Silver looks considerably weaker than gold, and it might look that way through July. Clive Maund explains…Continue reading
What You Should Know Prior to Buying Silver
Silver is one of the most valuable precious metals in the world today. Silver often matches the price patterns of gold, yet the lower price is attractive for investors who have limited funds to make an investment. This silver guide will give you access to the latest news about silver, content about how it is mined, tell you how to invest in silver bullion, and offer a look at the history of this precious metal. If you’re thinking about adding silver to your investing portfolio, this is the place to find out if it is right for you.
The links below can take you to the latest information in each category so you can immediately access the data you need to know right now.
5 Important Facts About the History of Silver
Silver has been one of the most valuable metals throughout the documented history of humanity. Here are 5 important facts about the history of silver and why it is still an important precious metal that can add diversity to any financial portfolio.
Fact #1: Silver has been mined for over 5,000 years – and perhaps even longer. The first known silver mines were located in what would be the nation of Turkey today. These first mines have been dated by archaeologists to have been in operation around the year 3000 BC. They would become a central component to the early wealth and development of civilizations in that region.
Fact #2: The “New World” silver dominated global markets. For 300 years after the discovery of the New World, silver that came from Mexico, Peru, or Bolivia would account for more than 80% of the world’s production and trade of this precious metal. Silver and the word money are interchangeable in over 14 languages.
Fact #3: There are 17 physical ounces of silver for every 1 ounce of gold in the earth’s crust according to geologists. Yet the current gold to silver price ratio is nearly 75 to 1. In other words, you can buy 75 ounces of silver for every 1 ounce of gold you purchase even though there is only 17 ounces of silver per 1 ounce of gold that physically exists on earth.
Fact #4: Silver is an excellent antimicrobial agent. In fact, there is no known bacteria that is resistant to silver. Silver Doctors, founded by two doctors, is especially keen on educating readers on this widely unknown fact.
Fact #5: Silver is used in over 10,000 industrial applications. It’s increasingly been used in technology devices including solar panels as silver offers the best conductor of electricity of any element.
Is Silver Better to Own Than Gold?
Many investors look to silver as an inflation hedge because the market is much smaller. In fact, the silver market is tiny compared to other widely trade commodities with only $3-$4 billion spent on silver as an investment. This means there are more fluctuations within the market, shifting the spot price frequently. While silver has unperformed gold in recent memory, given the historical price ratios of gold to silver, silver could outperform gold in value moving forward.
It is also important to note that silver is rarely seized by a government which is facing a deficit. Most governments are not stockpiling silver either, which means the market has less of a threat of being flooded with the commodity. Gold is money, but so is silver, and governments as far back as the Roman Empire have included silver in the coins that they have issued.
Many governments today even issue silver coins through an official mint. Some standard issue quarters from the US minted before 1964 may even be 90% silver and in circulation right now.
Gold is a wise investment for the wealthy. Fractional gold is available in small increments, but with a considerable higher premium than the 1 oz gold coin or larger bar sizes. For the average precious metal investor, silver offers comparable benefits with the added advantage that you can purchase at a fraction of the price of gold. As long as you have a place to store it or conceal it, this is a tangible asset which is treated just like any other commodity. Make sure that you’re receiving a fair price for your silver coins or other forms of silver that you wish to purchase and you’ll be joining many others who find that collecting silver is an easy way to make sure their hard-earned money keeps working for them.
How Is the Price of Silver Determined?
The price of silver is referred to as a “spot price.” This is because it is traded around the world on every major world market exchange, which means it is being traded around the clock. Markets have been trading silver to create a spot price for it since the 17th century. London and the COMEX division of the NYME [New York Mercantile Exchange] are the centers of paper contracts for the trade of silver today and the spot price is determined by the COMEX.
Silver is very similar to gold and other precious metals in that the spot price is determined by supply and demand factors. What has helped to push the price of silver higher in recent years is because there has been more fabrication demand and investment demand compared to the supply being produced by silver mines. This has forced prices upward as traders have been forced to compete for the existing supply levels, strengthening this precious metal as an investment option.
Supply and demand doesn’t have to be real in order for it to affect the spot price. Perceived shortages can also cause an increase in price to occur. The changing values of global currencies, interest rates, and the current level of inflation can all have influences on the price of silver as well.
When you purchase silver, there will be two prices: the bid price and the ask price. The bid price represents the highest amount that has been offered, while the ask price represents the lowest price offered.
There is also what is known as a “future’s price” that silver can be bought or sold for delivery in the future. Most investors will be purchasing silver at a spot price because it is the explicit value of that precious metal at the time of the transaction. Many futures transactions occur in stock portfolios, precious metals IRA accounts, and other similar trading mechanisms.
