Moe Zulfiqar: Gold bullion gets a lot of attention in the financial media and economists talk about it regularly. Sadly, another precious metal, silver, isn’t usually a topic of discussion. This metal moves in line with gold bullion, and for investors, it can serve as an alternative to owning the shiny yellow metal.
When gold bullion prices started to tumble in late April and then declined even further in June, silver prices did the same. Please look at the chart below of silver and gold prices. The golden line represents the spot price of one ounce of gold bullion, and the red and green line represents silver prices per ounce.
Just like gold found support at the $1,175 area, silver prices found support at around the $19.00 level. Since then, they have been on the rise, having roughly increased more than 23%; gold prices are up about 18%.
Where are silver prices headed next?
Looking at it percentage-wise, silver has the ability to outperform gold prices.
Chart courtesy of www.StockCharts.com
To give you some idea about what I mean, consider this: for gold prices to go up 50% from the current level of around $1,400, they will have to increase $700.00; to get there, it can take a long time and a lot of buying. Now, for silver to increase 50%, from the current level of around $23.50, it will have to go up by $11.75 to $35.25. This sounds attainable because the silver prices have seen that level; for gold bullion, $2,100 would be in uncharted territory.
Here’s why I think silver has the potential to increase.
The demand for silver is robust. Looking at the sales figures from the U.S. Mint, it shows investors are buying. Between January and August of this year, the U.S. Mint sold 33,075,000 ounces of silver; in the same period a year ago, the U.S. Mint sold 22,540,000 ounces of silver.