LONDON (Commodity Online): At a time gold is glittering at above $1,200 per ounce level, nobody is interested in its poor cousin silver. But, the truth is different. Those who want to invest in precious metals should now keep a close watch on silver.

Because, silver is probably the most undervalued of all metals in the market today. The strongest recommendation for silver at this time is that it is both a precious metal and an industrial metal. And that means two opportunities to profit. The first will be if economies continue to recover and industrial demand rises. The second is as an inflation hedge if economies perform less well than expected.

For the best part of a century, photographic film was silver's major industrial application. In 2000, 218.3m ounces of silver were used in film manufacturing; by 2008 this had halved to 104.9m ounces. It dropped again in 2009 to 82.9m. Digital cameras have been eating into this market to the extent that film is declining in use at something like a 20% per annum compounded rate.

It's clear that the decline of silver's traditional applications in recent years has put the metal in the shadows, but in fact silver's less than sparkling reputation goes even deeper. Silver is rarely mined on its own. It is much more frequently produced as a by-product of mining for copper, lead, zinc or gold. This means it gets mined irrespective of the silver price, so analysts cannot construct a meaningful cost curve for its primary production. It is seen as insensitive to its own price economics.

Another fact is that silver's use in photography gave rise to extremely efficient recycling. With the exception of medical x-rays, which are retained, silver is washed out of the film during both manufacturing and processing. It is quite easy to recycle. Silver used in batteries and electronics can also be recycled relatively cheaply.

On the industrial side, silver is valuable for two special qualities: it is the best thermal and electrical conductor available, and it is a super-effective steriliser.

As a conductor, silver is used in radio frequency identification (RFID) tags for goods and people (in passports and ID cards, for example). VM Group estimates that the manufacture of such tags will exceed 30 billion units by 2020.

Another growth area for silver is solar energy. Here, each crystalline silicon solar cell that is produced contains some 1.2g of silver per watt of energy produced.

Silver oxide (a highly-charged silver) is finding new and wide application in the treatment of bacterial disease.

Food hygiene is also becoming an important sector in terms of silver demand because silver acts as a biocide, a type of bacteria killer. It is used increasingly in work surfaces and vending machines, as well as for the linings inside cardboard milk, soup and juice containers.

Obviously, the amount of silver in each ID tag, catheter, band aid or pair of pong-resistant socks is minuscule. But a tiny bit in each of billions of applications adds up to a potentially huge market.

In contrast to gold, which currently trades at just about historical nominal highs, silver is nowhere near its historical highs of 30 years ago.

This does not exactly make it cheaper, because those highs were in many ways artificial. That's because the Hunt brothers' attempt to corner the silver market in 1980 sent the metal soaring to $50.

Still, there is a sound case for maintaining that silver is cheap relative to gold. A glance at this 20-year chart showing the ratio between the two metals will best illustrate this:

An ounce of gold currently sells for just under 70 times the price of an ounce of silver. The 20-year range has gone from 100 in the spring of 1993 to just over 40 in the spring of 1998. So the current ratio of 66.5 is slap in the middle.

What makes the chart particularly compelling though is the spike in gold's relative performance in 2008 and the subsequent drift back towards silver.

The previous major gold peaks of 1993 and 2003 took several years to fully wind down to the ultimate low levels. If history is to repeat itself, we might expect the ratio to continue in favour of silver for some months to come.

So there are a number of reasons to hold both gold and silver in current markets. But silver has the edge. Of course, it is possible that the silver price will struggle to gain further upside, or that some of the technological developments which rely on silver as a component could be discontinued.

Another risk to consider is the prospect of a double dip in the economy. This may hurt industrial demand for silver, causing softness in the price.