As the US is grappling with what the Chinese newspaper has termed as “immoral debt”, the price of gold and silver is increasing as risk avert investors rally to park their wealth in safer commodities. Because of the risk of America’s possible default, precious metals have experienced an upsurge in their demand with gold trading at an all time high $1747.85 on Tuesday.
For decades, the international banking system has been running on the basis of a fiat currency which does not have a “solid” backing. This standard has led to the birth and rise of banks “that are too big to fail”, a parasite for the whole financial system because of their excessive greed. Commodities have traditionally been considered a guard against inflation, and this time around analysts have started terming silver as the ‘investment of the decade’. “Over the past 10 years, the fall of silver and gold (advances from the summer lows) have averaged at 34.6 per cent and 20.7 per cent, respectively. Taking into account this summer’s silver low of $33.85 and gold’s low of $1483, and the historical mean advance, you could speculate that the potential ‘fall-target’ for silver and gold could be ‘at least’ $46 and $1790,” said a commodity market analyst. Silver stands at $38.07 per ounce on Tuesday.
“Historically, the ratio of gold to silver is 16:1 with gold way ahead at $1600 per ounce, so silver may follow the trend and could touch $100 per ounce,” said an economist Saad Khan while talking to Profit, adding that “We have a financial system which is on the edge of the cliff, thus silver can even break this threshold of 16:1 and can possibly go parabolic in a year or two.” “Gold is hoarded and stocked, whereas silver is an industrial commodity used in cell phones, cameras and other appliances, consequently the demand of silver is more robust than gold,” Saad added. From September 2005 onwards, the price of silver has risen plausibly, being initially around $7 per troy ounce but reaching $14 per ozt., for the first time in April 2006. The average monthly price of silver was $12.61 per troy ounce during April 2006, and the spot price was around $15.78 per troy ounce on November 6, 2007. As of March 2008, it hovered around $20 per troy ounce. However, the price of silver plummeted 58 per cent in October 2008, along with other metals and commodities due to the effects of the credit crunch. By April 2011, silver had rebounded to reach a 31-year high hitting $49.21 per ounce on April 29, 2011 due to economic concerns about inflation and uncertainty regarding bailouts in the Eurozone.
