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A lot of my friends are having
kids right now. Over the weekend, we had some friends over for dinner. One of
them brought his eight-year-old daughter. She loves animals, and was great
with all our dogs and horses, but we ended the night exhausted! Explaining
the rules, keeping a watchful eye over the bigger dogs, reminding her to use
her inside voice... I'm still tired from the visit.
And I can't begin to imagine how
much harder it would be with two kids. Especially with the arguments, trying
to decide who's right and who needs a time-out.
The mainstream financial media
is like a couple of eight-year-olds. We hear arguments from both sides --
corporate earnings are beating records, but at the same time joblessness
could jump to 10% again.
Which is it? And how do you plan
an investment strategy against such bipolar predictions?
Here at Smart Investing Daily, we
believe the U.S. economy is at another tipping point. The recent market
rallies are unsustainable, are similar to an extinction burst... You know,
when a child is throwing a tantrum and he lets out one last big scream before
he falls asleep.
But in case I'm wrong, wouldn't
it be nice to know of an investment that could make you profits if the market
rises or falls?
Well, I've got one for you...
Invest in
Silver
Silver is an interesting
precious metal. It protects against inflation like gold. But silver also has
a lot of industrial uses. That makes it like copper, which booms during
economic recoveries.
One of the toughest aspects of
gold is to find out if it's trading more as a currency or a commodity. Is
gold demand up because of concerns about the debt crisis? Or is gold up
because of jewelry demand in India and China?
It's an important question, but
one that doesn't apply in the same way to silver.
Silver straddles the metals
industry. Certainly, gold and platinum have industrial uses, and we like both
of these precious metals as investments right
now. Consider this, though. About a quarter of all platinum consumption came
from recycled platinum.
That's not the case with silver,
and that could mean increased demand during an economic recovery.
In fact, 487.4 million ounces of
silver were used for industrial purposes in 2010. That's well over four times
the amount of silver used to make coins and medals. That's also a gain of
about 20% from 2009.
Not bad in a struggling economy.
With uses that span electrical
circuits, water purification, photography and other industries, industrial
silver demand makes up 66% of silver production.
But there's another aspect of
silver that should get your attention -- silver investments.
World investment demand climbed
40% last year to more than 279 million ounces. And get this... Hedge funds
and money managers increased their silver positions by 19% last week,
according to the U.S. Commodity Futures Trading Commission... the third week
of gains.
How High
Could Silver Prices Go?
Bloomberg reports that silver
could climb as high as $70 an ounce by next March... a jump of almost 75%
from current prices.
Let's take a look at a chart to
see if this is a realistic forecast.
This is a chart of silver
futures for September delivery. See that pop from late April? A huge move...
but prices fell short of silver's all-time high of $50.35 an ounce in January
1980.
Since January 2011, silver
prices have climbed 26%. That's not a bad gain; it beats gold's
gain of 12% handily. But that's not near the pace silver would need to climb
in order to meet a 75% gain by next March.
Is it possible? Yes. Between
September 2010 and May 2011, silver prices climbed 140%.
But just as quickly, a huge
chunk of that gain disappeared when silver prices dropped from $48 back
below $35.
Realistically, silver prices may
test that all-time high by Thanksgiving. At that point, smart investors
should ruthlessly protect their gains.
That strong
resistance silver shows around $50 an ounce will be tough to beat. Expect a drop in prices
anywhere above $48.
For investors considering an
exchange-traded fund like the iShares Silver
Trust (SLV:NYSE), look to the price
spike in late April to find your resistance point.
For investors looking at silver
mining companies, be aware that mining costs, like fuel prices, impact
profits. Keep an eye on operating margins as companies report earnings. Lower
margins could mean lower earnings moving forward.
Sara Nunnally
Taipan Publishing Group
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originally published here
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