It’s not gold but silver that earns first place
SINCE the 2008 global recession, an increasing number of investors have moved away from the more traditional equities markets and have begun to consider commodities as a promising substitute. More recently, with the Eurozone crisis and various rounds of quantitative easing, interest in alternative investment options has spiked once again.
In fact, from 2010 to 2011, Tullett Brown saw a staggering 87 per cent increase in the number of people looking to purchase precious metals. While paper money is backed by nothing, commodities are tangible assets that hold their intrinsic value despite fluctuations on the financial markets. Precious metals, therefore, are a brilliant way to hedge against inflation.
The majority of individuals looking to purchase precious metals do so with their minds made up about at least one thing; they want gold. With stories on alternative investments in the press often focusing around the price of gold, it has become almost synonymous with precious metal ventures. Silver is seldom spoken about as a viable option, and so it has often been neglected by budding investors who believe it to be gold’s inferior cousin.
Few realise that over the last seven years, silver has consistently out-performed gold.
In 2005 an ounce of gold was worth $450 (£285), today that figure has reached $1,772 – an increase of 293 per cent. While gold has been performing extremely well, over that same period silver has gone from $7 per ounce to $35, a colossal 400 per cent increase.
The fundamental factors that drove this increase in the price of silver – sovereign debt, discord in the European Central Bank and inflation – remain live issues, and 2012 looks set to be another strong year for silver. Initial forecasts make us confident that silver will surpass $50 per ounce, with some analysts predicting that figure will reach as much as $80.
Not only has this growth had a significant impact on the landscape of alternative investments, and indeed the smart investor’s portfolio, but so too is it set to affect global industry production costs.
Silver has a plethora of industrial applications, ranging from electrical conductors and catalysts to control rods in nuclear reactors. Some of the greatest demands for metals with such uses are coming from the rapidly expanding Bric economies. China in particular has had a spate of significant growth, closing 2011 at 9.2 per cent. This increase in demand both industrially and personally should in turn help to push the price of silver even higher.
In this turbulent economic climate, traditional perceptions of investment are constantly being challenged. When it comes to precious metals as an investment, all that glitters may not be gold, but other metals are still worth considering.
Simon Greenspan is a former futures trader and gold and silver specialist at City commodities broker, Tullett Brown www.tullettbrown.co.uk