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Invest in Silver Before Prices Climb Higher

Silver prices are up this week on hopes of a third round of quantitative easing, or QE3, reaching their highest level in four months.

U.S. Federal Reserve Chairman Ben Bernanke on Friday hinted at further central bank action and silver prices jumped more than 3%. They've continued climbing this week to over $32 an ounce.

Speaking at the annual Jackson Hole, WY economic symposium, Bernanke expressed concern about the U.S. labor market stagnation and said yes, he is open to more quantitative easing to assist the economic recovery.

Details weren't included but it didn't matter: Bernanke said the magic words.

Silver has jumped on the bull train thanks to inflation concerns and talks of quantitative easing by central banks. Buyers increased in volume after the Aug. 22 release of Federal Reserve minutes, extending a rally that had been kicked off by signs of European solidarity.

It's not just U.S. news that's keeping the run going. German officials, including Chancellor Angela Merkel, are starting to sing a different tune for the European Central Bank's (ECB) stimulus activities. This may help reduce borrowing costs for debt-ridden Eurozone nations.

All these signs are reasons to load up on metals before prices take off higher.

"From now on, this is a dip-buying market," David Govett, head of precious metals at the brokerage Marex Spectron, told The Financial Times. "Yes, there will be setbacks along the way, but fundamentally the market is now in bull mode."

Invest in Silver: The Cheaper Metal

Silver is outpacing gold's gains as investors buy into real assets.

Silver prices have soared 15.8% in the past few weeks, while gold has gained 5.2% in the same period.

But silver still doesn't get as much market attention as gold.

Jared Cummings wrote in Commodity HQ, "Gold investinghas long dominated the precious metals space, as investors have used this ultra-popular metal as both a trading/speculative instrument as well as an integral part of a longer term strategy. While silver still has a large presence in the financial world, it is not often that a big name steps into the limelight and touts this white metal over its gold counterpart."

Interestingly, silver is the only major commodity that hasn't reached an all-time high during the bull market.

According to Peter Cooper of Resource Investor, "Silver is still cheaper than it was 32 years ago, prices are astonishingly depressed."

For investors interested in a product with upside potential and downside risk and who are optimistic about the potential for precious metals, silver is the metal for them. It has the most upside should the central banks give additional excess capital.

And now's a good time to buy ahead of potential central bank action around the world. There are plenty of upcoming events that can give silver a kick to the north in the new few weeks.

The Fed has its next Federal Open Market Committee (FOMC) meeting Sept. 12 – 13, with expectations that Bernanke will say more about QE3.

Europe may bring some bullish silver news with Germany's Sept. 12 vote on the legality of the European Stability Mechanism.

And then there's a possible market move thanks to ECB president Mario Draghi.

While initially scheduled to attend the Jackson Hole Symposium, he cancelled at the last minute. The pressure will now be on him when he speaks at this week's ECB meeting.

Last time he spoke, markets listened. This time, market watchers will be looking for more concrete plans out of Europe.

For silver investors, news of stimulus measures would be just the bounce they need.

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  1. MCCORMICK45309 | September 5, 2012

    What do you think of the silver/gold ratio as a predictor or indicator of relative value as to silver and gold? Don't you believe that platinum selling at a discount to gold when it has enjoyed a historical premium to gold makes platinum a screaming buy? Any solid way to own platinum other than PPLT as IMPUY has shown terrible price action and technical weakness? When would you expect MCP to rally as China controls about 93% of the worlds supply and these 17 rare earth minerals/metals are essential to virtually all production? Any targets on the MCP?

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