Silver - how and when to buy it? Will it go up in value?

Look in your change purse, do you see any gold coins? Chances are, the answer is no. Now look in your change purse and see if there are any silver coins. Chances are, you have lots of them. And that may be the difference between why gold looks more valuable than silver. Of course there are deeper issues why gold is more valuable than silver, but just on the surface, how frequently do we run across gold coins as opposed to how frequently we run across silver coins, silver looks almost inconsequential. But are we giving silver enough credit for being a valuable element? In our everyday life do we think about the innumerable uses for silver? When we look at the electronics in our homes, do we ever stop to think that silver is used in our laptops, our pc’s our cellphones, our stereo equipment, our medical devices, our mirrors, our silverware, our cameras and photographic equipment, for solar energy, water purification… chances are we don’t give this a thought. For utilitarian purposes, silver should be far more valuable than gold. The reality, however, is just the opposite. Historically, silver has been one twelfth the value of gold. In China, during the Ming Dynasty, silver rose to a quarter of the value of gold, and during Egyptian times, gold and silver were of equal value. In January 1979, gold was at $210.00 an ounce, while silver was at $5.90 an ounce. This meant that gold was 35 times the value of silver i.e. it took 35 silver coins to buy one gold coin.
In January 1980 both gold and silver peaked. Gold went to $850.00 an ounce while silver rose to over $50.00 an ounce. So by the beginning of 1980, it only took 17 ounces of silver to buy one ounce of gold.
Today, however, in February 2010, gold is at $1089 an ounce while silver is just over $15.00 an ounce – so it takes over 70 silver coins to buy just one ounce of gold.

Most silver supplies do not come from silver mining operations. Silver is generally a by-product of mining for gold, lead, zinc and copper. Silver producers actually only produce about 25% of the total silver production, so if you could freeze the demand for silver where it is today, and the silver producers were able to double their production capacity, it would take at least fifteen or twenty years to get the silver stocks back to the levels they were at in 1990.

When you look in your change purse and you see a lot of silver coins, you say to yourself, there’s a tremendous amount of silver in the world. And that’s why silver is so cheap. However, the reverse is true. It’s almost like an optical illusion where we think silver is so plentiful, but the reality is that silver is very scarce. In the United States until 1964, quarters and dimes were made of 90% silver. Starting with 1964, those same silver coins are now being made of copper, zinc and tin.

As of this writing, silver is being very seriously undervalued and the small investor can get in very very cheaply between and $15 and $19 an ounce before commission. But don’t expect silver to stay at these low prices. Due to the scarcity of this metal, it will probably soar in value in the not too distant future. And the investor can use it either as a hedge against the failing economy or to get a remarkable return on his investment.

So in what quantities should you buy your silver? The small investor would do better buying the one ounce silver coins rather than the 10 ounce or 100 ounce silver bars. If paper money becomes worthless and banks fail, the small investor has more of a chance of purchasing household necessities with one ounce silver coins than with 10 ounce or 100 ounce bars of silver.

The thing to watch out for with many of the dealers is their shipping times. If someone has a very long shipping time, be very careful. Coin dealers have been known to go bankrupt as they take risks. If they are sending you the coins by mail, make sure you tell the coin dealer to insure them and have you sign for the package. If possible, take out cash from your bank, go to your coin dealer, pick up the coins and have them in your hot little hand. If not, try to find someone who is reputable, ask around. There are websites that you can buy silver from – but you can never be sure, because the only way to have it is in your possession.
However, if you are buying silver over the internet, don’t buy everything from one dealer if you can help it. In smaller countries there are only a few dealers so your choice may be limited, but somewhere like the US, there are many dealers so you will have a choice. There are no restrictions as to how much you can buy and as of this writing, there is no taxation in these coins and they never lose their intrinsic value. There are no restrictions as to how much you can buy and as of this writing, there is no taxation in these coins and they never lose their intrinsic value. From generation to generation, to century to century, from civilisation to civilisation, to all parts of the world, to every culture, to all of humankind, gold and silver have been and always will be a negotiable commodity and a store of value.

The issue with silver is storage because it is bulky and heavy. Security may be an issue so think in terms of where you could hide that amount of coins. On a humorous note, there was an ad for a wooden box marked coins. In hard times, just visualise someone coming into your house, seeing the box marked coins and just walking off with it. If you’re going to store gold and silver coins, try to be a whole lot less obvious.

Financial advisor, Michael Maloney, says in his book “Guide to Investing in Gold and Silver”

“For 5000 years, gold and silver have been the only assets that have never failed. Because they are tangible assets of inherent value their purchasing power will never fall to zero. They are financial assets that can be completely private and not part of the financial system. Although you have to declare any capital gains on your tax return in many countries, it is still a private investment. Real estate, on the other hand requires the financial system to transfer title. Gold and silver do not.”

Financial advisors seldom advise their clients to buy gold and silver because they don’t make any commission as they do with stocks, mutual funds, unit trusts and pensions. For the small investor, this is a blessing. He gets to eliminate the middleman. At this writing, there isn’t a long way that silver can fall and the logical assumption is that it can only go up. If ever there was a need to protect yourself against a failing economy, the time is now. And if ever there was an optimum time to buy silver, that time is now.