Have the Prices of Silver Peaked?
When you look at the history of spot prices for silver over the last 40 years, there are certain trends that tend to stand out. For example: the historical COMEX spot price for silver between 1988-2005 never reached a high of more than $9.00 per ounce. At one point, in 1991, it traded for a low of just $3.508 per ounce. Today silver is trading around the $14.75 per ounce mark.
But have the prices of silver peaked? Much of this depends on the real and perceived demand for silver in the coming months and years ahead. Compared to the 1980 high trading price of $48.70 per ounce for silver, the current spot prices are nowhere near this high. As recently as 2010, silver was trading for $30.60 per ounce. In looking at the cycle of pricing for this precious metal, there tends to be a 5 year swing in upwards and downwards movement of the spot price.
From 2006-2010, the price of silver per ounce doubled. This means there is the potential that we could be just entering the next upward swing in the price of silver if the pattern of pricing since 1975 continues. Of course there are no guarantees on the price of silver and everyone should perform their due diligence before making any precious metals purchase or investment, but at Silver Doctors, we believe there is a lot of potential in the future of silver in whatever form you may choose to collect.
Always Authenticate Your Silver and Other Precious Metals
When the prices of silver and other precious metals climb upward, you will invariably find criminals attempting to take advantage of this fact. Counterfeit silver coins, bullion bars, and even jewelry flood the markets when there is a strong spot price, which means it is important to only trade with reputable metals dealers and collect items that have anti-counterfeiting measures. This is the best way to authenticate your silver.
To counter this counterfeiting issue, some collectors and investors have opted for alternative forms of owning silver, such as through mining stocks or silver ETFs. Although this paper ownership can help to reduce the risks of owning “fake silver,” there is still an investment risk because owning silver on paper is very different from being able to hold it in your hands.
If you went to a store with a paper certificate which said you owned a specific share of a silver deposit, would you be able to purchase anything?
If you are purchasing from a precious metals dealer, ask about their authentication process before finalizing any transaction. If the only thing your dealer mentions is that they weigh the silver coins and bullion before a transaction, then the dealer is not doing enough to confirm the authenticity of your purchase. Purity scans should be performed on any product that is not backed by a government guarantee.
What Are Your Silver Investment Choices?
If you want to buy silver, new investors should consider buying silver coins that are issued by national governments. These coins are issued as legal tender, have guaranteed purity levels, and are bought and sold regularly so that their cash value can be easily obtained. The most popular silver coins include the American Silver Eagle, Canadian Silver Maple, Austrian Silver Philharmonic, Mexican Silver Libertads, and the Chinese Silver Panda.
Silver bullion is another common method of adding this precious metals investment to your portfolio. Bullion comes in the form of a silver bar or silver round that is 99.9% pure. Investors can either possess the silver bars or rounds personally or have a certificate or storage account which allows you to be able to take possession of your silver with a few day’s notice.
There are several contracted ways to purchase silver as well. This includes ETFs, mutual funds, and futures/forward contracts. For the first two options, you are given access to a “basket” of silver that is being stored and purchasing a share of that basket. For futures/forward contracts, you are agreeing to take or make the delivery of silver at a specific time in the future.
Some investors may also look to use an approach called an “accumulation plan.” This allows an investor to gather silver on an averaging basis, but not actually own physical silver.
Investors need to due their own due diligence in researching silver options which do not involve taking physical possession of the metal to make sure their silver is not rehypothecated in anyway. Rehypothecation is the practice of banks and brokers of using your silver and gold bullion for their own purposes and posting it as collateral for other business dealings.
Does Silver Have an Enduring Value?
Silver has an intrinsic value which has been present throughout much of documented human history. While the price of this precious metal may go up or down, it has always maintained a certain level of value because it has consistent levels of demand. It is a commodity that has withstood the test of time and can help to create or diversify an investment portfolio or become the foundation of a valuable coin collection.
Some silver coins may even qualify for inclusion into certain retirement accounts. It may be somewhat scarce compared to other resources that are available today. Its unique qualities will always mean that there will be some level of demand for it, giving silver an enduring value.
Silver has been associated with status and wealth for generations.
There are many ways you can invest into silver, but there are only a few methods which allow you to take physical possession of this precious metal. This includes SD Bullion, one of the largest gold and silver bullion dealers in the United States which was founded by the co-founders of SilverDoctors.com. Keep up to date on silver news, be aware of any mining concerns, and research the history of each silver coin through this helpful set of links and articles to make sure your money is invested wisely.
In doing so, you’ll discover what humans have discovered for 5,000 years: silver is a wonderful thing to own.
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