How to Invest in Silver?

Silver, like other precious metals, may be used as an investment instrument. For more than 4000 years silver has been regarded as a medium of exchange or 'money', and as a store of value, that is, as an asset.

Gold & Silver Prices - Live!

The silver standard ended after the United States stopped silver being a form of legal tender. American coins still contained silver until 1964.

How Silver can protect your Wealth?

However, in 1971, Richard Nixon ordered the end to the Silver Certificates, which were replaced with a purely fiat currency. Since that date, the value of the dollar has fallen.

A falling U.S. dollar could cause hard assets to appreciate in dollar terms. Since, the dollar is falling, due to the record trade deficit and debt levels (public and private), other assets will appear to rise.

Silver

8 hour (New York) £ Pounds Sterling price per ounce - Silver

24 hour £ Pounds Sterling price per ounce - Silver

8 hour (New York) $US Dollar price per ounce - Silver

24 hour $US Dollar price per ounce - Silver

Silver is being seen as a genuine investment vehicle for the first time since the early 1970's when the United states stopped backing their dollars with silver.

However, the level of aboveground stockpiles of silver has reached historically low levels due to a near 20 years of accumulated supply deficits.

There is today, less silver above ground than there is gold. Moreover, two decades of declining silver prices have led to extreme underinvestment in new mines. The modernization of China, India and of other economies, combined with rising standards of living, will lead to continued demand pressure on commodity prices (in particular metals) for the next 20 years. Silver is historically cheap compared to gold, and compared to oil.

The Silver Supply
Silver supply is inelastic. 70% of silver supply comes from primary zinc and copper mines. Only 30% is from primary silver mines. Base metal mines will not base output decisions on the price of silver, unless the price of silver were to rise enormously.

Silver Demand?
Silver demand is inelastic. In the industrial uses of silver, the price of the silver contained in a final good is typically a tiny fraction of the production costs. A 10 times increase in the silver price will not cause industrial users to stop buying it, because they have no substitutes. Demand for silver jewellery and silverware may slacken at higher prices.

Silver Links

• Adam Hamilton looks at the historical price of silver in inflation-adjusted terms.

• Ted Butler analysis on silver market.

• David Morgan writes a monthly silver newsletter.

• Yukon Zinc has a research report on the case for silver.

• You can take a look at the supply & demand numbers available from The Silver Institute.

• COMEX warehouse stocks

• Silver Axis has articles on silver

• Silver Strategies aggregates silver articles

• Kitco aggregates lots of articles on precious metals and the economy and carries Silver Prices

• Silver price graphs

• Live quotes

• A 600-year chart of silver prices to keep it all in a long term perspective.

Buying and Selling Silver Bullion for Profit?
Gold investors have it easy. $100,000 worth of gold weighs just under 12 pounds today, and can be tucked in a corner of a small safe deposit box. Silver is heavy, so transport and storage is not as easy. Nevertheless, keeping your silver in your own personal possession allows you control over selling.

Investing in Silver Bars, Coins & Jewellery?
Two forms to own physical silver in are 100 oz bars and 90% US coin bags. 100 oz bars sell for a small premium (20-30 cents) over spot, weigh about 7 lbs each, and are easy to stack (giving you maximum density). 90% bags consist of $1000 face value of pre-1965 quarters or dimes. These coins are 90% silver, and a bag typically contains about 715 oz of actual silver. The bags weigh about 53 lbs. APMEX offer this service.

However, another good method (especially if you want to start with only a small amount of money) is to buy Sterling Silver at 925 purity, in the form of jewellery or old coins. Coins in England and Canada were minted in Sterling Silver until 1919. In Australia, they continued until 1945.
 

Ebay

Selling Silver is becoming increasingly straight forward online. Ebay offers a wide range of possibilities for selling bullion, jewellery and coins. The Canadian Silver Maple Leaf is a fine coin at 99.999% pure. Many jewellers will also offer to buy at a reduced price.

How to buy Silver Futures?
Silver futures can be traded by opening a futures trading account. Silver trades on the COMEX division of the NYMEX exchange in New York. Each futures contract represents 5000 oz of silver, for delivery in a future month. It is possible to gain extreme leverage to commodity prices using futures, because the margin requirements are so low. The minimum margin requirement is very approximately $5000 to control $60,000 of silver at spring 2008 prices. However, leveraged buying of futures is always risky, and a lot of money can be lost.
 

What about Futures Options?
However, there is nothing that says an investor must use leverage. It is perfectly acceptable to fully fund a futures account to the level of silver represented by the contracts the investor intends to buy.

Silver, unlike stocks, is not likely to go to zero; and even more importantly, the investor cannot lose more than the initial investment. If an investor uses leverage, futures options are often employed to limit downside losses to the level of the initial investment.

Which Silver Stocks to buy?

