Silver Vs Dollar – Silver Price at a Crossroads

The returns that silver and gold investors have enjoyed over the last few years are enough to make anyone smile. Recently, both precious metals have broken upward resistance price levels and are looking to increase their gains in the short term. Because silver is cheaper than gold and is subject to greater price fluctuations, the returns silver investors have realized are greater than that of gold investors. That’s not a knock on gold.

In fact, it is advisable to have a decent amount of both gold and silver, especially when the U.S. dollar remains weak due to an ever increasing national debt. I still maintain that for the average, middle income investor, silver is the investment of choice because of its affordability. Many new investors, however, may take pause when they see how far the price of silver has come in such a short amount of time. Will that, however, overcome the uncertainty that exists in the markets due to recent world events both in America and internationally? The price of silver is certainly at a crossroads.

Riots and protests have rocked the Middle East, and the price of oil has been on the rise due to production concerns. OPEC member Libya is on the verge of civil war and the violence is escalating as Libyan dictator Moammar Khadafy uses hired mercenaries to crack down on its citizens. Increased oil prices have sent a shock through world markets as the price of commodities and food rise as well. The major concern is over the riots spreading to Saudi Arabia which is OPEC’s largest and most influential member. A disruption in their oil production could be catastrophic and send the price of oil to prices never seen before in history. Such an effect would bring the price of gas in America to upwards of six or seven dollars a gallon and cripple what is already an anemic economic recovery.

Many countries are calling for the IMF (International Monetary Fund) to replace the U.S. Dollar as the global currency because of a crushing national debt that is hanging over our country’s future. In America, we are beginning to see the inevitable clash between those that want to increase government spending and those that want to reign in the national and state budgets. Many new state governments want to decrease their spending and keep taxes low in order to keep a better business climate for job growth.

They are being met, however, with loud protests by the government employee unions and their supporters. Ground zero for this political battle is in Wisconsin. Will the Governors and State Legislatures be able to withstand the pressure being put upon them, or will it be business as usual with more spending and higher taxes. If the later holds true, we can expect more bailouts which would further erode the value of the dollar.

All this uncertainty, both foreign and domestic, has been great for silver investors. The question is should people still be buying? Many experts say the answer is, yes. Silver has an advantage over gold in that it is considered an industrial metal and has far more practical uses. Silver is in short supply and the demand has been greater than ever. So whether the dollar continues to fall or the U.S. economy sees a rebound, silver should benefit either way. There are some in the market that believe silver will reach over $40 an ounce in 2011. The key, though, is to not be impatient and panic buy. Watch the silver market and buy on the dips, especially during slow news cycles.

Source by A. P. Papoon

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