Is silver a good investment? Why should someone buy it?
It’s natural and even prudent for an investor to wonder if a particular
asset is a good investment or not. That’s especially true for silver, since
it’s such a small market and doesn’t carry the same gravitas as gold.
But at this point in history, there are compelling reasons to add physical
silver to your portfolio (and only one is because the price will rise). Here
the top 10 reasons why every investor should buy some silver bullion…
#1 Silver is Real Money
Silver may not be part of our currency, but it is still money. In fact,
silver, along with gold, is the ultimate form of money,
because it can’t be created out of thin air (and thus depreciated) like paper
or digital forms.
And by real money, we do mean physical silver—not ETFs or
certificates or futures contracts. Those are paper investments,
which don’t carry the same benefits you’ll find in this report.
Physical silver is a store of value, just like gold. Here’s why.
Silver has…
• No counterparty risk. If you hold physical silver, you don’t need
another party to make good on a contract or promise. This is not the case
with stocks or bonds or virtually any other investment.
• Never been defaulted on. If you own physical silver, you have no default
risk. Not so for almost any other investment you make.
• Long-term use as money. A scan of monetary history shows that
silver has been used in coinage more often than gold!
As Mike Maloney says in his best-seller, Guide
to Investing in Gold and Silver, “Gold and silver have revalued
themselves throughout the centuries and called on fiat paper to account for
itself.”
Owning some physical silver provides you with a real asset that has served
as money for literally thousands of years.
#2 Physical Silver is a Hard Asset
Of all the investments you own, how many can you hold in your hand?
In a world of paper profits, digital trading, and currency creation,
physical silver stands in contrast as one of few assets that you can carry in
your pocket anywhere you go, even another country. And it can be as private
and confidential as you want.
Physical silver is also a tangible hedge against all forms of hacking and
cybercrime. There’s no “erasing” a silver
Eagle coin, for example, but that can certainly happen to a digital
asset:
#3 Silver is Cheap
What if I said you could buy a hard asset at 1/70th the price
of gold—and it would protect you just as well against crisis?
That’s what you get with silver! It is much more affordable for the
average investor, and yet as a precious metal will help maintain your
standard of living as good as gold.
If you can’t afford to buy a full ounce of gold, silver can be your ticket
to holding some precious metals.
This is also true for gift-giving. Don’t want to spend over a $1,000 on a
present but would like to give a hard asset? Silver just made it more
affordable.
#4 Silver is More Practical For Everyday Small Purchases
Silver isn’t just cheaper to buy, but can be more practical when you need
to sell.
Maybe someday you don’t want to sell a full ounce of gold to meet a small
financial need. Enter silver. Since it frequently comes in smaller
denominations than gold, you can sell only what you want or need at the time.
Every investor should have some silver around for this very reason.
Keep in mind that silver
bullion can be sold virtually anywhere in the world.
#5 Silver Outperforms Gold In Bull Markets
Silver is a very small market—so small, in fact, that a little money
moving into or out of the industry can impact the price to a much greater
degree than other assets (including gold).
This greater volatility means that in bear markets, silver falls more than
gold. But in bull markets, silver will soar much further and faster than
gold.
Here are couple good examples… check out how much more silver gained than
gold in the two biggest precious metals bull markets in the modern era:
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Gain from 1970 low to 1980 high
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Gain from 2008 low to 2011 high
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You might say silver is gold on steroids!
We can expect this outperformance to repeat in the next bull market, too,
because the silver industry remains tiny.
#6 Silver Inventories Are Falling
Governments and other institutions have traditionally held inventories of
silver. But today, most governments no longer hold stockpiles of the metal.
In fact, the only countries that warehouse silver are the US, India, and
Mexico.
Look what’s happened to those inventories since 1996.
A big reason governments don’t hold a lot of silver is because coinage is
no longer made from the precious metal. But as you’ll see, silver is used in
industry to a much greater degree now… so if future industrial needs are
difficult to meet, governments will be ill-equipped to support those needs.
#7 Industrial Use is Growing
Believe it or not, you don’t go one day without using a product that
contains silver.
It’s used in nearly every major industry, from electronics and medical
applications to batteries and solar panels. Silver is everywhere, whether you
see it or not.
As Mike says in
his book, “Of all the elements, silver is the indispensable metal. It is
the most electrically conductive, thermally conductive, and reflective.
