Your Questions About Investing In Silver

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George asks…

Is silver investing a good idea?

I live in the uk

Justin answers:

It’s ok, but look at the advantages and disadvantages:

Advantages:
1) Good hedge against inflation
2) Good hedge against a weakening dollar from stimulus (and not just United States stimulus…that includes EVERYBODY)
3) It has, like you said, emerging applications in
-electronics (silver is the absolute best conductor of electricity PERIOD. The other poster claiming that gold was a good conductor of electricity is correct, but only in special situations. You would not want to wire your house with gold or silver wire as it’s totally uneconomical…and likely to get your house broken into and torn apart by thieves! ,
-photography (although that’s on it’s way out. Silver Nitrate was once used as a chemical to develop prints, but now everybody is sticking to digital. That’s not saying it will completely go away, but the usage of silver nitrate as probably peaked).
-Medical Instruments (the main use here is in surgical equipment because bacteria and germs are less likely to live on highly reflective and shiny surfaces…silver fits the bill perfectly here.
And there’s many many more applications, but again, it’s all being developed as we speak

The only real disadvantage is a bar of silver does not throw off any cash flows. It just sits there, but it’s a precious metal and does not corrode like say copper or nickel. Thus you are essentially at the mercy of the market unless you buy a large amount and hedge the price action in the commodity.

You’re in a unique situation however, because if you were to buy physical silver in the UK, you wouldn’t get hit with a VAT. In some parts of Europe you can expect to pay an additional 7-22%.

I’d just buy an exchange traded fund that mimicked the price of silver in the meantime, like the SLV here in the states

http://en.wikipedia.org/wiki/Value_Added_Tax_(United_Kingdom)

Ken asks…

Investing in Silver Questions?

I plan to buy pure silver from the bank in order to invest in something that will grow substantially over the years.

If and when silver has reached a high peak in return value, where and how much will i be able to sell it for? I don’t think i should invest unless i can one day sell it for at least 95% of its full worth.

My mother thinks its a bad idea to invest in silver, and she believes its best to invest in property, but i do believe silver will reach a very high price in the near future.

Justin answers:

Here is a trick question for you…it points out to the weakness of your objectives

Currently the price of silver is about $27 and falling actually

http://stockcharts.com/h-sc/ui?s=$SILVER&p=D&yr=1&mn=0&dy=0&id=p54157797139

Is it your habit to spend money on something losing money??? How do you know it will “grow substantially??? Because everyone says it will?? That is it isn’t it…you’d like to be in gold but silver is cheaper, right?

Here is a 6 year chart for silver

http://finviz.com/futures_charts.ashx?t=SI&p=w1

How many times has Silver “GROWN substantially” in that time…DEFINE: Substantially for me…better yet…Define “95% of its full worth”….you cannot do it can you…both are undefinable

Let us define Substantially as 50% increase in price

In 2007 you could buy Silver for about $14 per oz ….in early 2008 it was worth $21/oz…that would have satisfied your (MY) substantially definition….BUT is it 95% of its full worth???? Ahhhh there is the rub….You don’t know, do you…if you hesitated a day it dropped to about $17/oz..WTF!!! You want your 50% back…Now it drops to $10 in late 2008…you are losing significant coin…yikes! Do you sell or not…isn’t precious metals a hedge against bad times??? Doesn’t seem so, does it??? 2008 was bad times…do you sell????

Ok you hang in there…price starts rising…You wait about 2 years in late 2010 it makes it back to $21…{finally got my 50% back}….do you sell now and take your SUBSTANTIAL PROFIT???

If you did…you missed the rise to almost $50/oz….if you didn’t you would always be wondering “Is it at my goal of 95% of what it is worth. While you are wondering about thst the price plunges to $35 the next day…WTFFFFFF!!!!!!!!!!

I could go on but what I am trying to show you is based on what you are telling us You have no clue as to what to do other than media rag BUZZ if that….you have a lot to learn.

From the sounds of it….your mother is not a bad voice of reason. You have no basis to believe in the price of Silver skyrocketing…other than hearsay.

James asks…

Do silver coins have more options for selling versus bars?

I am interested in investing in silver. My question is, in the future, when it comes time to sell, which will be easier to unload, coins or bars. Bars would be more convenient to store and sell in one lump but you could sell the coins at a coin shop right, instead or strictly to a precious metal buyer? Any experienced advice is appreciated.

