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Why Jim Rogers likes silver so much

Updated on August 21, 2010

If you're an avid reader of financial columns or watch financial television, you've probably heard of Jim Rogers.

Jim is one of the world's most successful investors. When he talks, it's worth listening.

A small country down boy from Alabama, Rogers teamed up with another successful investor, George Soros and started the Quantum Fund in 1970.

Over the next eleven years, Rogers and Soros chalked up a hefty 3,365% return which absolutely creamed the 47% return from the S&P 500 over the same period.

Rogers is one of the world's leading voices on commodities and has been loudly telling every man and his dog that silver is the 'next big thing'.

It's something I've been reading a lot into and have found that it's a rather simple but compelling argument.

I have outlined the case for silver below.

1) The world currency crisis is leading to increased demand for precious metals

Many of the world's currencies are in crisis.

The US for example has been printing the greenback like there's no tomorrow in an attempt to pay down debt.

This inevitably leads to inflation and reduces the buying power of a currency.

Historically, metals like gold and silver have been strong, safe substitutes for holding currencies.

A government can't go out and 'print' more silver and ruin your purchasing power.

It's likely that we'll see more demand for metals like silver as more and more currencies are devalued due to inflation.

2) Gold is overpriced and less attractive to those getting out of currencies

The price for gold is near all time highs, partly due to investors switching from currencies to precious metals.

This has certainly been the case in traditional gold holding nations such as India.

However, the high price of gold makes in increasingly unattractive to new investors.

While silver has often been the less attractive sister to gold, it is a fairly strong substitute. More and more 'would be' gold investors will be looking towards silver.

3) Silver is near all time low prices

Silver has until fairly recently, been stuck near all time low prices, particularly if you adjust for inflation.

Considering the dynamics at play in point two, this only adds fuel to the fire. Silver is becoming a more and more attractive substitute metal.

Word of the street is that countries like China are encouraging the new emerging middle class to buy silver jewellery for this exact reason. 

4) Lack of new mines

Low prices for decades have meant that nobody has been starting new silver mines.

Higher prices will attract new mine exploration, but finding new silver, setting up a mine and selling the silver could take near to a decade.

In the meantime, restricted supply and icnreased demand could see prices syrocket.

Summary, there's a silver lining in silver 

Nothing's certain in investing, but the environment for a big jump in silver prices looks like it's in place.

Like any investment, you should do your homework to see if it's right for you.

Good investing!

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    • profile image

      CMKAR 

      8 years ago

      Crudeoil Weight in Rogers International Commodity Index IS 21% AND IN CRB 23%, If substitute for oil should do well in the long term then they can realign Indicies.

    • jf_2000 profile imageAUTHOR

      jf_2000 

      8 years ago from Las Vegas

      Anything that's a substitute for oil should do well in the long term.

    • profile image

      CMKAR 

      8 years ago

      Jim is also telling to buy natural gas and it's down 25 % this month.

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