As we start this interesting new year of 2011 I thought I'd let you in on one of our thoughts for the coming year.

We have always been somewhat on the side of the gold bugs believing that most people with any form of savings should have some of their money in the shiny yellow metal. Just like any other investment the price of gold will fluctuate but, at the end of the day it does have a sort of historical intrinsic value. It is a good hedge against inflation and will generally hold its value as currencies and other commodities lose their's.

But recently we've become avid fans of that other precious metal. A precious metal normally referred to as poor man's gold, yes silver!

Why silver? Well a bit of research shows that claims it is vastly undervalued look to be well founded.

For a start silver is about fifteen times more abundant than gold, so you would surmise that silver would be about one fifteenth of the price of gold. Now gold is trading at about $1,420 per ounce, so silver should be at about $94:67c per ounce. Well, it's actually trading at about $31. That puts it at a differential of nearly 46 times, that would put silver at a third of the price it should be.

But there's more, much more.

It is alleged that the price of silver and gold have been manipulated in order to keep the prices low and there is much evidence to support this view and the US regulators are now looking closely at this. If as a result gold moves up to a more natural level then silver will also move up and then some as the manipulation shackles are released.

And then there's more.

Gold and silver both get mined and some is stored as an investment some becomes jewellery and some is used in industrial and healthcare applications. But the difference it seems is that whilst the amount of gold available to mankind is increasing despite its uses, the amount of silver is falling, yes falling!

At current consumption it looks like silver will one day become rarer than gold! One of the big new industries is the use of silver for its anti-bacterial powers. It kills germs so manufacturers now want to put it in everything from clothing, to medical dressings, to counter-tops, to furniture handles as well as all the other established uses such as in the electrical appliances that we all use.

So you can see why we are excited about the prospects for silver into the future. But the kick in the teeth for any prospective UK investor is that wonderful Value Added Tax that eats right into any gains you may make. But there is a way around this with BullionVault. As long as you don't withdraw the physical silver from the vault then it is VAT free and audited daily so you know you have bought real metal.

This is just our view and should not be considered as investment advice. Please consult a properly qualified and regulated investment adviser.

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