$8 by next spring?: Silver still the poor man’s gold

Platinum and gold may have been the best performers among precious metals in the current bull market, but the one to watch over the next six months is silver.

The reason, says Thomas Mohide, is the power of the “little people” who turn to silver as a way of sharing in the profits when precious metals take off.

Dr Mohide is no Henry Kaufman, a New York economist whose prognostications can make the market move, but when he speaks people listen. A former bullion trader and president of the Winnipeg Commodity Exchange, Dr Mohide was director of mineral resources for the Ontario government for 14 years where his duties included acting as advisor for the United Nations’ Nickel Inforamtion Study Group for seven years. He has recently retired and taken on the role of a private consultant.

While his credentials are impressive, his attachment to silver is more personal. His definitive study on silver, published by the Ontario government in 1985, is dedicated in part to his great-grandfather, a silversmith.

Dr Mohide told a recent meeting of the Canadian Institute of Mining and Metallurgy, Toronto branch, that silver prices are likely to continue an upward trend that began in August and would likely peak at $7.50 to $8 per oz by next spring.

Considering that silver slipped below $5 earlier this summer, such a gain over a 9-month period would far exceed the gains made by gold and platinum over the past nine months.

And, in North America, long the world’s largest source of newly mined silver, the appeal of silver is widespread.

“Do not think Rolls-Royce on silver,” says Dr Mohide. “Think Woolworth’s. Secretaries, plumbers, dog-catchers, messengers, waiters, etc., can all afford silver.”

As an investment, silver is a very good risk, he says. Over time, it has retained its purchasing power while paper currencies decline in purchasing power.

“In 1936, or even in 1949, you could buy a top quality car for 1,000 U.S. silver dollars. Today, you can still buy a car for 1,000 U.S. silver dollars. If those silver dollars are still uncirculated, you can buy the finest Mercedes Benz.”

What’s more, the increases in gold and platinum have “set the stage” for silver price increase which historically is slow to react to gold’s price swings.

While the pull of other precious metals on silver is not felt as strongly as it was in the past, it still reflects a positive climate for silver. On the supply side, Dr Mohide says the oft-quoted oversupply of silver is declining each year. The surplus is dwindling as the availability of silver coins for meltdown has virtually disappeared and the recovery of silver from new scrap seems to have reached its limit.

What’s more, there is no threat of the U S.S.R. dumping silver on the world market simply because it has no significant quantities of silver. Supply comes overwhelmingly from market-economy countries.

Dr Mohide wasn’t shy about giving advice on how to invest in silver, either: “For your own silver investments, the safest silver buy is the U.S. 40% silver-content Kennedy half-dollar coins. They are traded in U.S. $1,000 bags which sell so close to the face value of the coins that, even if the silver price were to go down, you are protected from loss because the value of these coins cannot fall below their face value.”