Why does silver bullion offer an exceptional investment opportunity?
*Barron's, by Allen Sykora, October 13, 2008
“With demand building, the ‘poor-man’s gold’ looks ready to rally.
INDUSTRIAL COMMODITIES GOT GUTTED again last week, yet a bright spot remains — in silver futures. While they’ve hugely sold off since hitting historic highs around midsummer, demand for coins and bars remains strong, setting up the metal for a rally through next spring.
Last week’s action made silver’s price even more attractive. At one point December silver was up $1.03 an ounce for the week, as global stock markets melted on credit-crisis fears. But silver then got caught up in selling across commodities in the final hour of trading, to settle Friday at $10.60, down by 72.5 cents, or 6.4% on the week.
Silver futures are off 46% from a mid-July high of $19.705 an ounce, and hit an interim low of $10.31 in September).
The Continuous Commodity Index, an updated version of the CRB which tracks the overall performance of the commodities markets, set a 14-month low Friday at 392.33, off its July high of 615.04.
Numerous haven-seekers bought gold in the past month, but many more investors can be expected to seek silver. ‘When gold takes off, people will look for a cheap alternative,’ says Gijsbert Groenewegen, managing partner of Gold Arrow Capital Management. ‘That’s why silver is called poor-man’s gold.’
Coin and bar sales have been so robust — the U.S. Mint now is rationing American Eagle coins — that dealers say they can’t meet small-investor demand.
‘That’s going to continue, because the economic problems the world is facing…are probably going to get worse,’ says Jeffrey Christian, managing director of commodities researcher CPM Group. ‘Sooner or later, physical trumps paper [markets] and the price of silver goes back up sharply.’
Analysts look for the price of the white metal to rise to between $14.50 and $24 by the end of next year’s first quarter. December gold has rallied already from a 2008 low last month of $739.80 to a Oct. 10 peak of $936.30. Silver could soon follow that trend.”
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