Modern life, as we know it, would not exist without silver.”
Due to these rare characteristics, the number of industrial applications
for silver has skyrocketed. In fact, industry now gobbles up more than half
of all silver demand.
Silver is used in a wide number of industries and products, and many of
those uses are growing. Here’s a few examples…
• A cell phone contains about one-third of a gram of silver, and cell
phone use continues to climb relentlessly worldwide. Gartner,a leading
information technology research and advisory company, estimates a total of
5.75 billion cell phones will be purchased between 2017 and 2019. That means
1.916 billion grams of silver, or 57.49 million ounces, will be needed for
this use alone!
• The self-heating windshield in your new Volkswagen will have an
ultra-thin invisible layer of silver instead of those tiny wires. They’ll
even have filaments at the bottom of the windshield to heat the wipers so
they don’t freeze to the glass.
• The Silver Institute estimates that silver use in photovoltaic cells
(the main constituents of solar panels) will be a whopping 75% greater in
2018 than it was just 3 years earlier.
• Another common industrial use for silver is as a catalyst for the
production of ethylene oxide (an important precursor in the production of
plastics and chemicals). The Silver Institute projects that due to growth in
this industry, 32% more silver will be needed by 2018 than what was used in
2015.
There are a lot more examples like this, but the bottom line is that due
to its unique characteristics, industrial uses for silver continue to expand,
which means we can reasonably expect this source of demand to remain robust.
But that’s not the whole story… unlike gold, most industrial silver is
consumed or destroyed during the fabrication process. It’s just not economic
to recover every tiny flake of silver from millions of discarded products. As
a result, that silver is gone for good, and limits the amount of supply that
can return to the market through recycling.
So not only will the ongoing growth in industrial uses keep silver demand
strong, millions of ounces cannot be reused. That might be a problem,
because…
#8 Supply is About to Fall
As you might be aware, the silver price crashed after peaking in 2011.
Over the next five years it fell a whopping 72.1%. As a result, miners had to
scramble to cut costs to turn a profit. One of the areas cut dramatically was
exploration and development of new silver mines.
It doesn’t take a rocket scientist to understand that if you spend less
time and money looking for silver that you will find less silver. That
drought in exploration and development is starting to take effect.
Low prices have affected how much scrap metal is available, too.
All of this is starting to have an impact on total supply.
Silver supply has fallen three consecutive years, the first time since
1991-1993.
As much as two-thirds of silver mine supply comes as a byproduct from base
metal operations (copper and zinc, for example). But these other sources of
supply will clearly have an impact on the availability of new metal coming to
the marketplace.
These realities have set the stage for a peak in silver supply. If demand
stays at current levels, it will be difficult for everyone who wants silver
to get as much as they need. And don’t look now, but…
#9 World Demand is Growing
Global demand for silver is growing. Virtually all major government mints
have seen record levels of sales, with most already operating at peak
production.
Surging demand is nowhere more evident than China and India. These two
behemoth markets have long histories of cultural affinity toward precious
metals. And with their populations growing (the opposite of what is happening
in the West), their tremendous appetite will continue.
Here’s a couple good examples… check out the growth in silver demand in
China (for all uses):
And look at the growth of silver jewelry in India:
This kind of demand doesn’t happen in a vacuum. Sooner or later there will
be consequences when surging demand meets crimped supply—and those
consequences are all positive if you own the metal.
#10 The Gold/Silver Ratio Favors Silver
Last, the gold/silver ratio (the price of gold divided by the price of
silver) can give clues about which metal might be the better buy at any given
time. Especially when the ratio reaches an extreme…
The gold-to-silver ratio averaged 47:1 during the 20th century.
It’s averaged about 61:1 in the 21st century. So a ratio at or
above 70 is in outlier territory and thus makes silver a good buy relative to
the price of gold.
You can see that the ratio sank to almost 30 at the peak of the bull
market in 2011. It reached as low as 17 in early 1980. This compression in
the ratio shows just how much silver can outperform its cousin gold. It also
confirms it is undervalued compared to gold.
• Add all up the reasons and silver just might be the buying
opportunity of the decade.
It’s hard to find an asset with a greater distortion between price and
fundamentals. Not only is it a good hedge against crisis, the price will be
forced up by a perfect
storm of fundamental factors.