NASDAQ's silver sector page lists only 6 major companies as in 2007:

• Silver Wheaton (SLW)

• Coeur d'Alene (CDE)

• Silver Standard Resources (SSRI)

• Pan American Silver (PAAS)

• Apex Silver (SIL)

• Hecla Mining (HL)

Are Silver Mutual Funds or Unit Trusts better than owning Precious Metal?

Silver Mutual Funds may be an easier investment to own and keep than actual pieces of silver. If you love the idea of owning real silver, like coins, then investing in the real metal can be exciting. If you are more concerned about long-term investment value, however, investing in the silver industry through a mutual fund may be easier to sell.

Mutual funds in silver, or precious metals in general, can be a good complement to an otherwise diverse portfolio. The popular wisdom is to diversify into precious metals to prevent a portfolio that moves wildly and unpredictably especially in the event of a currency collapse or crisis..

Though silver stocks are favoured among the precious metals by some investors, the category, in general, can be extremely volatile. Please be aware of this volatility before investing.
 

The London Bullion Market Association

For the daily Silver Price check the London Bullion Market website. http://www.lbma.org.uk/statistics_current.htm

Since Gold prices are rising by leaps and bounds, Investors have been bound to take notice of Silver. Considering that Silver had reached a high of $50USD in 1980, today's prices of $16.89/oz, are just plain cheap when tuned for inflation, yet before planning your investment, it is a good idea to check past records.

Market study shows that the value of Silver the average price of silver oscillates due to the simple economic law of demand and supply. After jewelry and silverware, silver was largely consumed in the photographic industry. However, as a direct result of the wide spread acceptance of digital photography, there has been a steady decline in silver usage from this industry.

The Silver Book reported that in 2007, there was a surplus of 6171 tons of silver. In a short span of time, here has been a steady decline of demand for silver although the supply of silver will increase as traditional photography is replaced with digital and as the demand from other areas decline. Huge demand that will also affect the supply of silver will come from the stocks held by Exchange Traded Funds. New industrial as well as technological advances which are likely to make good use of silver, may increase its demand and thus reduce the supply. Thus prices increase in the process.

A final argument in silver's favor for those who believe in reversion to the mean is the level of the gold/silver ratio. At the moment, you need 63 ounces of silver to buy one ounce of gold. 2,500 years ago, when coins were first made in ancient Greece, the ratio of gold to silver was generally between 10:1 and 13.5:1. In the 1930s and 1940s the ratio reached 90:1 or higher, and in 1991 it peaked at about 98:1.

For the last decade it has hovered at around 60:1. However, the last 350 years is more like 30:1, suggesting that to bring things back into balance, either the gold price has to fall, or the silver price has to rise. The tides are turning in favour of silver.

So, in 2008, this may be a good time to invest in silver.

What is 925 Sterling Silver?

925 Sterling Silver is an alloy of silver containing 92.5% pure silver and 7.5% other metals, usually copper. Fine silver (99.9% pure) is generally too soft for producing large functional objects, and in Sterling Silver, the silver is usually alloyed with copper to give strength whilst preserving the malleability of the silver and a high precious metal content - ideal for making silver jewellery.

Other metals can replace the copper, usually with the intent to improve various properties of the basic sterling alloy such as reducing casting porosity, eliminating firescale (a red or purple stain), and increasing resistance to tarnish. These replacement metals include germanium, zinc, and platinum, as well as a variety of other additives including silicon and boron. A number of alloys claiming firescale and/or tarnish resistance have appeared in recent years sparking heavy competition between the various manufacturers and their different formulations. No one alloy has emerged as an industry leader or standard and ongoing alloy development is a very active area.

What are the origins of Sterling Silver?

The term "Sterling Silver", in reference to the 925 grade of silver, emerged in England by the 13th century (the 1200s). The terms "sterling" and "pound sterling", seem to have acquired their meaning over a period of time, and from several convergent sources. The first mention is that of "sterilensis" in 1078, and by the 13th century the term sterling had appeared.

The word "Sterling" may have come from the Old Norman French esterlin (meaning little star) and Old English stiere (strong, firm, immovable).

An alternative explanation is that Sterling Silver may have been known first as "Easterling Silver". The term "Easterling Silver" was used to refer to the grade of silver that had originally been used as the local currency in an area of Germany, known as "The Easterling".

This "Easterling" consisted of five towns in the eastern part of Germany which banded together in the 12th century under the name of the Hanseatic League. The Hanseatic League proceeded to engage in considerable commerce with England. In payment for English cattle and grain, the League used their local currency. This currency was in the form of 92.5% silver coins. England soon learned that these coins, which they referred to as "the coins of the Easterlings", were of a reliably high quality and hardness.

The word Sterling in its original form may have come from an old English word.

This web site is for information only. Please take proper professional advice before you invest.