Monday, December 14, 2009

Chinese Investing in Silver

Considering silver a much better investment than gold at this time, Chinese investors have been flocking to the industrial metal in hopes of generating some significant profits in the years ahead.

Reasons for shunning gold by the Chinese are the high cost of the yellow metal at this time, which is prohibitive to a large number of Chinese.

Even though gold prices should continue to rise, silver should have a lot more upside, making it an idea investment and one many Chinese can afford to make.

Along with the upside potential of silver prices going up, it also is a better bet in short-term swings, making it more stable than its gold cousin, which many fear can make huge price swings, making it more volatile in price during the short term versus silver. That may be true, although smaller price decreases can cause equal price and percentage swings in silver, so I'm not sure that's the proper way to think about the reason for investing silver rather than investing in gold.

While I agree that silver is a better investment at this time than gold, the reason is demand rather than price alone. Demand for silver is both industrial and as a safety hedge, making it a great play going forward, as well as being off significantly from its inflation-adjusted highs. Gold is too, but it's the price difference in the two as far as it concerns the Chinese which make it so attractive.

with that in mind, we may want to watch Chinese consumption of silver as one of the market indicators and price drivers over the next several years.

Gold isn't going to go down in price for a long time, so we can count on silver remaining an attractive alternative investment choice to the Chinese, which allows us to know prices in silver will eventually start to skyrocket on that alone, but also including demand and the factor of being a safety hedge as well.

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