High-Yo Silver, away!

Some investors are turning to silver as the cheaper alternative to gold

Is silver the new gold? Silver prices have risen 154 per cent in the last 12 months, compared to 32 per cent for gold, and 45 per cent for oil. And on Wednesday, the metal hit a 31-year high at US$44.79 an ounce. The silver surge is proving a bonanza for pawnbrokers and jewellery buyers, who are now urging people to sell anything from their silver coins (Canadian quarters made before 1967 are made of silver and are now worth over $7) to grandma’s silver tea set. Skyrocketing silver prices are also putting wind into the sails of proponents of precious metals, such as Peter Schiff. The well-known investor has long been advising clients to stock up on things like bullion bars as insurance against a collapse of paper currency that he predicts.

Though Schiff’s views may be extreme, analysts note the silver rush is driven by investors looking for safe havens. Though gold continues to be the favourite of traders concerned about the weak U.S. dollar, not everyone is ready to stomach its US$1,500 price. Some, then, may be turning to silver as the cheaper precious-metal alternative.

The silver hike, though, has been so steep that some market-watchers just won’t buy into the conventional explanations—and wild conspiracy theories are spreading, according to the Financial Times. The most popular ones circulating revolve around a mysterious Russian magnate discreetly hoarding the world’s silver supply; a secret silver-buying program set up by the People’s Bank of China; and Chinese traders using silver as collateral on debt. The hypothetical villains admittedly sound as realistic as a Dr. No character in a James Bond plot, but analysts may be somewhat justified in their speculations. In 1980 and 1998, silver prices did soar because someone was squeezing the global supply. Thirty years ago, it was two billionaire oil baron brothers,William Herbert and Nelson Bunker Hunt, who went on a massive silver-buying spree; nearly 20 years later it was Warren Buffett’s Berkshire Hathaway, which similarly bought up enormous amounts of the metal. Too bad that silver prices subsequently came crashing down in both cases–dropping by 80 and 40 per cent, respectively.

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