Market Pulse

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There are several reasons to love gold right now. From the twin specters of a weak dollar and commodity inflation, to the recent all-time highs north of $1,430 an ounce, to returns that doubled the broader market in 2010.

Yet investors who focus on gold and ignore silver could be missing an even better bet. Demand and performance numbers show that silver is beating gold handily right now and has been for a while. What's more, a look at the uses and possible supply bottlenecks of silver shows that this metal could have an upside gold may not enjoy in the new year.

While both gold and silver have rolled back recently--a 5% decline for silver and a 3% decline for gold since Dec. 31--there's no doubt many investors are considering the drawback little more than a pause before the commodities skyrocket once more.

Don't be fooled by gold's glitter. Here are five reasons silver may be a better play for your portfolio, and several investments to capitalize on the metal's run.

1. Silver's performance

Silver has lapped gold's gains better than three times over the past year, with appreciation of about 79% compared with 24% for gold. Silver also has better long-term performance, with three times gold's run in the past 20 years. Specifically, silver has posted gains of about 637% since early 2009 compared with 255% for gold in the same period.

Remember, past performance is no guarantee of future results. But a look at just about any time frame over the past few decades shows that silver has outperformed gold. Another annual gain of nearly 79% may be a bit unrealistic, but if you think precious metals are on the rise, you should bank on silver instead of gold.

2. Silver production bottleneck

According to historic estimates, about a century ago there were about 12 billion ounces of unmined silver. In 1990, commodities research firm CPM Group pegged that figure at 2.2 billion ounces. But today, that figure has fallen to less than 1 billion ounces in above ground refined silver--a number that's shrinking every day. Recycling is common for silver, but the dwindling supply of metal in the ground is creating a bottleneck.

Market Pulse - Market Pulse

NASDAQ:SODA  Sodastream International Limited 

39.00 +6.30 (19.27%)

After Hours39.40 +0.40 (1.03%)

Jan 13, 7:59PM EST  

  • Range 32.90 - 39.40
  • 52 week 23.15 - 43.88
  • Open 33.00
  • Vol / Avg. 4.18M/757,042.00

Shorting a good ol' American staple: sugary, carbonated drinks! This could be a quick short if you have true grit. The stock is trading near its 52 week high. However, the after-hours indicates that it may still have some upward thrust, so it'd be wise to get some good research in while it runs out of steam. 

NYSE:SLV   iShares Silver Trust (ETF) 

28.00 -1.00 (-3.45%)

After Hours28.08 +0.08 (0.29%)

Jan 13, 7:59PM EST  

  • Range 27.86 - 29.00
  • 52 week 14.37 - 30.44
  • Open 28.98
  • Vol / Avg. 30.36M/27.64M

Silver has eased off its record highs and seems to be settling into a pocket before another take off. After taking profits during last week's $30 dollar highs,  I decided to jump back in during yesterday's late day sell off. It has shown some resistance around yesterday’s closing price (28.00) and I don’t believe it will fall much lower. Tomorrow may be another buying day, but I think within the next two weeks it should begin to bounce back to its highs. I see silver nearing $35USD during the 1st quarter or early on in 2nd.


 NYSE:PSLV  Sprott Physical Silver Trust ETV 

12.87 -0.37 (-2.79%)

After Hours12.79 -0.08 (-0.62%)

Jan 13, 4:00PM EST  

  • Range 12.75 - 13.45
  • 52 week 9.75 - 14.25
  • Open 13.45
  • Vol / Avg. 772,944.00/1.01M

If SLV were to jump back up early tomorrow you may have even more reason to look at PSLV, which seems to be holding its value more. For this reason it may be a bit of a laggard and start to correct a bit tomorrow before the bounce-- giving you some opportunities to cash in. Another interesting fact is that unlike SLV, this ETF isn’t managed and owned by Wall Street banks, which theoretically negates using the silver ETF as a hedge—especially for long term holds or if the financial stressors worsen.

 We recommend PSLV, especially for long-term hedges against the economic uncertainties.


1 GLD 122.49
+0.62 (0.51%)    
2 INX CA$0.47
0.000 (0.00%)    

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