Diane Alter: Good news for those investing in silver: The price slump is ending, making now a good time to buy.
Silver prices have slid since the start of 2013, and the white metal’s down nearly 9% so far this year. Silver, which had hit a record high of $49.79 an ounce in April 2011, was trading for $29.36 Tuesday afternoon.
That leaves plenty of room for prices to climb – and plenty of profit for investors who buy on the dips.
Money Morning Global Resources Specialist Peter Krauth said recent weakness in gold and silver prices “has created a great opportunity for true contrarian investors” to add to their positions.
“We may not have hit the absolute near-term bottom, but I think the odds are good that we’re pretty close,” Krauth said as the sell-off accelerated in February.
Reasons to Expect Higher Silver Prices
Some investors had feared the U.S. Federal Reserve might end or scale back quantitative easing, which has driven silver prices higher, after minutes from a January meeting showed officials at the central bank expressed concerns about the monthly purchase of $85 billion in securities.
But Fed Chairman Ben Bernanke’s testimony before Congress today (Tuesday) underscored the Fed has no immediate intention to change its course.
That should reassure silver investors.
The Fed’s easy money policy is just one reason to be bullish on silver, despite its recent lackluster performance.
The investment rate for the metal is robust, analysts point to “oversold” conditions, and bargain-hunters are lurking, ready to pour money into the metal.
“Silver is grossly oversold at current levels, more so than any time in the past five years,” James Carrillo, senior portfolio adviser for precious metals investment firm Swiss American Trading Corp., told MarketWatch.
At the same time, investment demand remains strong. This is key, given supply will outpace demand by 6,411 tons this year, according to research from Barclays.
Also, industrial demand is on the rise.
Analysts predict expansion in the global electronics and solar power industries, which use large amounts of silver, will grow at a quicker clip this year than the overall worldwide economy.
Commerzbank AG said “silver is establishing itself as a precious metal with an industrial character, setting itself significantly apart from gold.”
Frederique Dubrion, president and chief investment officer of Blue Star Advisors SA in Geneva, told Bloomberg News, “With silver, you can benefit from both sides: its safe-haven status and the fact that it’s also an industrial commodity. Given some positive leading indicators, especially in the U.S., investors would probably prefer turning to silver rather than gold.”
Investing in Silver
Silver and gold have long been viewed by investors as safe havens. In 2007, when investors panicked about the financial crisis, gold soared 30% and silver gained 14%.
Silver’s a particularly good bet now, with mounting concerns about inflation, high unemployment, the slow recovery here and abroad and economic uncertainty with the possible sequester cuts looming.
“Investors appear to be putting their money increasingly into silver ETFs as an investment alternative. It can only be a question of time before the buoyant ETF demand causes the silver price to rise,” Commerbank wrote in a report.
Coin collectors also have been buying up silver: In January, the U.S. Mint sold out of 2013 silver American Eagles after selling 6.01 million ounces of Eagles, the most since January 2012.
You can cash in on higher silver prices by investing in the exchange-traded-fund iShares Silver Trust (NYSEARCA:SLV) or the Sprott Physical Silver Trust ETV (NYSEARCA:PSLV).
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