Patience and bravery are key to reaping the metal’s rewards

Not too long ago, analysts were cheering the metal’s prospects in the face of a recovering global economy and strong prices for gold, but the metal has so far failed to perform as well as many expected.

Silver “has the most potential of the metals and will … outperform gold — but it will take time,” said Julian Phillips, an editor at SilverForecaster.com.

Analysts remain upbeat about the longer-term potential, but warn that the short-term journey will continue to be rough.

“Silver, like all investments, will reward those who are patient and who have a long-term view,” said Mark O’Byrne, a director at GoldCore, an international bullion dealer.

That patience has already been sorely tested.

Late last year, analysts were touting the metal’s promise as a much cheaper investment alternative to gold that was poised to see higher industrial demand. Some even predicted a price climb above $20 an ounce by the end of 2009, but instead, prices dipped below $15 in February. See previous Commodities Corner on poor man’s gold.

“The overall demand for silver is down compared to gold,” said David Beahm, a vice president at precious metals retailer Blanchard & Co. “Since silver’s price is driven much more strongly by global industrial demand rather than investor demand, it has underperformed as compared to gold.”

‘Silver, like all investments, will reward those who are patient and who have a long-term view.’

Silver has “underperformed significantly over the long term,” said O’Byrne. But “this under performance will be rectified in the coming months and silver will also reach the record highs that gold has reached.”

In the meantime, silver’s short-term performance hasn’t been too shabby.

O’Byrne pointed out that in the past year, silver prices have climbed more than 31%, much larger than gold’s more than 19% rise, and while gold prices fell almost 1% in the past month, the price of silver rose 1.7%.

Potential shine

From here, it’s anyone’s guess where silver prices will go.

True, if there’s another deflationary crash and equities come under pressure again or if the U.S. fiscal position were to “miraculously” improve in the short term and the U.S. dollar again be the trusted safe-haven currency in the world, silver could again fall, said O’Byrne.

And “if the global economy does not improve over the next two years, silver will remain range bound,” said Beahm. “If the global economy further deteriorates, silver will struggle.”

On that same note, the global economy would need to improve further in order for silver to move significantly higher, given that silver is used primarily as an industrial metal, as well as for investment purposes, he said.

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