If silver continues its upward trend, it could easily outperform gold during 2010. While the price of gold increased by more than 30 percent last year, silver prices increased by more than 60 percent.
“Even though I am a firm believer in gold, I think it is important for investors to include some silver as well as gold in their precious metals portfolio,” says David Levenstein, a leading precious metals analyst with Lakeshore Trading.
“In fact, at current levels it looks extremely undervalued and I would not be surprised to see it trade as high as $25 per ounce this year.”
On this basis, Levenstein expects silver to appreciate a further 45 percent this year, while he expects gold to increase by another 30 percent.
He says that when it comes to investing in silver, many investors could be misinformed or have no knowledge of how to participate in this market.
“I think investors in the U.S. are totally clueless when it comes to silver. This is not surprising because for years they have not been able to participate in this market and have had no way of getting correct information about this market. Their perception of silver is that it is some metal used to make grandma’s tea set.”
Even though there is some truth in this, this is not the entire picture at all.
“The argument made by many uninformed equity analysts is that the demand for silver will disappear due to the declining demand for silver in the photographic industry, which is nothing but a myth.
“Silver has many different industrial applications. It is also used in the manufacture of jewellery and bullion coins. And, more recently we have seen unprecedented investment demand for the metal via the silver exchange traded funds.”
According to Levenstein, silver will also benefit from many new industrial applications – in particular silver-zinc batteries, solar panels, water and even medical applications.
On the question of how investors in the U.S. can get involved in silver: “There is nothing like owning the physical metal, and buying bullion has been the traditional way to do this.”
“However, they must not expect to make a big fortune from a small one overnight.
“This will not happen. Investors must be prepared to keep their holdings for several years.”