Silver Coins and Bullion as Investment

Silver…shiny, reasonably soft as metals go, conductive, sterile, pretty and very valuable. What of all the talk about adding precious metals to one’s investment and retirement portfolios? Why silver? What’s so good about it?

Silver is a unique commodity. It conducts electricity. It is impervious to the elements but for some tarnish. It has been used as the basis for nations to mint coinage since well before Rome. And it is sold at very reasonable prices and is a perfect investment vehicle for anyone to own. Unlike gold that is trading at almost $1500.00 USD per ounce, silver closed at $43.01 per ounce Friday evening. The silver/gold ratio is about 34 and that’s important to keep in mind…I’ll tell ya why later.

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Silver Coins and Bullion as Investment

Silver has history. It has been used since time immemorial as a tender for trade. Silver is valued everywhere. And what of the possible collapse of the trust in the American economy and our money were to decline drastically? A Greenback is a representation of the US. But for the promise of the US to honor it, it is worthless green toilet paper and not much good for that either. Our paper is only good because of the reputation of the US but if our fortunes decline as they seem to be our money will decline in value. It’s known as inflation…more Greenbacks chasing the same number of goods. Printing them only devalues every single Greenback in existence. Have readers heard world leaders have been meeting to discuss taking the world off of the US Dollar as the planet’s reserve currency and standard for all international trade?

Silver bullion and coins have exploded in value of late. For example, but for the Hunt brothers of Texas trying to corner the world silver market in 1980, from at least the mid 1970’s until 2004 silver traded at about $5.00 per ounce. In 2004 silver took off in price and Friday evening silver bullion closed at $43.01 per ounce…an all-time high but for the 1980 effort of the Hunts and the brief spike to almost $50.00 per ounce. Nothing, including gold, Wall Street or real estate have experienced an 800% increase in value in these 7 years.

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Silver is attractive because it is a limited quantity. It cannot be made out of thin air. It is used in tons and tons of industrial and commercial applications. It’s what backs the glass of a mirror for one to see reflections. It’s used of course for coinage as well as nation’s wealth reserves. It is far cheaper to purchase than is gold, yet it tracks gold in it’s value, albeit only 1/34 the value of the same quantity of gold at present. That 1/34th is the ratio I mentioned earlier.

Silver to gold ratio has historically held firm at between 10 to 1 up to 13 to 1. Today that ratio is 34 to 1, meaning gold has outstripped silver in price increase but as we can see now silver is leaping in gain percentages. In the last 6 months gold is up 8.33% whereas in the last 6 months silver is up 75.37%. The trend is undeniable and predicted to keep trending in this direction. Much speculation exists that silver will have to eventually return to its historical ratio to gold. It can do so by either going up to meet gold; gold can fall to meet silver or more likely a combination of the two. If silver climbed to an even 15 to 1 ratio with gold at $1500 per ounce silver would trade for $100 per ounce. I AM NOT making such a prediction, merely explaining the speculation as to ratios.

Silver has another intrinsic value beyond gold at today’s prices and the likely higher prices in future. Silver, as it is worth so much less is better positioned to serve as tender or money. Today an ounce of “junk” silver is worth $43.00. Basically it’s a $43 dollar coin. An ounce of gold would be a $1500 dollar coin. How many items does one purchase that costs $1500? See the point? Junk silver rounds and bullion could and in fact most definitely would be used as currency. Not so much for $1500 ounces of gold bullion.

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I buy silver by the ounce because it’s easy to buy and store. Any firm selling or trading in collectible paper and hard currency will sell junk silver rounds by the one ounce weight and ingots in one, five, ten, one kilo (2.2lbs) 100 and even 1000 ounce sizes. My advice is to stick to the ounces or if you must, the ten ounce sizes. At today’s price a 100 ounce bar of silver bullion is worth $4300 bucks and again, how many things does one buy that cost that much? For silver to serve as emergency currency, and that is why I buy it in one ounce sizes, it needs to be in popular and easily traded and represented amounts and dollar values.

Many pawn shops also trade in silver and gold bullion, “junk rounds” and coin. Next up is an explanation of the difference between “junk rounds and ingots” of gold and especially silver, versus gold or silver coins that are legal tender or collectibles and the pros and cons of each for the purposes of collecting to stash wealth or for future currency as well as investment vehicles for retirement, etc.

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