Wednesday, September 26, 2012

Silver Now Outperforming Gold

Over the last three months, the price of silver has jumped about 25 percent, while during that same period of time, gold has performed at about half that level.

Most commodities experts have been saying that silver is highly likely to outperform gold over the next decade, as the price of gold has soared so high in the previous decade that it'll be hard to duplicate that going forward, even as more industrial demand for silver continues to grow even as silver supply is tightening.

Add to that the new practice by the Federal Reserve and ECB of initiating open-ended stimulus programs, and you have support under both metals, with silver poised to break out even more once the sellers complete their current disposal of silver assets, which has pushed the price of silver and related companies and ETFs down.

Some rightly point out that economies important to silver demand have been slowing down, with the most significant being China, but that will change if that continues to go beyond the attempts by Chinese leaders to cool off their economy, which they've been doing for some time now.

There is no doubt the Chinese will stimulate if that becomes the case, and silver demand will continue to rise, even if there is a temporary lull.

The world is now in stimulus mode, and it doesn't matter whether the demand for silver is based primarily on that reality. What's the difference if silver prices move up because of stimulus or industrial demand that is organic in nature? Either way, silver demand will rise, even though over the long term the question of sustainability rises.

But we're talking years there, not months, and so silver prices should continue to rise over time, even though, as usual, it will have a more bumpy ride than gold.

Finally, the underlying assumption and assertion by the Federal Reserve is it stands ready to stimulate even more if the jobs market doesn't improve. If that were to happen, it would assuredly give the price of silver another big boost.

Again, most of this is only a matter of when, not if. In the short term, China and Europe may weigh on the price of silver some, but once Spain caves and requests stimulus, that should change quickly, and with most investors understanding China has deliberately slowed their economy down, it won't be much of an impact on silver prices, as there are really no surprises there except for those that don't do their homework.

Silver has become a long-term investment option, and one that should be invested in that way. There is no doubt whatsoever that it will be among the strongest performing assets in the next decade, based upon industrial demand alone. Include the long-term stimulus strategy of the U.S. and Europe, and you see how that will be the case.

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