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By Melissa Pistilli-Exclusive to Silver Investing News

The price of silver gained 84 cents ^[2] on the NYME yesterday in reaction to the Treasury's US$700 billion bailout of the financial sector.

As more and more retail, mortgage and investment banks fail, are taken over or nationalized, investors are becoming increasingly leery of paper assets and are now leaning toward the "safe haven" protections of the precious metals.

Silver mining companies ^[2] also witnessed gains on Monday. While most stocks across the board opened lower, companies like Silver Wheaton Corp. and Hecla Mining Co. saw their shares rise 11.4 per cent to US$10.57 and 9.5 per cent to US$6.09, respectively. Silver Standard Resources shares rose US$2.29 to US$21.57, and Pan American Silver Corp. was up US$2.62 to US$25.74.

Gijsbert Groenewegen ^[3], a fund manager at Gold Arrow Capital Management, believes gains in silver may outpace gold ^[4]. For Tuesday, the chart of the day revealed the ratio of silver's price to gold was closing in on its highest since November 2003, according to Bloomberg ^[3], and was nearly 17 per cent above the five-year average. Silver will soon "play catch-up to gold," said Groenewegen.

As the world's financial systems remain in trouble, and the dollar weakensfurther, we shall see more and more investors turning towards silver. For now, silver remains "ridiculously cheap," added Groenewegen. "In all this financial turmoil, precious metals are the place to be. People are going to realize that silver is just as much of a safe haven and currency as gold and it's going to go much, much higher."

In this environment of financial uncertainty, "any share linked to gold and silver - and silver may well show its usual precocious volatility and outperform gold on the upside as it has recently done on the downside - will do very well", said Peter J. Cooper ^[5] of GoldSeek. Junior companies that were "bombed out at 10 cents" may see their share prices double, triple or even quadruple.

Upcoming unprecedented wave of mergers and acquisitions?

According to a Blackmont Capital ^[6] report, major and mid-level silver and gold producers with healthy cash flows may soon force "an unprecedented wave of merger and acquisition activity" as they attempt to grab up junior exploration and development companies. "While there remain several junior companies with projects that are expected to ultimately be economic under the current gold price, a significant amount of upcoming mergers and acquisitions are likely to be done under the assumption that the gold price will increase in the longer-term," said analyst Richard Gray.

Major producers are seeking immediate production, attempting to fill in growth gaps, or trying to capitalize on strong cash flows, said Gray. Mid-level producers are looking for geographically strategic development projects and trying to reach growth goals through acquisition. Junior producers are in search of more assets and will use their strong cash flow positions to acquire promising projects and increase their silver resources.

"We also expect the struggling junior market to look towards more mergers in order to gain the critical mass to be relevant," added Gray. "In the current uncertain market, investors look for size and liquidity and the one-project juniors typically do not provide these important characteristics."

Octagon Capital analyst Hendrik Visagie ^[6] said it was cheaper for producers to buy near production projects than to develop them. For investors, Visagie recommends looking for mining companies that are in a position to use their healthy balance sheets to acquire undervalued juniors. As far as the silver sector is concerned, majors like Pan American Silver, Coeur d'Alene Mines, Silver Wheaton, Fresnillo, and Hecla Mining are rumoured to be searching for such opportunities.