Historically the price of silver has been 1/16 that of gold, but in recent years silver has lagged behind, creating an opportunity for bullion investors. Silver is currently a value buy and some commodity experts recommend putting 10 to 20% of one’s net worth into it.
- 1 Investors Should Buy the Physical Silver Metal
- 2 Precious Metals Investment
Investors Should Buy the Physical Silver Metal
Silver bars are expensive, so many investors choose to buy one ounce coins, particularly American Eagle Silver Coins or Canadian Maple Leaf Silver Coins. Buying the actual metal is preferable to buying shares of a mutual fund or a precious metals exchange traded fund.
As silver becomes more scarce, potential fraud will become more of a threat. Investors should avoid the risk of doing business with dealers who can’t deliver the silver they were paid to store for their clients, and would be wise to take possession of the physical metal instead.
Purchase Silver Bullion From Established and Reputable Firms
If the price is cheap and it sounds too good to be true, it probably is. Look for established, reputable firms that have weathered all kinds of markets. According to James Cook, President of Investment Rarities Incorporated, “the failure rate in the coin business is 90% every decade.”
Be extremely careful in choosing where the silver is purchased. One couple bought a large amount of coins from a local firm and drove immediately home. They had no sooner closed their garage door when the doorbell rang. They answered it only to look down the barrel of a gun; the robber had apparently followed them home from the coin dealer.
Store Silver Coins in a Safe Place
Silver bullion should be stored in a secure safe with a combination lock or else in a safety deposit box at a trusted local bank. Investors should be discreet with friends, neighbors, relatives and especially acquaintances about owning any silver.
If an investor thinks he must store his bullion with a dealer, he should proceed with extra caution. The silver should be stored in his own name, not the dealer’s, and if he owns silver bars, the serial numbers on the bars should be itemized on his storage receipt. He should be able to have his silver delivered to him if he ever requests it.
Use a Buy and Hold Strategy When Investing in Silver
Hold the silver for the long term and do not sell too soon for a quick profit. Paper silver is easy to trade, so owning the actual silver metal helps to curb excessive trading. The investment is for the long term and is a hedge against inflation.
Silver is used in medical applications, photography, kitchenware and jewelry, but it is also a highly valued investment vehicle. Because it is so reasonable in comparison with gold, demand for silver is increasing. Investors looking for a decent return in the long run should find silver a good value.
Precious Metals Investment
The most well-known precious metals are gold and silver, but a precious metal is any rare metallic chemical element of high economic value. Throughout history precious metals have been traded as currency, but now they are generally regarded as a form as investment and many are also traded and used as industrial commodities.
In the past aluminium was regarded as a precious metal because pure aluminium was exceedingly difficult to refine prior to the invention of a new process in 1886. According to J. W. Richards, the adoption of the new process caused the price to collapse, and aluminium went from being a precious metal to a common metal.
Commonly Traded Precious Metals
The precious metals of gold, silver, platinum and palladium all have investment codes that allow them to be traded in international finance. Platinum in particular is widely traded and quite volatile in price. The use of precious metals as investments and a store of value drives their demand as much as their use as industrial metals does, and precious metals command much higher prices than common industrial metals.
The precious metals of gold, silver, platinum and palladium are all cast into ingots, and the bulk form of precious metals is referred to as bullion when traded on commodity markets. It is valued by its mass and purity rather than by a face value of money. Bullion metals are also minted into coins.
Investing in Precious Metal Coins
The most well-known precious metal coin is the South African Krugerrand which is made of gold. With bullion coins the face value of the coin for legal tender can be well below their value as bullion, determined by their weight and purity. An example is the Canadian Gold Maple Leaf Coin which has a legal tender face value of $50, but contains one troy ounce of gold, making it worth several hundred dollars as bullion.
The $10,000 Australian Gold Nugget coin is one of the largest bullion coins in the world, being made from one kilogram of 99.9% pure gold. Some larger bullion coins have been produced but not in mass quantities, as they are impractical to handle. Coins should be kept in mint condition to maximise their worth.
People often turn to gold and silver in terms of economic downturns and they are also seen as a hedge against inflation. Gold is the most popular of all the precious metals as an investment. Silver coins are popular with collectors because they are more affordable than gold and platinum coins. In addition their value as collectables can be worth more than their actual bullion value.
Other Precious Metals Besides Gold, Silver, Platinum and Palladium
There are other precious metals that belong to the platinum group, and these are not traded on the world exchanges. They include rhodium, palladium, iridium, ruthenium and osmium. Rhodium is one of the most expensive precious metals. The price is currently depressed due to the economic slowdown, but it commonly trades for around eight times as much as gold, per troy ounce.