Bet on silver bullion prices in battle with copper and gold

A declining dollar, inflationary fears and growing silver consumption in emerging economies helps explain silver’s out-performance of both gold and copper, and it’s a trend that’s likely to continue.

Silver inhabits the shimmery space somewhere between a precious metal (like gold) and an industrial metal (like copper). By straddling both spaces, it offers unique advantages that have helped it outperform both gold and copper for the past eight years.

“If the world were going to hell in a hand-basket, then I would expect gold to outperform silver,” writes Peter Schiff at SilverSeek.

That hasn’t been the case, though, and Schiff believes the cause is more insidious than most investors realize. Namely, it’s indicative of a shift of economic power from the developed world to the emerging world. While the U.S., Japanese and European economies struggle to regain their footing, China and India are rapidly growing.

That’s the key to silver’s out-performance in the precious and industrial metals markets. Western investors are buying silver to hedge against a falling dollar while emerging economies are consuming more of the metal as jewelry and for use in high-tech goodies like iPhones, batteries, medical equipment and solar panels. The net effect is a growing gap between silver demand and mine production.

With silver demand at roughly 890 million ounces a year, global mine output is closer to 720 million ounces a year. That disparity alone puts upward pressure on prices. Throw in a declining dollar, inflationary fears and growing silver consumption in emerging economies and you’ve got a playbook that explains the metal’s out-performance of both gold and copper.

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