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The Hard Assets Alliance Blog

Two-Faced Silver

With his trademark warped persona and marred physical appearance, Two-Face is undoubtedly one of the most memorable villains of the Batman comic book series. Once Gotham's respected district attorney Harvey Dent, Two-Face is notorious for his obsession with duality and fate, which is epitomized through his ritualistic use of a silver dollar to decide critical matters.

Outside of Gotham, silver displays its own two-faced tendencies as both an industrial and precious metal. And, like the opposing personalities tugging at Dent's psyche, silver too is subject to polarizing forces.

Industrial and Investment Demand: Two Sides of the Same Coin?

In addition to its longtime use in jewelry and silverware, silver's historic reputation is as an industrial commodity. A unique combination of conductivity, strength, malleability, and high light reflectance has made silver the preferred metal for electronics, medical technologies, and increasingly since the turn of the century, solar panels.

Analogous to the fateful splash of acid that mutilated Dent's face and forever altered his destiny, money printing has tarnished fiat currencies and radically transformed the perception of silver. Though still viewed as gold's sidekick, silver is gaining recognition as an alternative to corrupted paper money. The trend is especially evident in emerging nations, where demand is rising three times faster than in the developed world. However, this is hardly an anomaly, as silver has been used as money for more than 3,000 years. In fact, the word "silver" translates to "money" in many languages, including French, Spanish, and Hebrew.

With investors flocking to silver as a hedge against swelling deficits and reckless money printing, silver has loosely tracked trends in the gold market over the past decade. However, given its relatively small market, silver is inherently more volatile, creating greater risk and opportunity for investors.

Investors Embracing Silver's Alter Ego

The dualistic nature of silver as both an industrial commodity and precious metal has a discordant effect on the white metal. On one hand, broad economic indicators steer industrial demand, while silver's perception as a store of value drives its alter ego as a precious metal.

In the years since the global economic decline took root, industrial demand for silver has largely faltered. With few encouraging signs to speak of these days, industrial demand figures to be a secondary catalyst of silver for the foreseeable future. With tepid economic growth weighing on the industrial appetite for silver, a stimulus-fueled recovery has prompted shortsighted investors to sell gold and silver for equities and other paper assets, despite the "recovery" being entirely fueled by quantitative easing and other inflationary schemes.

Given the obvious disconnect between a rapidly expanding money supply and falling or even flat precious-metals prices, it should only be a matter of time before debt-addicted economies buckle under the weight of mounting deficits. When the farce fiat monetary systems begin to unravel, gold and silver stand to rise markedly as investors ditch worthless paper promises for items of intrinsic value.

With the intensification of debt monetization over recent years, silver's reputation as an industrial metal is rapidly giving way to investment demand. According to the 2012 World Silver Survey, global investment demand rose from 31.6 million ounces in 2002 to 282.2 million ounces in 2011. This impressive rise is particularly due to demand for physical bullion, namely government coins, which experienced a 274% rise in demand over the same period.

In the fictional world, Two-Face leaves fate up to the flip of coin. In the real world, one's financial security should not be left up to chance. Investing in silver is one way to secure your financial future. After climbing from $10 per ounce in late 2007 to a peak of $48.70 per ounce in 2011, the silver spot price has since retreated to $28.90 per ounce, providing investors with what will likely be a short window to accumulate silver at such affordable prices.

Though silver's split-personality includes bursts of volatility, the big picture favors silver. For investors looking to diversify their precious-metals holdings, silver offers second-to-none protection against the actions of rogue central banks and the consequent inflation. If you don't want to entrust your financial future to a random coin flip, now is the time to align your gold holdings with a worthy ally.


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