There’s a great deal of media coverage these days about the record-setting high price of silver. It makes for interesting copy, but what does it mean?
As CNNMoney.com reported last week, silver seems to be correcting itself, but experts agree that its run isn’t over. Many think it’s just begun.
So what is all the fuss about, what are the market experts watching and what does that mean to the average investor?
Historically, the silver market as somewhat of a mirror of the stock market and the current economy. This is why investors have always considered silver to be something of a hedge, or insurance policy, against a poor economy. Today, many economists, politicians and market experts agree that the rising national debt and political unrest are propelling us toward a period of high inflation. It’s during these periods of inflation that silver and other metals skyrocket in value.
In the last year, the silver market has seen record highs reached as far as price and silver has even surpassed gold in returns. Many feel that this is due to the affordability of silver at a time when gold is well over $1000 per ounce. Silver is simply more feasible an investment for many investors.
Silver is also a somewhat more versatile metal, in that it has many more uses for industrial purposes and manufacturing. Silver is used in the production of electronic and medical equipment and many consumer goods, which helps it to maintain its value in most economic conditions. Gold is used primarily as a currency and for jewelry, which limits its ability to hold it’s value in periods when sales of luxury items are down.
Another reason why silver is making the news is that it has outperformed gold several times over the last year, in terms of percentage of increase in value. While gold sells for many times over the price of silver, it has lately realized smaller returns than has silver. This is an exciting development for many investors, who may have once considered silver to be a second-class citizen.
Although some feel that, in the last few weeks, the price of silver has stabilized in a corrective move, countering the silver rush of recent months, many experts agree that this plateau is very temporary. It’s a widely-held expectation that the oncoming inflationary period and the 2012 election will see the silver market setting records once again.