5 Reasons Why It's Time To Buy One Of The World's Most Undervalued Assets: Silver

5 Reasons Why It's Time To Buy One Of The World's Most Undervalued Assets: Silver
  • Silver might be one of the world's most undervalued assets.
  • As the global economy rebounds, demand for silver should also increase as it is used in many industries.
  • Silver has just made a breakout move (on h
  • High volume) above the recent trading ranges and that could mean a strong new uptrend is beginning.
  • "Left for dead" silver and gold stocks are coming back strong which also shows renewed interest in this asset class.

With the stock market near record highs, it's getting tough to find real value in stocks and many other asset classes. Of course, everyone says they want to buy low and sell high, but psychology makes that very tough to do. Most people want to own "winners" and end up chasing stocks that they see going ever higher, especially when they see other people making money. By contrast, it is hard to buy something that is a "loser" which has been dropping in value. After all, who wants a stock or asset that has not been performing like a winner? However, contrarians like Warren Buffett often go against the crowd and buy depressed assets when few investors are interested. That is what led him into buying shares of Bank of America (BAC) when it was trading for just a few dollars. While it seems that many investors are jumping back into the real estate and stock market, not too many are bullish on silver and that could be one sign of a real bargain. Warren Buffett is not known to be a big fan of precious metals but he has bought significant amounts of silver in the past and according to one article, he did buy about 130 million ounces.

Regardless of what Mr. Buffett is currently doing, it seems clear that silver and precious metals in general, are an unloved asset class. It also seems clear that precious metals might be at bargain-like levels. Furthermore, the hardest part of buying something that has dropped in value is wondering if it will keep going down after you buy it. However, that is why many investors look at the charts for signs of a clear bottom and that is exactly what seems to be the case for silver now. Let's take a look at the chart for silver and review a few other reasons why it might be the world's most undervalued asset class:

Reason #1: As The Global Economy Grows, Industrial Demand For Silver Will Increase

While many investors bought gold as a hedge against some type of financial disaster that has not played out, so many precious metals have lost some luster in recent months. However, even though falling gold prices can also take down silver and platinum to a certain point, a time will come when silver and platinum can rebound along with the global economy and that time might be now. Silver and platinum are heavily used in a wide variety of industries, which includes electronics, automobiles, and more. Both the electronics and auto sector are seeing robust demand and that should continue and even increase as the European economy picks up steam. A Bloomberg article details why silver prices could be on the rise later this year thanks to increasing demand from a number of industries. This article also notes that silver prices could benefit from a drop in production. The article states:

"This year demand from the electronics industry will drive growth, Krebs said. Industrial uses for silver, including electronics and photography, represent about half of total demand. The silver market will receive a boost as larger mines such as BHP Billiton Ltd.'s Cannington mine in Australia, the world's largest silver mine, end production, Krebs said. Scrap availability is also falling, he said."

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