Economic turmoil in the Eurozone and global recognition of slowing financial systems has recently resulted in worldwide fiscal volatility. Even precious metals have taken a hit, despite their common reputation as safe-haven investments. Does this mean that silver bugs should hold on investing in their favorite precious metal, until things stabilize?
If history repeats itself, as is often the case, a contrarian view is being taken by many savvy investors. A rise in the valuation of fiat currencies usually means a drop in precious metals. Such is the correlation we are currently experiencing, as we approach the end of the year.
Just as in 2008, when the US economy tanked, silver has lost big, largely due to its industrial metal status. Further stalling of global fiscal recovery is projected, and along with it, decreased industrial silver demand. Previous overselling of commodities helped create the price plunge for precious metals in 2008. Although clear fundamentals for silver investment are few and far between in any economic circumstance, many were able to capitalize on the price drop at that time. Buyers who invested in silver at the bottom were able to take enormous profits, as precious metals surged sharply in the aftermath.
Silver bulls, although keenly aware of the likelihood of decreasing industrial usage, place their bets on the fact that silver is always traded in excess of its real supply. Inability to deliver, if demand increases, is still a realistic scenario in the long term.
Short selling of silver by panicky speculators appears to be taking control of precious metals prices in the short term, but the old adage of buying low and selling high has never been a false prophecy.
http://mineweb.com/mineweb/view/mineweb/en/page32?oid=136023&sn=Detail&pid=10255
