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Silver prices are outpacing gold this year

Karnani suggested that silver coins represent 50% of total silver investment, based a “systematic” investment plan. An investor who puts $500 a month into silver investing “should give a return of more than 15% in 2012.”

Purchasing 90% silver U.S. coins, known as “bag silver,” may be the best way to invest in physical silver, said Lundin, adding that the bags are typically traded in increments of $1,000 in face value. They come in various coin denominations, though some dealers sell $500, $250, or even $100 face value bags, possibly at a higher premium.

For the remaining 30% of Karnani’s suggested strategy, he proposed exchange-traded funds, with an investment time period of three to five years. “ETF returns always lag behind physical prices,” he said.

Edmond Bugos, director of mining finance at Strategic Metals Research & Capital, prefers ETFs and likes the Central Fund of Canada , which owns both gold and silver, as well as the Sprott Physical Silver Trust

He still prefers gold overall, though has enough exposure to silver through CEF, he said.

Building a portfolio of companies that explore for or produce silver can deliver substantial leverage on rising silver prices too, according to Lundin.

Great Panther Silver Ltd.  and Silvercorp Metals Inc.  have profitable and growing silver production, and South American Silver Corp.   “has a large silver resource that is currently undervalued by the market …” said Lundin, who has no positions in any of those stocks.

Best guess

One thing is certain when it comes to silver this year: expect to be just as volatile as ever, analysts said.

“I wouldn’t dare say that the days of sub-$30 are over. Considering how volatile the metal is … silver could correct below $30 the moment after I claim it never will,” Lundin said. But the trend is “definitely upward and it appears much more likely that silver will trade over $40 before it trades under $30 once again,” he said.

Jeffrey Wright, senior research analyst with Global Hunter Securities, said he envisions a scenario where a significant drop in industrial demand on a global scale leads to a decline in the price of silver below $30, as was the case in the fourth quarter of last year. That is when prices dropped around $8.

But SilverForecaster.com’s Phillips believes that the days of sub-$30 silver prices are over, as demand outpaces production. “Just as the oil price is moving up on growing global demand, ensuring we have probably seen the last of $80 [a barrel] … so silver has risen to a new minimum plateau.” – MarketWatch

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Posted by on Mar 9 2012. Filed under Silver Analysis. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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