-- Posted 22 June, 2010 | | Discuss This Article - Comments:

News that Saudi Arabia has secretly doubled its official gold reserves over the past few years should come as no surprise to readers of ArabianMoney. But then it was just speculation. Now this is fact. Will it be the same story for silver?

We can only draw on the evidence and gossip that comes to our attention in Dubai. There has certainly been a big jump in interest in silver on the arabianmoney.net website over the past six months.

Indian weddings

Then we hear that there is new demand for silver from India for weddings. Basically gold has gotten too expensive so Indians are coating silver in gold and satisfying themselves that at least silver is also a precious metal.

This is what you would expect as the gold price rises. Silver is literally poor man’s gold at one sixty-fifth of the price. Does that mean the Saudis will stick to gold?

Not necessarily, the desert kingdom has some shrewd investors well versed in the merits of real assets in a global financial crisis. And there are those in Saudi Arabia who reckon the global economy is far from being out of the woods and want a contrarian investment as a hedge.

No fools

They have also read the gold and silver literature. They know the argument that the silver price will not only advance with gold but outperform gold as the price takes off because silver stocks are tight, short positions in futures markets enormous and investment demand rising as an alternative to paper currencies.

So given this week’s sudden revelation about Saudi gold reserves, we can pretty be close to certain that they will also have been active in the silver market.

When if ever will this come to light? That is far less easy to predict.