The precious metals market has been in a bull market since 2000 when it reversed a 20 year bear market trend. Like other markets, the precious metals market fluctuates … and sometimes it fluctuates wildly. The last time gold reached its $850/oz high it eventually fell back to around $252/oz and silver fell from $50/oz to a little under $5/oz. Silver’s fall in terms of percentages, was greater than gold’s, and since the year 2000, it’s run up has also been greater in terms of percentages.
It’s that reason that many financial advisors are recommending that clients invest in silver rather than gold, and more than a few say to invest in physical silver. When you consider that less silver available for investing than gold, it makes it a little more appealing as well. While there IS more physical silver in the world, most of it is used for industrial applications – it’s the best conductor of electricity, the best conductor of heat, and the best reflector of light. For those reasons (and many more) silver is more critical to our economy than the yellow metal (gold) which is generally held solely as a store of value or in jewelry.
Most of the silver used in industrial applications has generally been used up and cannot, in any significant amount, be recovered or recycled. That constricts supply. Additionally, investors are increasingly turning to silver for its monetary role. The US Mint sold more silver eagles in January, 2011 than in the previous nine months of 2010. Silver may be making its own comeback as a store of value.
Before the advent of paper money and fiat currency, physical silver was money and was in greater use for that purpose than gold ever was. It was what was circulated, used to settle debts, used for purchases, and saved for a rainy day.
Since the silver market bottomed out 30years ago, society and industry has been consuming more silver than was being mined with shortfalls being made up by governments liquidating their stores and by a little silver recycling. Neither of these last two options can continue to provide our ravenous appetite for the shiny metal and when the above ground stores are depleted, any new silver will have to come from mines.
But, consider that all the easy to find silver has already been found and any more remaining in the ground will be more costly to find and bring to market. Also, silver’s depressed market price for the past 30 years discouraged investment in new silver mines and in expanding the capacity of any existing mines. As a matter of fact, most silver mines closed in the 1990s due to silver’s depressed market. Even today, with silver’s higher prices, it cost more to mine silver than it can bring in the open market. Even a dramatic increase in the silver price from this point forward will not result in new silver production for at least five years since it takes at least that long to turn a mineral discovery into a working mine.
What happens when a product is in high demand but short supply? Prices rise. And for that reason alone, many advisors are recommending silver over gold as a hedge against inflation.
How to buy silver
Another option is to buy actual physical silver, cold, hard, bullion bars or silver art rounds from a company like Straight Silver. They offer bullion bars in 10 oz and 100 oz sizes as well as decorative art “coins” that they call “rounds.”
Why buy silver rounds? They’re small, often one ounce or less, and they’re easily transportable. That ease of transport also means they’re easy to hide. I was told by one precious metals buyer, “Any gold or silver the government can find, it can confiscate.” But I seriously doubt confiscation is anywhere on the horizon.
Why buy Physical Silver?
Not because you want to hide it from the black helicopters and G-men, but because you retain full control. Should the economy degrade further, having physical possession insures that your depository doesn’t fold and leave you holding a stack of papers.
Precious metals will probably never be confiscated like they were in the 1930s. Why? First, gold no longer forms a significant part of the monetary reserves in this country, as it did in 1934 and so, confiscation wouldn’t make sense. Second, the people whispering about government gold or silver confiscation are generally trying to sell you overpriced coins that will line their pockets and empty yours.
Consider investing in physical silver coins, rounds, or bullion through Straight Silver.