Justin answers:

Certain Silver coins have more collection value Silver Eagles, Morgan Dollars 90% silver, Peace Dollars 90% silver, Australian Kookaburra and so on will carry a Premium over spot, many junk silver(common non key date coins) however will not increase more than the spot price. Many people collect silver art bars and many have a 2 to 3 dollar over spot collector value some bars even higher, like coins they too have a rarity factor. The bottom line is when collecting silver for a investment any purchases you can get under spot price is a good deal. You will can always sell Silver for its melt value.

Thomas asks…

How can I invest in Silver?

Okay, I would prefer people who actually have investing experience or personnal knowledge to answer this. I was wanting to buy some silver so I researched how to tell what the prices will do in the future. I read that things like wars, debt, and scandals will drive prices up. Bailouts confidence in the dollar drive them down. Well, what about things like the market crash back in 08? Would that drive it down?

Justin answers:

The crash back in ’08-’09 was very bad for silver – it lost 40% or so of its value.

First off, there is tons of garbage on the Internet about silver. There are lots of people on the Internet who are selling silver and they have posted all kinds of quasi-truths about what is going to drive up the price of silver. People post on YA all the time about crazy predictions like silver is going over $300/oz, etc..

Some facts:

a) Silver has been on a dive for about 900 years.

If you bought an ounce of silver 900 years ago and held it in a vault, you have lost a ton of buying power. You could have bought far more, say, apples 900 years ago with your ounce of silver than you can now. If you bought equities 900 years ago, your buying power doubled every 10 years and the only things that keep you from owning the world are estate taxes and such. If you are buying silver now, you are surely not buying long-term but making a market timing bet (or betting that something that has been happening for 900 years reached a bottom a few years back). Do you think that you can time markets well?

B) Silver is not gold

Lots of the stuff that you read on the Internet is really about gold but then they replace “gold” with “silver”. Both gold and silver have been losing their status as money over the last 900 years but gold retains lots more standing than silver. Central banks are big buyers of gold and govts have an interest in high gold prices. More powerful govts like the US and Germany own thousands of tons of gold and want its price to remain high. To the best of my knowledge, no govt owns significant amounts of silver. Silver has value because of jewelry and minor industrial uses not because it is a store of value.

C) Silver currently has a decent positive correlation to equities

There are tons of places that will tell you that silver should go up if equities go down. People post on YA all the time about why is their silver going down when equities went down. Right now, silver is being traded as another source of risk and when people go running for the hills, they are buying US Treasury debt and dollars and selling silver. I personally doubt this is going to change soon.

D) Silver is a hedge against inflation which is much less likely than silver bugs would have you believe

The crises that we have going on in the world right now are just not inflationary. Precious metal hawkers point out the actions of central banks like quantitative easing and say “Look that’s inflationary – you need to guard against inflation”. Well, that’s just lying – the central banks are being expansionary to keep us from falling into a deflationary spiral. They are out of bullets and we are slipping toward the abyss. Deflation is very bad for silver.

E) Silver used as barter in the apocalypse is not an investment strategy

This is a child’s fantasy that social institutions will break down and we will end up using old dimes to buy bread. I personally have planned for ths by building myself a police V-8 interceptor just like Mad Max’s car and stockpiled gasoline. I will roam the wasteland and steal all their silver. But this fantasy does not influence my investing.

Anyway, if you want to buy silver the best way is almost certainly through an ETF like SLV. There are lots of people on the Internet who will tell you that this is terrible, that you are buying paper claims to silver and that these paper claims can easily collapse under some conspiracy theory or other about how people want to deprive you of your silver. This all comes from people hawking physical silver over the Internet and is not to be believed. If you have lots of money and want to trade silver, silver futures contracts are better. If you want to store it in a safe deposit box so nobody knows about your wealth, gold is better.

Edit: Along comes revsuzanne – someone who has bought into all the internet idiocy and passes it off as the truth. Sure silver should be $100/oz but people are “manipulating” it. There must be some conspiracy going on to deprive him of the gain that is rightfully his. Revsuzanne when are you going to take me up on the offer to sell you options on all these things you believe? I’ll in throw in free silver $100 calls. Revsuzanne is building himself a silly unbalanced portfolio with enormous transactions costs. It’s just childish kid-stuff.

Joseph asks…

if for long term investment, what advantages if we are investing in silver than gold?

Justin answers:

Invest for the long term silver is very nice because the use of silver as a raw material very much.
While a limited amount of silver and silver will continue to be used,Gold and silver as gold is used as a limited but more gold for jewelry. Silver inventory is currently a little more. Because silver is used for various industrial purposes, and most have been consumed out. While gold stocks have never diminished, because gold is only used as a reserve of wealth. So I believe silver prices will continue to rise.

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