Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Buy Silver, Special Report

Commodities / Gold and Silver 2010 Sep 01, 2010 - 12:01 PM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticlePeter Krauth writes: As precious metals go, silver may not have quite the same mystique as gold.

But let's be honest: The "white metal" has its backers, too.


In fact, when Money Morning published its "How to Buy Gold" special report just a few weeks ago, one of the biggest questions that we received in response was: "When can you do the same for silver?"

That's just what we've done here. In this special report, we show you how to buy silver.

Silver: The "Other" Precious Metal
Although gold possesses the greatest allure of precious metals, silver has a longstanding tradition in many cultures - a tradition that in some cases reaches back thousands of years. Nearly 2,500 years ago, for instance, China was the first to use silver as money.

Here in the United States, silver alloys were still present in some of our everyday coins as recently as 40 years ago. Today, however, silver is no longer viewed that much as a monetary metal. But that's because about 40% of silver is used for industrial applications.

The physical silver market is small, with annual demand of slightly less than 900 million ounces.

Silver prices are volatile - on the upside and the downside. It set a bull-to-date high of near $21 in early 2008. The global financial crisis tipped silver prices into a near-freefall: They declined by more than 50% to drop into the $9 range later that year.

Since that financial-crisis nadir, silver prices have more than doubled to reach nearly $19.40 an ounce.

An important metric to understand and watch is the silver-to-gold ratio. It tells you how many ounces of silver it takes to buy one of gold. Historically, that ratio is 16 to 1. On this basis alone, silver should be at $77 right now. That's a long way from $19.

But perhaps a more realistic level, at least in the short term, is the ratio of silver-to-gold since the start of this bull market back in 2000. That ratio has been about 50-55 ounces of silver for one of gold. With gold at $1,200, that implies a silver price of $22-$24 an ounce - a return of as much as 25% from current price levels.

How to Buy Silver
Like gold, silver investments can be made in a variety of forms. Let's take a look at some of the most popular forms.

Physical Silver: Physical silver can be purchased in a variety of sizes and weights, which determines its price. Most typical are 1.0 ounce silver coins, like the Austrian Silver Philharmonic, the American Silver Eagle, and the Canadian Silver Maple.

Their prices vary slightly due to differences in silver purity, with the Silver Maple being the highest at 99.99% pure. You'll pay about a 16% premium over the silver price for coins due to the cost of fabricating them.

Another popular option is the 100-ounce silver bar, which commands a 5% premium over the spot price of silver, meaning the bar is currently selling for slightly more than $1,900.

These coins and bars are essentially bought for their silver content and not as collectibles. If you're looking to build a silver stash - either large or small - bullion dealers may be the easiest way for investors to do so. But do your homework first, and check them out before you buy. Also, avoid paying more than the premiums I noted above for either coins or bars.

Some investors wonder if they should buy smaller denominations, like 1/20th, 1/10th, ¼, or ½ ounce (gold) coins. The thinking goes like this: If ever these coins need to be used to transact and make payments, one would want to have smaller "amounts" to carry around. That's a valid rationale. Even so, keep in mind that you'll pay a premium to the actual silver content, since each individual coin has to be fabricated. I believe that, should we ever get to that point, you could just convert a one-ounce coin or bar into a number of smaller coins, and pay the premium, or perhaps receive whatever else is being used for transactions (a new currency?) in return.

A few dealers that have an established reputation are:

•Kitco.com: Premiums are fair and the selection is usually quite good. They have offices in both New York and Montreal.
•Asset Strategies International Inc: This dealer is located in Rockville, MD. Asset Strategies also offers gold storage options outside U.S. borders.
•Camino Coin LLC (caminocompany.com): Burlingame, CA.
•American Precious Metals Exchange (apmex.com): Oklahoma City, OK.
•The Tulving Co. (tulving.com): Newport Beach, CA
•Gainesville Coins (gainesvillecoins.com): Lutz, FL.
Exhange-Traded Funds (ETFs) and Certificates: Another option for silver ownership is through exchange-traded funds (ETFs) or certificates.

As I mentioned in the "How to Buy Gold" special report, ETFs are a convenient way to establish a claim on gold, and the same applies to silver. A simple way to acquire a claim on silver is to buy units of the iShares Silver Trust ETF (NYSE: SLV). With some $5.5 billion in assets, SLV is the world's largest silver-backed ETF, using JPMorgan Chase & Co. (NYSE: JPM) in London as its custodian. SLV shares, which represent approximately 1.0 silver ounce each, are easy to buy and sell through your brokerage account.

