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Should I buy Silver? Outlook for 2014

Updated on January 1, 2014
Silver Bars
Silver Bars | Source

Silver Facts

Did you know that you do not just mine for Silver? Silver is cultivated when mining for other precious metals such as gold and copper. The top producers of Silver are 1) Mexico 2) Peru and 3) China. Other countries that produce silver include Bolivia, Australia, Poland and Chile.

Silver Uses

95% of all silver is used for industrial, decorative, photography, jewelry and silverware. Silver's properties restrict use of other elements/metals in most applications, per The Silver Institute. In other words, you can only use Silver there are no other substitutes.

Silver is also used in coins, bullion, the production of electric conductors, solar energy cells, water purification, batteries, automotive industry, disinfectant and dental fillings.

Silver Measured

Did you know that all precious metals are measured in Troy an ounce which is the equivalent to 1.09 "regular" ounce. The Troy ounce comes from the Roman monetary system and the measure was adopted my most countries, including the United States.

The U.S. supply of Silver is kept in West Point, NY and the supply of gold is kept at Fort Knox.

Bars vs. Coins

Prior to 1965 US coins were 90% Silver. A coins value is heavily tied into the condition of the coin, circulated, UN-circulated, mintage, and quantity minted. Silver coin investors must take great care to maintain the condition of the coin through proper storage and handling to keep/appreciate their value.

Coins are very easily recognized and trusted because they are US currency. Very easy to buy at a coin shop, harder to counterfeit and a possibly a cheaper way to start investing in silver since its 90% silver. A coins value as mentioned above is tied into many different factors and its silver content is lastly considered since in the US we can not melt down the coin for its silver.

Bars/Bullion are easier to store, uniform in size and all silver.(.999)

I like silver bars because they are 99.9 percent pure, where a silver coin is only 90% pure. A coin could have value that is not related to the silver, but related to how rare the coin is or is not, the condition of the coin, and if it is circulated or UN-circulated. If I want to sell my bars of silver, it is tested for purity and weight only, none of the other coin factors are present. In my opinion silver bars are much easier to sell.

Silver as an Investment

The price of Silver is driven by speculation and supply and demand, therefore it is more volatile then gold.

Silver and other precious metals are often used as a hedge against inflation, and as all the major countries in the world keep pumping money into their economies, the less valuable their currency (including U.S.) will become and the more valuable Silver will become.

In 1980 the Hunt brothers cornered the market of Silver and the price rose to $49.95 per troy ounce. This day is known as "Silver Thursday" It is said that the Hunt brothers accumulated more then 100million Troy ounces of Silver and future contracts. After it was discovered and regulations were put in place to prevent this from happening again the price of Silver was $10 per troy ounce, then 2001 it was $4.15, in 2006 it was $15.20 per troy ounce, and in 2010 it reached as high as $30 per troy ounce.

In 1997 Warren Buffet purchased 130 million troy ounces of silver at $4.50 per troy ounce and in 2006, he was quoted saying that he no longer held silver. Assuming he sold it in 2006 when silver was at $15 per troy ounce he gained $10.5 per troy ounce more then doubling his money or $1,365,000,000.

2010 the price of Silver rose 80% to approximately $30 per ounce.

In 2011 the U.S. Mint reported "All Time Record Sales" for the Silver Eagle coin.

Silver Outlook for 2014

While Silver as an investment has stalled in the United States, the demand in India has increased dramatically. India is currently the largest buyer of Silver and Gold in the world.

India’s Government has limited the amount of Gold that could be purchased, reduced the amount of imports by 20% and has increased the duty on Gold purchases to 10%. Silver is now the default precious metal for India. (Source: Money Morning) This fact alone, I believe will push Silver prices even higher. I am currently a buyer/accumulator of Silver at current prices.

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