There is a tendency to lump gold and silver investments together, but in fact they are distinctly different.

July 06, 2011 – There is a tendency to lump gold and silver investments together, but in fact they are distinctly different. While both gold and silver are experiencing growth in demand that far outstrips growth in supply, the fundamentals driving the markets are unique to each.

Gold is and always has been money – real money. While industrial demand is a powerful force, it pales in comparison to that basic fact. We are rapidly approaching a turning point in global economics as the era of fiat money comes to a close and nations seek out a means to stabilize the money supply.

Monetizing gold in some form is the obvious solution, and experts agree that is where we are heading. Highly respected analyst Chris Martenson calculates that to back 100% of today’s money supply with the gold currently in the reserves of central banks the price of gold would have to be over $60,000 per ounce.

Granted, that is a fantastical figure, but the implications are clear. Even if central banks shrink the money supply to some reasonable level and buy up sufficient gold to back a prudent percentage of the remainder, the price of gold would still reach currently unimaginable levels as a balance is reached between the stress on supply and effective monetization.

Silver, on the other hand, “is an industrial metal with a host of enviable and irreplaceable attributes,” Martenson says. “It is widely used in the electronics industry. It is used to plate critical bearings in jet engines and as an antimicrobial additive to everything from wall paints to clothing fibers. In nearly all of these uses, plus a thousand others, it is used in such vanishingly small quantities that it is hardly worth recovering at the end of the product life cycle.”

Because of that above-ground silver reserves have dwindled to “perhaps 1 billion ounces … when in 1980 there were roughly 4 billion ounces.” As demand from emerging economies climbs steadily upward, production lags ever farther behind. The net result will be silver becoming increasingly scarce and prices will rise accordingly.

While the gold and silver markets have vastly different fundamentals driving them, the outlook for both gold and silver investments is particularly bright.

Shannon King

Senior Staff Writer –

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