Silver is notoriously volatile. However, since 2002 it has still been the best performing commodity for investors. Between 2002 and 2012 it grew in value by 572%. Gold on the other hand was up 428% in that same span and is also a top performer, but silver’s gains are stronger. In fact, gold is second only to silver in this category, so investing in both gold and silver has proven to be a smart financial move for investors over the past decade.
Why did silver beat gold? Silver is considered by many to be a safe investment. Gold is as well, though silver is usually more accessible because of its price, which is significantly less than gold per ounce. Silver is also used for industrial and technological purposes, and its many uses add to its overall demand and value.
Silver’s demand has seen record breaking levels this year, especially in sales of Silver Eagle coins from the U.S. Mint. Demand for other silver coins and bars are up in 2013 as well. Resource nationalism may also help drive silver demand (and price) up this year. Increased government involvement in the silver mining industries in countries like Peru can significantly affect the global silver market.
Also, it is important to understand the gold/silver ratio. Throughout history, the ratio has averaged around 16, meaning gold has traditionally been 16 times higher in price than silver. However the current ratio is closer to 54. If we are to base predictions on the historical average, then silver should be priced closer to $100 an ounce, as compared to gold’s current price of about $1600 an ounce. This would be more than three times the current price of silver!
Near the end of 2012, some financial experts were predicting silver to increase to $60 an ounce by the spring of 2013. As of early April 2013, silver’s price is roughly half of that prediction, so while those forecasts have proven incorrect thus far, it is still good news for potential investors. Said another way, the top performing commodity of the past decade is hovering at a low price point, so investing in silver now is considered a wise move by many experts. The growth to $60 an ounce is still a strong possibility in 2013, which means it might double in price sometime this year. Even if this does not happen, it is hard to argue with the precious metal’s performance as the top commodity over the past decade.