So obviously gold and silver have increased in value tremendously over the past few years. Especially silver, increasing over 100% in the past year. Is this just a bubble that will reverse soon? That’s what I wanted to figure out. So doing some research I’ve come to the conclusion that while silver and gold have been hyped the past few years, in 3-5 years they will both be at least 50% more than current prices. For this article I’m going to focus on silver, since gold gets most of the attention in the media. Below is the silver price for the past year:
Silver Price History - 1 Year
What this chart doesn’t show is that silver has been at the $18 – $22 / ounce range for many years now, lagging behind gold. Why was this? It has to do with the issue that gold is always viewed as a very precious metal and silver being a 2nd tier metal, a poor man’s gold. People don’t realize that silver is being used more than ever in industrial processes and the supply for silver is decreasing. Silver has an in-elastic supply, which means that the same or less amount is produced, regardless of the demand. So silver could be exploding in price, but the same amount will be mined. That is because there are only a handful of pure silver mines left, with supply decreasing.
I bought a 10 ounce silver bar last summer for $190, today the same bar on APMEX’s website is $375. What more of an investment do you want? With the federal government about to run out of money, people are flocking to precious metals to hedge their portfolios and for good reason. So if you have received some good gains from this past year in the bull market, consider hedging some of those gains with precious metals. Or even worse if you have still not broke even due to the meltdown of 08, do your self a favor and put 20% of your portfolio in precious metals.
Of course there’s going to be some corrections every so often. This is healthy for a growth movement. But for the intermediate and long run, gold and silver are going no where but up, so get in while you can. While silver is still the poor man’s gold 
Disclaimer – 20% of my portfolio is split between GLD and SLV (Gold and Silver ETFs).
