Investing in Silver Now Is Outshining Gold

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Precious metals investors are investing in silver now at a higher rate than gold – and the price is rewarding them.

The physically backed iShares Silver Trust (NYSE: SLV) took in $88.2 million in new money last month, according to data from IndexUniverse. UBS expects holdings in major silver exchange-traded funds (ETFs) worldwide to grow by 10 million ounces (311 tons) this year.

That's a stark contrast to the $227 million of outflows in the gold-backed SPDR Gold Trust (NYSE: GLD) and $6.66 billion among fixed-income funds.

Here's why those bets will pay off.

Why Investing in Silver Is Beating Gold

Fresh rallies in silver and gold were stirred last month as scores of market participants flocked to risk-off trades. Gold futures climbed 6% in August and are up a stellar 12% since June.

Yet, compared to silver's more than 20% gain over the same period, gold's gains look dull.

After a steep 32% decline from January to June, silver prices gained 21.3% in August amid bargain hunting, renewed interest, and frenzied demand. The white metal continues to show strength and remains on pace to log its first quarterly gain since Q3 of 2012.

And silver ETFs were the best performers of the group in August.

Sentiment toward investing in silver has changed drastically since earlier this year when investors fled from the precious metal as stocks soared to record highs.

But recent geopolitical tensions, U.S. debt issues, and worries over a market crash have made investing in silver a smart option – and it's turning more heads than gold.

Moreover, gold prices are likely to remain under pressure near term as uncertainty lingers regarding the timing and pace of the U.S. Federal Reserve's plan to scale back its share-price-driving stimulus programs. Since the first mumbling of a quantitative easing (QE) taper, gold prices have skidded some 18%. [Although the long-term gold price outlook remains bullish - go here for details.]

While the white and yellow metals often trade in tandem, silver's movements are more extreme. That's why precious metals experts like Money Morning Global Resources Specialist Peter Krauth like to best describe silver as "gold on steroids."

The white metal has long been a fan favorite among smaller retail investors and speculators who aim to gain exposure to gold at a fraction of the price. Silver investors also tend to buy and hold. Traditionally, that means more bang for your buck.

Investing in Physical Silver on Record-Breaking Pace

Join the conversation. Click here to jump to comments…

  1. Stephen Lee | September 13, 2013

    As always your figures are old and outdated. Silver has lost most of its gains and the metals (all) are criminally manipulated with the help of this site and the people who support and write for it. Here are the problems with silver: 1. Price is manipulated. 2. The same prediction for price increase is now at least 4 years old. 3. Price for silver is down over the last 3 years by as much as 30%.4. Predictions for very low production, high demand, and price pressures based on those factors have not materialized.5. Physical silver storage is a nightmare–bulk to value is enormous. My advice is watch for the prosecution of the manipulators, when you see that has occurred, watch for the economic normal supply and demand price rise, then and only then–PURCHASE SILVER.

  2. Stephen Lee | September 13, 2013

    The only way to level the playing field so that all investors have equal access and opportunity to metals, and metal value appreciation,is to establish a hard fast rule that all metals when bought or sold must physically change hands to the new owner. No metal transactions (except US Treasury) are legal by paper only transfer. Metals in mutual funds would be required to operate under the same "Physical Transfer" rules.

  3. Stephen Lee | September 13, 2013

    I ran a 36 month cost average test on silver (paper only but meticulous). I selected 9 dates per month randomly. I bought 100 ounces of silver per date, sold nothing, I computed in the premium per ounce (price above spot silver for each date and shipping cost), all purchases were simulated as bought from one commercial reputable supplier. After 36 months ,I am under water on all 9 purchase dates. A 100 % loss in value for each of the nine tracked transactions. Additionally, if I had taken physical possession of my simulated purchases, I would have to store somehow, some where, 32,400 ounces of silver. That is huge in space and cost. Just info based on reality, not false manipulated projections.

  4. H. Craig Bradley | September 15, 2013

    PRECIOUS METALS SPECULATORS GATHER DUST, NOT INTEREST

    Why are you buying physical silver (or gold) in the first place? It is pretty clear that making money in these precious metals, even without the storage and security concerns, is no "slam dunk". Gold peaked in Sept. 2011 and has been trending down ever since. It went up for the previous 12 years, so it probably still has quite a ways to go before hitting bottom. We have not bottomed-out yet.

    Heck, you can make more income on a 4% CD. You only make money in precious metals IF the price keeps going up and up and you SELL. During brief rallies, if buyers loose enthusiasm, prices quickly head back down. So, if you don't sell, you have tied-up your capital in dead investments that cost you money to store.

  5. Juan Zapata | September 16, 2013

    Not everyone is loosing money by the way. I would just talk about yourself!

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