Silver: A Unique Opportunity

A Basis for Silver

It seems that everyone is talking about gold these days.  The current price of gold is just over $1,100 per ounce at the of this writing, but the price of silver is just over $18.00 an ounce.  Before we dive into why I feel that silver provides a unique opportunity let me give you a few reasons that silver can make sense as an investment vehicle:

  • First of all silver (as well as gold) is an excellent hedge against a falling dollar (have you seen the dollar recently?).  In March of this year the dollar hit a high of 89.71, today just eight months later the dollar closed at 74.93.  When you look at a chart there has been a steady decline of the dollar.  Because silver is a monetary metal it tends to rise quickly as the US dollar and other currencies decline in value. 
  • Silver is an industrial commodity, which simply means that silver is consumed by industry.  It's supply is used up to make things.  This translates to a very small amount of silver left for investment purposes.  As new investors enter the market additional pressure is put on the current supply (which is at an all time low) driving prices higher.
  • As mentioned above, the majority of the world's silver stockpiles have been used.  Just recently the U.S. Mint has suspended minting additional silver coins.  With the emerging industry and growth in India and silver additional demand is also be placed on the current supplies of silver.
  • When looking at the markets, gold and silver are in what is known as a secular bull market.  Secular trends tend to run for up to 10-15 years.  The last secular bull market in the metals was in the 1970's causing silver to increase from $1.30 per ounce to $50.00 an ounce.  That is a 3,750% increase!!!  Using the same numbers we could see silver go from $4.00 per ounce at the start of this trend in 2002 to $150.00 per ounce.

Right now gold is getting a lot of attention, but not too many people are talking about silver.  When the masses realize that the dollar is tanking and inflation is on the horizon they will run to the metals.  Since most cannot buy gold due to it's high price they will flock to silver putting additional pressure on the limited supply that is currently available.  I heard one expert recently say that silver should be $100 per ounce, now without anything else happening!  In my opinion this is not too far off base.  I think the price of silver should be between $60 and $75 presently.  I believe that within the next few months silver will make a jump to come into line with the current value of the declining dollar and it's own limited supply.

How To Buy Silver

There are many ways that you can benefit from a rapid increase in the price of silver. Personally I think physical possession is the best, but I will discuss a few different option to help you get started in your research.

To physically take possession of this metal you simply need to find a reputable dealer. Most cities will have a local coin dealers. All you need to do is look in your local phone book under coin dealers. The benefit of buying locally is that you support your local community, can take possession immediately, and you can save on shipping costs. However, many times you can get a better price with online dealers (however pay attention to the shipping costs).

For me, there is a coin dealer about a block from my office, but I have found that it is cheaper to purchase online. I have made my online purchases through www.apmex.com and have been very pleased with them, but you should check around for what works best for you.

Right now there are many commercials trying to entice one to buy gold and silver. The typical markup for bulk gold and silver is not very much. Therefore, if you are buying from a company that is advertising on TV or placing large print ads in magazine you are probably going to be paying more than you should. That type of advertising is very expensive and the typical markup will not support such expensive means of advertising.

When you've made a decision to buy some silver what should you buy? There are many forms of silver that can be purchased. First off there are coins that are minted by governments and will have a face value. These coins are easily recognized and are typically very easy to sell. These types of coins may also develop numismatic (collecting) value. The down side of these types of coins is that they typically sell at a premium compared to other forms of silver.

Make sure you determine what type of silver you want to own so that you are not sold a bill of goods by a fast talking dealer. Many advertising pitches will be that certain coins, because of their rarity, will appreciate faster. While it may be true unless you want to educate yourself on collectibles you are probably going to end up making someone else rich. For the average person owning silver is enough. Don't get caught up in rarity, unless you are an expert you'll end up paying too much.

Silver bars and rounds are another form of silver.  This is an inexpensive way to purchase silver.  Bars typically come in various sizes such as one ounce or five ounce bars to even much larger bars.  Make sure that any bars or rounds that you purchase have the weight and purity stamped on them.  99.9% silver is always the best.  This classification is represented as .999 fine silver.

Rounds on the other hand are one ounce silver coins that have no face value.  They are not real coins.  They are minted privately and are therefore not government issued.  The value of rounds, like bars, will be determined by their silver content.  Again you should make sure that the weight and purity is stamped on them.  Many companies will offer rounds with eagles or buffalo's on them.  This is relatively unimportant as the value is in the metal not the design.  This is a cheap alternative to coins especially if you have limited funds to purchase.

Finally there is the circulated coin option, which is typically referred to as "junk silver."  Don't let that classification fool you.  It definitely is not junk, but comparatively it is also not .999 fine either.  Prior to 1965 most dimes, quarters, and half dollars contained either 40% or 90% silver.  As you can imagine people have been hording these for years.  Every once in awhile you will get one of these in your change, but for the most part they out of circulation.

Most larger dealers will offer these coins in either rolls or bags.  They are cheaper then what we've discussed earlier and represent a great way to own silver for those on a very tight budget.  Because they are cheaper (not being 99.9% silver) when it comes time to sell the price will be less than owning a silver bar, round, or coin.


Other Ways to Own Silver

Some don't want to take physical possession of silver for a variety of reason.  Others want to just trade the price moves and don't want to hassle with the shipping, storing, and other aspects of taking delivery.  Therefore, I will briefly cover some alternatives where a person can take advantage of the price moves of silver without taking possession.

A person can buy "paper silver" which is basically purchasing silver without taking possession of the silver.  This is obviously one of the biggest advantages of this type of purchase.  The downside to it is that it's a paper demand.  If the company goes under or something else happens you just have paper, which is worth nothing.

You can also purchase silver stocks to take advantage of the upside potential that I believe silver has.  Your best bet in silver stocks is with silver exploration and mining companies or by trading the silver ETF (SLV).

Be careful because silver companies don't always rise and fall with the price of the physical metal.  They can both lead and lag the metal price and will depend a lot on the operations of the specific company. 

As for me I think there is an unprecedented opportunity in silver that the average person can participate in.

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Comments 7 comments

websclubs profile image

websclubs 6 years ago

Hi The Rising Glory,

Buy Silver, physical possession is the best. Benefit of buying locally is that you support your local community, can take possession immediately. Silver is a monetary metal it tends to rise quickly as the US dollar and other currencies decline in value. Opportunity in silver, average person can participate.

Very useful information, Thank you for sharing.


Kidgas profile image

Kidgas 6 years ago from Indianapolis

No, I never have invested directly into oil wells or partnerships. I have owned MRO, HAL in the past. Currently own VLO and CHK as my energy exposure.

Yes, I think we share many mutual interests in the investing world.


The Rising Glory profile image

The Rising Glory 6 years ago from California Author

@Kidgas, yes I think some of our interest correspond well. Have you ever invested into any oil wells? I have an interest, but no experience.


Kidgas profile image

Kidgas 6 years ago from Indianapolis

You know that I enjoy the silver trade myself and have been doing well with Silver Wheaton (SLW) recently.


Midasfx profile image

Midasfx 7 years ago

Really a great, makes you want to go out and buy some. For people like me, this just reassures me that I have sound investments ( mutual fund FKRCX ) And have be in this bull run again, since late last year.

Thanks for the boost of confidence!


Tiffani 7 years ago

you would write about silver.

oh father.


psychicdog.net profile image

psychicdog.net 7 years ago

Another very interesting read. Thanks The Rising Glory!

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