"Silver has been the worst performing metal for decades. What it's doing now is a bit of a catch up. Although most of the above-ground silver stock of 46 Boz. is fabricated into some useful form, unlike gold, silver is gaining popularity, especially in emerging economies. The above-ground silver stock value went from 1.5% of GDP in 1970 to a peak of 6% in 1980. But by 2002 the silver stock was worth only 0.5% of GDP. Right now it's between 2% and 3%. I believe silver can parallel gold's role as a hedge against the uncertainty associated with the long-term relative decline of the United States and the gradual disappearance of the U.S. dollar as the world's reserve currency. If we assume the silver stock will establish a value as 3% of global GDP, the price will base out in the $30–$40 range this year, which will grow to $47–$57 by 2016. If it goes to $100/oz., that would indicate a bubble reflecting the inflation-adjusted equivalent of the $50 peak in 1980. Because the recent price growth looks exponential, the markets have fought back and a bear attack is pushing silver back down. But I believe $30–$50/oz. will be the new long-term reality, which opens up some good buying opportunities among silver companies in the next couple of months."
John Kaiser, a mining analyst with over 25 years' experience, is editor of Kaiser Research Online.