Is silver going to boom?

Silver has often been called the poor man’s gold, but a boom in the precious metal could make poor men rich.   

Silver has numerous uses besides jewelry and coins including industrial and medical uses.  Dr. Jeffrey Lewis writes at CommodityOnline that “[i]n the last decade, silver has been readily consumed almost as quickly as it has been produced, with the largest driver of growth coming from the electronics sector. In the same computer you're using to read this article, there are several grams of silver, most of which will never be recovered due to the economic costs of removing precious metals from electronics.”

At its height in 1980 silver was trading for $50/oz.  Compare that to the current price of $18/oz.  Adjusted for inflation using the “official numbers” in 1980 silver was worth $128/oz in today’s dollars.  If you calculate inflation the way they did in 1980, the price in today’s money for silver was $365/oz in 1980.  You can see an explanation and some good charts about silver prices adjusted for inflation at Silver Stock Report.   

Besides the current consumption of silver there is another reason that I believe silver will boom in the future.  As I stated in the beginning of this post,silver is the poor man’s gold.  As inflation begins to rise faster and faster due to government spending and the Fed’s printing press more and more people are going to be looking for a safer way than fiat dollars to hold their money. Jim Rogers, Marc Faber, Peter Schiff, Gerald Celente and many others who have been right so often in the past, predict that gold will hit $2,000/oz in the coming years.  But most average Americans cannot afford $2,000/oz gold. So where are they going to put their money?  My guess is silver.  At $18/oz silver is still very affordable to middle class America.  The higher the price of gold goes the more likely it is that we will see a silver boom, because average Americans, not wanting to be left out completely in the precious metals market will finally begin to buy silver. 

Then there is the question of silver market manipulation.  Dr. Lewis writes“[a]s the CTFC begins to investigate claims by a whistle blower that the precious metals markets have been manipulated by several large US banks,investors are left to ponder: ‘What will happen to silver if manipulation is found?’”  The answer is simple, the price will skyrocket.  Dr. Lewis goes on to explain that “[i]f you were to extrapolate the amount of currency in circulation in1913 (roughly $10 billion) to today's figure of $1.6 trillion, you would find that the amount of money has actually grown by a figure of 160 times, or16,000%. Silver, by contrast, has earned 30 times its 1913 price, or 3000%. Clearly,there is a huge discrepancy in the numbers, opening up the possibility that should the markets be found to be manipulated by excess futures supplies, the price of silver could rocket from $18 per ounce to $90 per ounce – just by calculating the differential in the change of the amount of money and the performance of silver over time.”