Gold prices have surged to a record high. Silver, however, has flashed brightly behind the scenes, as evidenced by the performance of related shares and exchange traded funds (ETFs).
Silver has experienced a bull market of its own, standing in the shadow of the $1,038 per ounce in gold. Jeff P. Opdyke for The Wall Street Journal reports that the metal is up 44% this year, recently topping $17 a troy ounce.
Why do investors have a taste for gold and leave silver glistening quietly behind? The answer is not simple, but silver has two sides that appeal to investors.
- It’s a precious metal accumulated by investors and central banks as a quasi-currency.
- It’s an industrial metal with an increasing number of applications in health care, electronics and even food and clothing.
Which side of silver really shines? Silver’s precious-metal characteristics are driving prices at the moment. As inflation anxiety mounts and the health of the U.S. dollar is doubted, investors and speculators look to the metals as a hedge to a weak currency.
As investor demand wanes, though, prices may fall sharply because silver’s market is a much smaller one. Industrial demand won’t grow fast enough to supplant investment demand. Have a stop loss in place to protect yourself when the trend reverses itself.