You’ve heard that every cloud has a silver lining? Well, in this case, the dark economic cloud does have a silver lining…literally. Because, monetarily, only gold and silver glitter. If you were excited by the prospects of investing in gold in the last chapter, wait till you get a load of the possible gains to be made by investing in silver.
Think you’ve Got Silver Pegged?
For the first 2000 years that gold and silver were the primary forms of money across the globe, the exchange rate between the two metals averaged 12 ounces of silver to 1 ounce of gold. In other words, silver’s value was one-twelfth that of gold. Of course, it would vary by region and time period.
The ratio is set by the marketplace doing what it does naturally, which is discovering the fair price of something. This means that on average there was probably twelve times more silver in circulation than gold throughout history. It is simply the market finding the price/quantity equilibrium based on the relative rarity of the two metals.
Get to the Point!
The reason why I am giving you all this background is that I think that investing in silver in the near future will be as good as gold, or should I say, better. As I mentioned, when investors became net buyers of silver in the 1960’s, it forced the government to abandon silver as money and when investors became net buyers of silver in 1979, the price catapulted to over $50. Well, guess what? In 2006, for only the third time in history, the public became net buyers of silver once again.
Industrial Grade
So you might be asking yourself, if the Government was selling silver and investors were selling silver, just who was buying silver? The answer: industrial manufacturers. Silver sold was used to make consumer goods. Of all the elements, silver is the indispensable metal. It is the most electrically conductive, thermally conductive, and reflective. Modern life, as we know it, would not exist without silver. Photography, batteries, electronics…these things all came of age, and became widely available, during or shortly after, World War 11 and then absolutely exploded in use after the 1960’s due to scientific discoveries regarding the industrial applications of silver. Unlike silver, gold has two basic uses and both are hoarding type uses where the metal doesn’t get used up… money and jewellery. Less than 10 percent of gold production is used in industrial applications. Ninety percent of all the gold ever mined throughout history is still available for purchase somewhere.
Of all the uses for silver, only jewellery and silverware result in saving the silver used; in all other uses, silver gets used up in microscopic amounts, thrown away, and eventually ends up in a landfill. That’s where those billions of ounces went!
From the book: “Guide to Investing in Gold and Silver” by Michael Maloney
