Silver Investing: The “Other” Precious Metal

Gold is one of the most aesthetically pleasing metals our planet naturally produces. Its value has skyrocketed over the past decade, which has created a new generation of investors eager to get in on the potential profits. Though gold is much prettier and more popular than her step-sister known as silver, many people fail to realize silver is actually the rarer metal. World gold supplies have increased from 1 billion ounces in 1940 to more than five billion in 2009; while silver supplies went from 10 billion ounces to under one billion in that same time period, according to Butler Research. This trend is likely to continue for the foreseeable future. Supply continually fails to meet demand, making silver a great investment in 2013.

Silver Price Explosion

silver investingGold, again and deservedly, gets a lot of attention because of its incredible rise from about $300 per ounce in 2002, to $1,650 at the end of December 2012. Silver, in that same period, increased sevenfold, from about $4 per ounce to $30. Bullion dealers like US Money Reserve sell silver bars and coins at current market value, making it a far more affordable investment with similar growth potential. Americans seem to prefer  exchange-traded funds, or stocks in precious metals, to the physical bullion. But according to Jeffrey Christian, founder of CPM Group, a commodities research company, there are 100 “paper ounces” of silver and gold respectively, for every one physical ounce of each. Thus, the best way to protect your investment is to simply purchase the physical metal and store it in a safe place.

Silver In Industry

Both metals and their values are innately tied to the central banks, mainly the Federal Reserve and European Central Bank, and its policies of printing money and debasing its value. All commodities and tangible assets will cost more due to the resulting inflation, and that includes precious metals. The central bankers have made clear that they will continue printing, so both metals will benefit from this.

Silver, however, is an indispensable material needed in more industrial applications than any other metal. Silver is by far the most efficient electricity conductor, has hundreds of medical uses, and has the highest thermal conductivity of all metals.  The industrial demand for silver and its relatively limited supply, will guarantee its stability as an investment.

$500 Per Ounce Silver?

There are several industry experts, who predict silver will top the $500 mark by 2020. Some are even predicting $1000. Silver is consumed in industry, used in jewelry and held by investors but only 700 million ounces are mined every year. Private buyers and the industrial sector will ultimately begin competing for this relatively small supply, driving the price way up. The demand for solar energy will grow as energy prices continue trending upward. Silver is one of the primary elements necessary to produce photovoltaic solar cells. The Silver Institute estimates the solar industry alone will require 100 million ounces (or 1/7th) of the silver mined in the year 2015 leaving that much less for investors and jewelry. As demand goes up the price will be driven up as well.

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