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News Headlines - Richmond - The American International University ...

News Headlines - Richmond - The American International University ...

News Headlines - Richmond - The American International University

News Headlines ISSUE 15, VOLUME II 28/03/2011 Inside This Issue Americas: US stocks rise most in almost two months Link Latin America growth to slow in 2011 on inflation Link Europe: Richmond, the American International University in London Richmond Finance Society Weekly Newsletter Is Silver the new Gold? Is Silver the new Gold? 1 Islamic Banking on a Global Stage A little bit of socialism does not hurt 2 3 Jonny’s Chronicle 4 Euro fall from a four-month high reached on ECB interest rate speculation Link UK Budget 2011 highlights Link Asia: Japan nuclear: Workers evacuated as radiation soars Link Hong Kong’s Lehman minibond investors to receive ’significant recoveries’ Link Africa: Egypt rallies most since 2009 on speculation drop overdone Link Libya: Uganda freezes Libyan assets under UN sanctions Link By Kári Olsen From being a tool investors in industry used in order to hedge, sliver has today become a good substitute for money. The graph below shows the price of silver over the past 20 years. Up to 2006 the price was very steady as primarily industrial investors were trading it. In the period from 2006 to present the price of silver has increased significantly. The reason for this increase can be found in professional investors’ change in attitude towards the commodity, as gold has been reaching historically high levels. Interest rate levels have been extremely low over the past period. This has caused investors to worry about inflation as money has continually been pumped into the economy and interest rate have artificially been kept close to zero. Many investors expect that this will cause a spike in inflation leading to their fixed income securities depreciating. The most optimal hedge against raising inflation has been gold, but over the past couple of years gold has appreciating so much that investors are starting to doubt the sustainability of its price. Investors have therefore started to convert their fixed income securities into silver and other precious metals in the expectation that these commodities are at more sustainable price levels and will protect them against raises in inflation. This seems to have resulted in a self-fulfilling prophecy, as there is no change in the underlying asset or the general public perception of silver. It is rather just the investors’ attitude towards the commodity that is making it a good hedge against inflation. The important thing to keep in mind is that as long as investors believe silver is a good hedge against inflation, it will remain being a good hedge. www.richmondfs.com Page 1

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