The returns that investors in silver and gold have enjoyed in recent years are enough to make anyone smile. Recently, both precious metals have broken resistance levels to the upside in prices and are looking to add to their gains in the near term. Because silver is cheaper than gold and subject to greater price fluctuations, the returns that silver investors have earned are higher than those of gold investors. That is not a golden coup.
In fact, it is advisable to have a decent amount of both gold and silver, especially when the US dollar remains weak due to a growing national debt. I still maintain that for the average middle income investor, silver is the investment of choice due to its affordability. Many new investors, however, can take a break when they see how far the price of silver has come in such a short time. Will that, however, overcome the uncertainty that exists in the markets due to recent world events both in the Americas and internationally? The price of silver is certainly at a crossroads.
Riots and protests have rocked the Middle East, and the price of oil has been on the rise due to concerns about production. OPEC member Libya is on the brink of civil war and violence is on the rise as Libyan dictator Moammar Gaddafi uses hired mercenaries to crack down on his citizens. Rising oil prices have impacted global markets as commodity and food prices rise as well. The main concern is that the unrest will spread to Saudi Arabia, which is OPEC’s largest and most influential member. An interruption in its oil production could be catastrophic and send the price of oil to prices never seen before in history. Such an effect would drive the price of gasoline in the United States to more than six or seven dollars a gallon and cripple what is already an anemic economic recovery.
Many countries are asking the IMF (International Monetary Fund) to replace the US dollar as the world currency due to the overwhelming national debt that hangs over the future of our country. In the United States, we are beginning to see the inevitable clash between those who want to increase public spending and those who want to reign in the national and state budgets. Many new state governments want to cut spending and keep taxes low to maintain a better business climate for job growth.
However, they are met with strong protests from government employee unions and their supporters. Ground zero for this political battle is in Wisconsin. Will state governors and legislatures be able to resist the pressure being put on them, or will business as usual with more spending and higher taxes? If the latter is true, we can expect more bailouts that would further erode the value of the dollar.
All of this uncertainty, both foreign and domestic, has been great for silver investors. The question is should people still buy? Many experts say the answer is yes. Silver has an advantage over gold because it is considered an industrial metal and has much more practical uses. Silver is scarce and the demand has been greater than ever. So whether the dollar continues to slide or the US economy rebounds, silver should benefit either way. There are some in the market who believe that silver will go above $40 an ounce in 2011. However, the key is not to get impatient and panic when buying. Watch the silver market and buy dips, especially during slow news cycles.