Silver is often described as the “devil’s metal”. It is extremely volatile, and has a startling ability to burn holes in investors’ pockets. Never has the latter trait been more evident that in recent months.
In March 2011, silver hit $48.60 per ounce, a record peak. Three years ago, it traded at $28.50/oz. Yet now, in real (inflation-adjusted) terms, dollar-priced silver is hardly any higher than it was just after World War I.
The metal’s underperformance is thrown into sharp relief by the gold/silver ratio. This indicates how many silver ounces equal one gold ounce (there’s more on this topic later on). At present, the ratio shows that silver is looking cheap compared with bullion. However, with silver’s fundamentals both strong and improving, it could soon be rerated relative to gold.
Why? For starters, silver is an industrial metal whose range of applications keeps growing. It is extremely durable, one of the world’s best electricity conductors, and is particularly suited to coating electrical contacts on printed circuit boards. So it
