Increasing demand from green technologies, falling supply due to underinvestment, the “consumption” of mined silver in industrial processes and a historically massive deviation from the average gold silver ratio all point to a rising silver price from its current level of $16.30/oz.
In fact, many silver bulls are predicting the metal rising 10x between now and the end of the commodities super cycle expected to run until 2015. Considering its record high of $49.45 reached in 1980 is $100/oz today in inflation-adjusted terms, that target does not appear so fanciful as it first seems.
On top of that the mind-blowing quantitative easing programmes, loose monetary policies and record deficits resulting from government attempts to pull the world’s economy out of its worst recession since the 1930’s are by their very nature highly inflationary. This is an environment that favours precious metals as an asset class.
Technically silver is at the lower end of its rising trend channel and within touching distance of its 200 day moving average. We believe now is a great time to buy at these levels.
Whilst we still believe that gold is a core holding in every balanced portfolio, we believe that silver has even more room than gold for appreciation. So while gold’s bright prospects are in part the result of dark, economic “clouds”, don’t forget that those clouds are also likely to have a silver lining.
For investors looking for capital growth or diversification within a balanced portfolio, we recommend an allocation of 5% in ETFS Physical Silver (PHAG.L).