Wednesday, September 26, 2012
Silver Is Outshining Gold by a 2-to-1 Margin
Gold may have more prestige and a broader fan base, but experts say, silver is where the real action is right now. In the past 3 months alone, the price of silver has risen 25%, while gold's recent run up, albeit impressive, has only been about half as strong.
Still, whether it's gold or silver or platinum or palladium you are chasing, the penchant for precious metals has been reignited by the dovish central bank action commonly called QE3. But Tom Lydon, the editor of ETF Trends, says when it comes to silver, there's more to this hard asset story than monetary policy, inflation concerns and fear.
"There's been a huge increase in emerging market demand as more people move up to the middle class, and silver is an easier acquisition for them," Lydon says in the attached video. "Although somewhat of a speculative investment ten years ago, gold and silver are now becoming a foundation investment." He says the average investor no longer just puts 60% in stocks and 40% bonds anymore.
Naturally, some pros have doubts that the current run can last, or at least will run out of steam. While there is really no way to tell what the future holds, metals traders and analysts do say that silver tends to outperform in a bull market, underperform in a bear markets, but overshoot in either directions.
While silver is unarguably more volatile, Lydon points out that it is still almost 40% below its highs of two years ago, while gold is just 15% beneath its $2,000 peak a year ago.
Ease of access via ETFs is another reason why metals are gaining market share in portfolios Lydon says, calling the precious metal investing process ''much more free flowing." While he says the largest silver fund is the iShares Silver Trust (SLV), the ETFS Physical Silver (SIVR) and the Powershares DB Silver (DBS) are also very widely held and actively traded.
In addition, just like their brethren in the gold patch, Lydon says some investors prefer to own the metal producers instead of the metal itself and do so via mining ETFs such as the Global X Silver Miners (SIL) or the iShares Global Silver Miners (SLVP). But no matter what route feels right, Lydon says to would-be investors, "it's exciting, but you've got to do your homework."