You can also acquire "paper silver" through Perth Mint Certificates(PMC). Vault-protected and insured, PMC offers the only government-backed bullion storage program on an allocated or unallocated basis [this means stored separately for you (allocated), or stored along with everyone else's (unallocated)].

In an "allocated" situation, your coins or bars are removed from the mint's operating inventory, and placed in the Perth Mint Depository vault with your own account number. Allocated metals are not part of the mint's balance sheet, so you will pay storage fees. The government of the state of Western Australia guarantees the certificate.

Minimums are USD $10,000 for your initial PMC purchase, with subsequent purchases at the USD $5,000 minimum level. If you hold your coins, bars, and bullion on an unallocated basis, they can be converted into specific coins or bars and you can then take delivery, if you wish. The Perth Mint Certificate program is a solid way to gain international diversification for your silver holdings. For more information, check out Perthmint.com (note that Kitco and Asset Strategies also offer PMCs).

(The Perth Mint was established in 1899 when Britain's Royal Mint built a series of branch mints. These branches were set up in places throughout the British Empire where gold was found, eliminating the need to ship gold back to England to fabricate coins that would then have to be distributed back through the Empire.)

As I noted in my "How to Buy Gold" article, "paper" gold is not the same as "physical" gold. This contrast holds true for silver, as well. Despite the Western Australia government backing and long history, you have to realize that with PMCs you're still relying on someone else's promise. By contrast, with physical silver under your control, you've eliminated any counterparty risk.

Confiscation Fears
The escalating interest in precious metals brought about by the rapidly accelerating fears about the U.S. economic outlook has brought about a real increase in worries of gold-and-silver confiscation.

Back in 1933, in the depths of the Great Depression, U.S. President Franklin D. Roosevelt signed Executive Order 6102, effectively forbidding the ownership of gold coins, bullion, and certificates by U.S. citizens. This coerced the public to turn in their gold for $20.67 an ounce, which the government shortly thereafter "revalued" to $35 per ounce. What's especially interesting about EO 6102 is the absence of any mention of silver.

Now we can't know if there will ever again be anything akin to this Oval Office edict - much less what it might cover and might say. But going on the past, and considering the size of the silver market relative to gold, silver may be a way to own a precious metal that just might sidestep any risk of future confiscation.

However, if the government getting its hands on your hard-earned silver is a personal concern, then you may want to consider a particular kind of silver investment. One option may be to own silver that's held outside of your country of residence.

As I mentioned in the "How to Buy Gold" article, one example of this for U.S. residents would be the Central Fund of Canada Ltd. (AMEX: CEF). It's a closed-end fund that owns physical gold and silver, and that's been around since 1961. It's domiciled in Canada, with its precious metals stored in the vaults of a Canadian-chartered bank. CEF often trades above its net asset value (NAV), but you should avoid paying more than a 5% premium. See www.centralfund.com for more information.

But my favorite "silver-only" fund is the ETFS Physical Silver Shares (NYSE: SIVR). Issuer ETF Securities Ltd. is one of the largest ETF providers in Europe, with some $16 billion under management. Each unit is about the equivalent of 1.0 ounces of silver in U.S. dollars. As well, it seems to trade with a net asset value that boasts almost no premium or discount, and management fees are reasonably low, around 0.45 % annually. The company indicates that the physical silver that backs the units is held in a vault in London.

As I've said before, there's no substitute for having some physical precious metals stored under your own direct control. And even the SIVR silver ETF shares are a paper claim on silver. But it does add another dimension to your precious-metals holdings, and accomplishes that with storage in another jurisdiction.

[Editor's Note: Peter Krauth, a frequent contributor to Money Morning, is the editor of the Global Resource Alert, a private advisory service that focuses on precious metals, energy commodities and other natural-resource-related topics. Krauth spent two decades as a market analyst and portfolio advisor, and has covered all the commodities sectors, including gold, silver, coal, alternative energy and agriculture. He even makes his home in Canada - to be closer to the action. And several of his recent predictions have generated a genuine Internet buzz.

To find out more about commodities, or the Global Resource Alert, please click here.]

Source : http://moneymorning.com/2010/09/01/how-to-buy-silver/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in