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Precious metals have seen a resurgence in recent years as investors search for ways to secure their wealth. Investments that are heavily reliant on the dollar are riskier than ever. Precious metals such as silver, on ..

09 Jan 2012

Precious metals have seen a resurgence in recent years as investors search for ways to secure their wealth. Investments that are heavily reliant on the dollar are riskier than ever. Precious metals such as silver, on the other hand, provide hedges against economic uncertainty. For this reason, silver has become a mainstream investment vehicle.

Countries such as China are purchasing silver in record quantities. China is encouraging its citizens to do the same in order to secure the country’s financial holdings and to become less reliant on weakening paper currencies. As a result, the price of silver is expected to continue its upward trend.

While silver has traditionally been overshadowed by gold, it does have the advantage of being an industrial metal as well as an investment metal. Stephen Leeb, chairman and chief investment officer of Leeb Capital Management, said, “There’s no industrial use for gold. It’s become ever-more recognized as a possible reserve currency. Silver does have industrial uses. It’s industrial vs. nonindustrial. They’re totally different classes. But silver overlaps. In a diagram, you would have silver in both sets: the industrial set as well as the monetary set.”

China’s central bank has purchased silver aggressively in recent years and has also created tremendous industrial demand on the precious metal. The solar industry is fueling demand for silver, and China is currently spending $1 trillion every year on alternative forms of energy including solar.

While other countries are scrambling to get out of debt, China is gaining strength. In order to secure that wealth, its citizens are purchasing silver bullion bars, coins and jewelry. With 50 percent of the market share on the solar industry and a significant role in many other industries that create a high silver demand, China has added to silver’s strength as a monetary metal and to the rising price of silver.

Leeb believes that China will continue its silver buying trend. He said, “China will start buying silver much more aggressively and start accumulating it. There’s very little doubt in my mind that China will be accumulating massive amounts of silver.”

At the same time, central banks in such countries as Russia and Mexico have also created further demand on silver. The high demand for the metal among individual investors has cause the price of silver to continue its upward trajectory. Investors interested in adding the precious metal to their financial portfolios can choose from bullion bars and coins, or indirect investment vehicles such as exchange-traded products or silver certificates.

Source: PreciousMetalsPrice


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