year—in fact from 2009 onwards—silver price has more than doubled. Silver has boomed to the current $30 level from the $13 level in 2009.

Why is silver booming? Why are investors piling their money into silver?

In this following lucid write up, precious metals analysts Dr. David Eifrig provides some fascinating inputs on silver:

Surging Silver Investment is changing the nature of this market. A couple of years ago, I shared two shocking silver charts with DailyWealth readers.

These charts showed how governments around the globe have abandoned silver as money. They've decided it's easier to expand a nation's credit with fiat paper money than to mine more silver. They've sold off their silver stockpiles to industry and investors.

This trend is decades in the making. At first, much of this silver was used up in industrial manufacturing and processes like photography. That silver is gone forever.

But starting around 1997, silver began flowing into private hands. Folks concerned with wars, investment bubbles, and mismanaged economies were buying it up. They turned to silver as a safe form of savings that can't be debased by a gang of spend-happy politicians.

It was a modern day "rush" into Silver Investment. And Buying Silver back then was a smart move. The metal is up sixfold over the last 14 years...while stocks and real estate have struggled to do anything...and while paper currencies have depreciated in value.

The thing is, the silver rush is still on.

Demand for silver coins is taking off. It's up almost sevenfold from the mid-1990s. The public is catching on to the value of silver, and I expect this trend to continue for years.

Since my first essay back in 2009, the price of Silver Bullion has soared more than 100% – from $13.50 to about $29 today. But over the long term, there's much more to come.

Here's how I explained it in 2009:

"Governments around the world are behaving absolutely stupidly right now. Our vice president just said with a straight face that the government has to spend more money in order to save the nation from bankruptcy. That's crazy...but it passes for conventional wisdom these days.

"In my 30 years of investing, I've never seen so many risks in the financial system. That kind of 'patriarchal thinking' is producing those risks."

The stupid thinking I saw in 2009 hasn't gone anywhere. Governments across the globe are spending with abandon and creating big risks for savers and investors.

That's why it's a good idea to keep a portion of your assets in "chaos hedges" like gold and silver. You should know, I'm not the kind of guy who lives in a concrete bunker. I don't think the world is about to end. I'm not anyone's idea of a "gold bug". I buy this stuff just like I buy car insurance.

You should think of gold and silver as insurance against calamity. You should think of it as a safe store of wealth. And as I've just shown you, many people are catching onto this line of thinking. I expect millions more will over the next few years.

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