Silver lining is seen for precious metals


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Silver has been called the poor man's gold, and for good reason when you consider that at today's prices, it is about 51 times cheaper than the yellow metal.

Just about anyone who really wants silver can find a way to come up with the $33 it currently costs for a one-ounce coin or bar. By comparison, gold is selling at around $1,700 an ounce, meaning many people are going to need a bank loan to get their hands on even one ounce.

While much of the popular attention in the recent precious metals bull market has been on gold, authors Michael MacDonald and Christopher Whitestone have turned the spotlight on silver in their book, "The Silver Bomb: Beyond the Return of Metal As Money," published through CreateSpace Independent Publishing Platform.

Many people have watched in awe as the price of silver rose more than 700 percent since 2001 when it was selling for $4.50 an ounce. They may believe silver is in a bubble, they have missed the bus and there's no need to buy it now. The central message of the book is that there's more upward movement still to come.

"We recommend both silver and gold. But the real opportunity is in silver," said Mr. MacDonald. "The silver opportunity is the greatest investment of our lifetime and we predict it will shoot over $500 an ounce within the next five years."

The authors chose to focus on silver because it is the most undervalued, most needed metal in a technological age and the supply is actually running out. Unlike gold, which is mainly useful for hoarding and jewelry, silver has many commercial uses -- an estimated 10,000 commercial applications -- and the world is consuming silver like never before.

Most of the silver mined annually is consumed in electronic gadgets like computers and cell phones or batteries, windows and pesticides. Then it is usually thrown away because the amount in the individual products is so small it is not worth recovering.

Not only is silver being used and consumed more, it is not being extracted out of the ground as fast as it used to be, according to the authors.

"Silver isn't even being mined specifically in most cases," said Mr. Whitestone. "It is a byproduct of base metals mining, mainly copper. That is where most of the silver is coming from these days -- not from silver mines."

Financial experts are often divided on the subject of precious metals. Many are not as bullish as these authors.

Arthur Stein, a certified financial planner who has advised clients in the Washington, D.C., area for more than 20 years, suggests the current worldwide gold market may be in a bubble about to burst, and anyone investing in gold right now needs to be cautious.

"The price for gold is set by supply and demand," Mr. Stein said. "The demand for gold jewelry is going down, and that's not good. Most of the gold demand now is coming from investors. Gold is unique in that the supply does not go down. All the gold that ever been mined is still around because it's not used up, only recycled."

He said silver has far more uses than gold, but he has not analyzed the market closely enough to render an opinion on its future prospects.

Mr. MacDonald is a precious metals analyst, writer and founder of Wholesale Gold Group, a national gold and silver dealer based in Walnut Creek, Calif. Mr. Whitestone is vice president of Wholesale Gold Group and a precious metals analyst based in Tulsa, Okla.

They say investment demand for silver will continue to grow because people are looking for investments that will protect rather than lose purchasing power.

"Most people have paper assets in their mind as what constitutes money," Mr. Whitestone said. "But that is changing with the growing awareness of the weakness of all paper currencies. People can see this when they go to buy something at the store and realize the real rate of inflation is not what we are told by our government sources.

"If you take a dime minted before 1964 [which contains 90 percent silver], it can still buy a gallon of gasoline today at roughly $3.50," he said. "But the dimes the government produces today with no silver content gets you 1/35 of a gallon of gas. Our currency since 1964 has gone down 35 times, whereas silver and gold have maintained their purchasing power."

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Tim Grant: tgrant@post-gazette.com or 412-263-1591.


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