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Is silver investing an avenue you should be pursuing in an effort to diversify your portfolio? Why does it seem like silver is gold's poor bastard stepchild when it comes to investing? Every radio talk show host seems to be pushing this or that gold investing fund, guru or scheme, but silver rarely gets so much as whisper. Why is that?

Is silver investing worthwhile, or are all the gold talkers right? Currently, silver is sitting at $16.96 an ounce, while gold is at $889.70. That doesn't mean, however that gold is a better investment. Actually you could have made impressive gains in through silver investing over the last 3 years. As with many commodities, silver has been in high demand because of various world economic factors, causing prices to skyrocket (investment cliche number 307).

For much of 2005, silver hovered in the mid $7.00 range. In August of '05 it briefly dipped back into the $6's, where it had spent most of 2004, before starting a nice climb, culminating about 22 months ago, when it reached $15/oz in mid may of 2006. Subsequently it gave much of those gains back, falling to $10 by mid June. Since then silver has been pretty generous, see-sawing itself up to it's present level of almost $17.00. Actually Silver reached a peak of just over $21 in mid March, only to lose 25% of it's 3 year run and land at it's current value. So, in 3 years you would have seen roughly 242% gains in a silver stake. How does that compare with the talk show darling, Au?

In April of 2005, Gold was sitting right about $440/ oz. It was flat for the first portion of the summer of 2005, actually declining to about $425 by early June. It then started a rise roughly parallel to that of Silver, growing to $750 by mid May of 2006, before dropping back to $575 by mid June. Since then, like silver, gold has risen nicely. The exception is that gold reached a peak of just over $1,000 an ounce in mid March of this year before giving back about 20% of it's 3 year gains to land at its present value of $889.70. This equates to a gain of roughly 202%, impressive, but less than the over 240% gains posted by it's ugly cousin from Nevada.

What are we likely to see from silver investing in the future? Silver has historically been in high demand, and in the past traded at about 1/10^th the price of gold. In the early 1980's it even rose to almost $50 an ounce (not adjusted for inflation). Like many other commodities, volatility is the order of the day. Investing in precious metals is not for the faint of heart, but is often used to diversify a portfolio and protect against losses in the stock market. This is because many of the things that cause stocks to rise or fall will stimulate the opposite result in precious metals, as investors tun to alternative places to rest their capital.

One thing about investment in precious metals or any other commodity is that while prices can see precipitous drops, they will never decline to absolute zero, as can happen with stocks. If a company goes out of business, it's stock will be worthless, while a commodities stake will never experience a decline all the way to nothing.

One of the most powerful factors stimulating prices is expected future demand. Nothing causes bidders in the commodities pits to ratchet up prices more than either the fear that something will be unavailable, or that demand will grow enough to outpace supply.

One of the largest uses of silver today is in the electrical switch contacts of small appliances and consumer electronics components. Silver is also used in appliance in other interesting ways. Because silver has bug killing properties, it is now being used in washing machines, air conditioners, and toilet seats to kill germs. As developing nations demand more and more such trappings of 21^st century success, we'll have to pull more silver out of the ground to supply raw materials for them. Another popular use of silver is for the rear window defroster conductors in vehicle defrosters. Again, look to China to cause demand to grow here.

One place where the use of silver will be on the decline is in photography, where 24% of the world's silver was used in 2001. Since most of pics today are printed using ink jet and dye sub printers, rather than developed on traditional film, this use of silver will taper off.

Due to the many uses of silver in industry, jewelery and economic conditions such as inflation and uncertainty in the middle east, silver could be a nice addition to one's portfolio for the near term. Pressure on the dollar, recent rises notwithstanding, could help to drive the price of silver even higher. Many of these conditions were the same as were seen 30 years ago, when silver last experienced a huge price run up. Just remember that prices eventually came back down to earth, so if you are going to try your hand at silver investing, keep both hands on the wheel.