While the gold price lost around 15% after topping above $1,920 per troy ounce in early September, the price of silver is currently trading at a discount of nearly 40% compared to its record high of $50 per ounce (which it came close to reaching in late April). However, investors are well-advised not to judge the current market situation too quickly, since the fundamentals underpinning the rise in gold and silver prices remain intact. James Turk discusses some of these fundamentals – and a key formula for determining whether or not gold is overvalued – in a special article for the King World News Blog, released yesterday.
The debasement of currencies by central banks, combined with continuing problems in the banking sector have led to mounting fears of sovereign defaults among from industrialised countries. These fears have been the driving forces behind gold and silver’s strong price gains. Silver's sharp price decline of around 40% has led to frantic buying from those eager to “buy the dips”. This is especially true in the USA, Canada and many European countries – and last but not least China and India. Indian metals experts and bullion dealers estimate that sales of the white metal will jump by 30% in the course of this year's festival season. Many analysts are also expecting China's silver consumption to rise further as well. The affordability of silver versus gold or platinum on a per-ounce basis is making the white metal even more attractive for many investors who have up until this point not been involved in the gold and silver markets.
However, Shreekant Jha, managing director of the company PJ Commodity Ventures, said that he would sell gold as he expects the yellow metal to continue trading in a sideways direction over the short-term. N Prasad, CEO of Safe Trade Advisors, believes that investors should currently favour silver over gold. His opinion is shared by other analysts and renowned market experts such as Eric Sprott and Jim Rogers, who both think that silver will outperform gold over the next decade; Sprott thinks that silver will be “the investment of the decade”.
Roman Baudzus
Originally published on Goldmoney.com here
