Nowadays with the fall in the value of the US dollar, the rise of precious metals (silver, gold, palladium, platinum and gold coins) provides evidence that the smart money is continuing its march away from the dollar. However, something else is also evident: silver (and to an extent, palladium) is rising at an even greater rate. Check the recent rise in the price of silver as of January 11, 2011.
Why is Silver Rising Faster than the Rest of the Precious Metals Group?
This issue is perplexing, however one has to consider the fact that silver is still incredibly undervalued compared with gold. Gold and silver have always had an enduring relationship. The value used to be based upon a a rough 16 to 1 relationship. The current economic/political turmoil offers no reliable or justifiable explanation as to why silver is inching upwards at a slightly greater rate than the rest of the pack.
The fact is that silver, compared with gold, is under-priced and now may be a propitious time for silver to regain its former eminence in that old gold/silver relationship. Certainly, any of the precious metals can be marked as safe havens in the time of a potential dollar devaluation. Many from other countries, such as Australia, have seen the value of their currency rise against the dollar. This advance and decline will continue until the U.S. economic picture becomes more robust.
Dollar Decline Could Foreshadow Other Problems
Certainly if the dollar declines even more, the potential for US currency to lose its position as the "world currency" is quite possible. This of course, would foreshadow additional economic problems in the United States. Obviously, if the US dollar is dropped, than perhaps China will assume an even more significant position in the world economy. This is mere speculation for it is also quite likely that because the dollar has declined, the balance of trade in favor of the U.S. could also advance making U.S. made goods more attractive on the world market.
Certainly, the price of silver receives then a double growth impetus. It is grows in value against the dollar and secondarily it will grow in value against gold among holders of U.S. currency if they elect to purchase precious metals. There is no real explanation other than that. Silver may be perceived as undervalued and also remains one of the historic safe harbors for wealth. The investor will need to carefully watch the increase in the price of silver against gold and make a decision on the basis of the market direction as the price of silver ever inches north.
Nick Schklair - Nick Schklair, author, writer and business consultant has published a work on business startups in today's economy.
