Could silver one day be worth more than gold?

news.silverseek.com

Summer time is a chance for re-reading investment classics at ArabianMoney. We’ve just been dipping into the 2008 ‘Guide to Investing in Gold and Silver’ by Michael Maloney, and find that pretty much everything he predicted has come right.

If you bought silver when this book came out then you have probably doubled your money today, and briefly sat on a three-fold profit back in April this year. ArabianMoney is confident that April’s spike will be passed this autumn, so loading up on silver in the quiet summer months is our best tip right now.

Silver, not gold

However, we were still struck by Mr. Maloney’s conclusion that the silver price will one day exceed that of gold. That is an absolutely extraordinary claim as striking now as it was three years ago.

But we can see a scenario that could get silver more highly valued than gold. It would require a hyperinflation of a kind not seen in the advanced economies since Germany in the early 1920s, or at the very least a long period of elevated monetary inflation.

At the moment gold is the currency of choice among precious metal investors but this could change, particularly if the kind of price momentum we saw from last autumn to this spring is repeated. Everybody loves to jump on a winning trade.

The thing is that physical silver is in very short supply, and the situation in the Comex futures market is one of artifical price suppression that teeters on the brink of a breakdown. How else could any commodity be priced at less than it was 30 years ago?

Physical shortage

So if the Comex price fixing is broken by overwhelming physical demand, and a momentum trade develops in a tighly supplied market then you do have the potential for an exponentially soaring silver price. Those presently stashing their insurance money in gold would therefore be tempted to switch part of it into silver, and so the price would go up and up.

Perhaps in that dynamic the price of gold might begin to weaken, or certainly not to rise at all. Silver could then in a super price spike shoot past the gold price. But this would be like the dot-com bubble of the late 90s and after a short time the speculative fever would burn out and the price collapse.

However, the point to note is that silver prices are low now with massive upside potential if the bull market in precious metals continues and the global economy does not fall into a deflationary depression.

Summer time is a chance for re-reading investment classics at ArabianMoney. We’ve just been dipping into the 2008 ‘Guide to Investing in Gold and Silver’ by Michael Maloney, and find that pretty much everything he predicted has come right.

If you bought silver when this book came out then you have probably doubled your money today, and briefly sat on a three-fold profit back in April this year. ArabianMoney is confident that April’s spike will be passed this autumn, so loading up on silver in the quiet summer months is our best tip right now (click here).

Silver, not gold

However, we were still struck by Mr. Maloney’s conclusion that the silver price will one day exceed that of gold. That is an absolutely extraordinary claim as striking now as it was three years ago.

But we can see a scenario that could get silver more highly valued than gold. It would require a hyperinflation of a kind not seen in the advanced economies since Germany in the early 1920s, or at the very least a long period of elevated monetary inflation.

At the moment gold is the currency of choice among precious metal investors but this could change, particularly if the kind of price momentum we saw from last autumn to this spring is repeated. Everybody loves to jump on a winning trade.

The thing is that physical silver is in very short supply, and the situation in the Comex futures market is one of artifical price suppression that teeters on the brink of a breakdown. How else could any commodity be priced at less than it was 30 years ago?

Physical shortage

So if the Comex price fixing is broken by overwhelming physical demand, and a momentum trade develops in a tighly supplied market then you do have the potential for an exponentially soaring silver price. Those presently stashing their insurance money in gold would therefore be tempted to switch part of it into silver, and so the price would go up and up.

Perhaps in that dynamic the price of gold might begin to weaken, or certainly not to rise at all. Silver could then in a super price spike shoot past the gold price. But this would be like the dot-com bubble of the late 90s and after a short time the speculative fever would burn out and the price collapse.

However, the point to note is that silver prices are low now with massive upside potential if the bull market in precious metals continues and the global economy does not fall into a deflationary depression.

By: Peter Cooper