Is It Time to Buy Silver?

Is It Time to Buy Silver?

The price of silver has been languishing in the low- to md-teens per ounce for most of a year, well below its highs of just five years ago when it traded in the twenties. In the fifteen years from 1989 to 2004, it traded for around five dollars an ounce, a range it had been in for thirty years other than a brief period around 1980 when hoarding and speculation sent it soaring to nearly fifty dollars. In the early teens, it shot up to near fifty again (fueled by rumors and speculation) only to fall precipitously over the next few weeks, reaching a low below fifteen dollars in 2016. And it’s stayed in that 16-19-dollar range ever since. So is it time for another breakout?

Lessons Learned?

The first thing to realize is that silver is subject to wild fluctuations over short periods of time. But the second is that silver has a good long-term growth record.

One hundred dollars invested in silver in 2002 would be worth a little over three hundred today, an average return of around 7%. Not spectacular, but not bad, either, considering how flat the market has been the past few years.

But is there a case to be made for higher prices in the future?

What Drives Silver?

We’ve already seen that speculation can cause wild swings in the silver market, and no one can predict the next round of silliness. But there are some fundamentals that drive the market regardless of what the crazies are up to. You learned them in Econ 101: supply and demand, and as this article is being written, supply is down and demand is up.

Low prices have caused mining to slow down, reducing the supply, while industrial demand is rising, courtesy mostly to high-tech needs like mobile devices and solar energy technology. Since the silver market is relatively small compared to other industrial commodities, minor changes in the supply/demand cycle can cause significant pressure on prices.

Second, as a real store of wealth, silver is seen as a hedge against inflation and political uncertainty. As the economy continues to improve there are signs that inflation isn’t far behind. And as for politics, well, you read the news, too.

Silver vs Gold

While gold has traditionally been the first refuge during uncertain times, silver can be, too. Which brings up another indicator that some find compelling. Gold is currently priced at nearly eighty times that of silver, and that’s near record highs. Gold vs silver value is a favorite measure of followers of what’s known as “bimetallism,” a theory that dates back to the Founding Fathers who set a silver-to-gold ratio of 15:1 in order to establish the value of the nation’s coinage.

To a large extent, that ratio has been embraced by bimetallic devotees based on a geologic survey that estimates there is 17.6 times as much silver in the earth’s crust as gold. In that case, whenever the price of gold is over around 18-20 times that of silver, it makes sense to sell that gold and buy silver, and vice versa. When bimetallists see a current ratio of nearly 80:1, they get excited.

Think for Yourself

There are plenty of good reasons to invest in silver, but before taking the plunge, assess your financial goals and do your homework. Fifteen dollars an ounce seems to be an attractive price, especially for longer-term investing. If you agree, there are several ways to buy silver.

Getting into Silver

Pure silver bullion is a known commodity. Regardless of price fluctuations, an ounce will always be an ounce. How you get your hands on it is a matter of preference…if you want to hold it at all.

Pure silver bullion is available in bars, coins, or rounds. Bullion bars can range from fractional ounces to several pounds. Rounds are coin-like silver discs of various weights made at private mints in convenient sizes for bullion collectors. They’re stamped with designs similar to coins and state the product’s weight and purity, usually 99.9%. Bullion coins are produced by government mints and carry legal tender status, although their face value is generally much less than their bullion value, which is what you’ll be charged.

There is also what’s known as “junk silver.” These are old silver coins with little or no collectible value that are sold in rolls and bags based on their bullion or “melt” value. Before 1965, US silver coins contained 90% silver, so they are also readily priced stores of bullion.

To Have or to Hold?

There’s a certain allure to holding pure silver or gold in your hands. If that suits your fancy, rounds, coins, and smaller bars are your choice. If owing it is more important that touching it, there are several bonded depositories that will acquire and store bullion for you at a nominal cost. Or you can buy shares of silver and silver mining stocks through your broker. It’s a matter of personal choice.

While we make no solicitation of investment nor do we offer any investment advice, The Great American Coin Company®offers a wide selection of silver bullion coins, rounds, and bars along with collectible U.S. coins and paper money and currency from around the world. We keep adding items as they become available, so be sure to visit us frequently. And while you’re there, be sure to visit our blog for interesting and timely articles about currency and precious metals.

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