Wednesday, April 8, 2009

Is silver the new gold?

For decades consumers have sort to invest in gold but the consistently high price is now leading investors to reconsider the potential of silver – not simply as a material to be used in jewellery but for its investment potential as a store of value. 

The argument that silver may outperform gold in the next few months was backed up by recent news that India, traditionally the largest importer of gold, imported no gold in March 2009.  This trend could easily be repeated in other countries over the coming months as people continue to feel the pinch during the global economic downturn.  The recession could see investors turning to gold’s poorer cousin, silver. 

Additionally, silver will continue to be in demand not only because of its investment potential but because of its industrial uses.  The demand for silver in industries, such as photography, is estimated to account for 65% of global supplies, that’s approximately 895 tonnes.  For gold the industrial and dental demand is much lower.   About 11% of supplies are used by industry and dentistry – that’s around 3,880 tonnes.

However, there isn’t much doubt that part of the increased demand for silver will come from investors. With gold prices still near $900 an ounce holdings of exchange traded silver funds are expected to rise. 


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