Silver is as good as – or better than – gold
Everybody knows about the value of gold. For the past few years, since the global financial crisis set in, it has been the only asset type that has seemed unstoppable. Every time it reached an impossible high, it rallied even further. Every sign of bad news from the world economy was a signal for gold to move into uncharted territory.
And then, all of a sudden last month, gold experienced a 20 per cent drop. Some say it was just a technical readjustment, what traders call a “reversion to the mean”. Others point to the strength of the US dollar, which became increasingly attractive as the European debt crisis unfolded, causing a mass movement in its direction.
Whatever the reasons, the drop caused some to question whether it’s time to come off the gold fixation. It may come as a surprise to a financial public trained to monitor the price of gold that the stronger trade in recent times has been silver, or the “poor man’s gold”, which has outperformed the yellow metal by a significant margin.
Silver also took a beating late last month, even bigger than that experienced by gold, but that is not how it has played out for most of the past three years. If you take the global financial crisis as your starting point and then compare the prices of the two metals over that period, the so-called lesser metal has quadrupled in value compared with the mere doubling in the US dollar value of gold.