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Silver Investing

Why Invest In Silver?

The basic reasons for investing in silver are the same as those for investing in gold - to realize substantial short-term profits or to carry your wealth forward through these perilous times. Of the many similarities silver has with gold, these are the most prominent: 1. Silver is real money, readily accepted around the world for payment in trade. 2. Silver is a time-proven store of wealth when currency is in decline. 3. Silver is an indispensable industrial metal. 4. Silver is in a sustained bull market and has excellent short-term prospects. So it is not surprising that averaged over the very long term - at least 15 years - the returns on gold and silver investments tend to track very closely. Year to year returns, however, are another story, and today silver is outshining gold.

What Makes Silver Special.

Silver has outperformed gold in six of the past ten years. Over that same period the total return on silver investments was nearly 50% more than that of gold:


To understand why that is happening you need look no further than the fundamentals of supply and demand.

For more than two decades very low silver prices has made exploration for new sources impractical, even though demand has exceeded production by as much as 200 million ounces in a single year. Furthermore, unlike gold, silver is consumed in most of its industrial uses and cannot be reclaimed.

Despite its recent stellar performance silver is still too far undervalued that it is not cost effective to expand production or seek new in-ground reserves. And above-ground reserves are rapidly eroding. The demand is still there and it is growing strongly. Whatever is holding silver back - many are pointing to the ETF SLV and its long-standing short-selling policy - it can hold out just so long.

When The Dam Breaks.

Silver is due for a correction of epic proportions. It tried to break out in the summer of 2011 but quickly fell back to current levels. While other forces were definitely at work, individual investors played a part in the pullback as well.

Because the silver price is so much lower than gold's, casual investors flock to the market whenever the metal goes on a run. Most of them don't have an advisor - or they pick their partner out of a hat - so they usually trade at the worst possible times.

Rather than jumping in at the start of the run, they wait until the price has overshot the trend and then go into a buying frenzy. The prices spike, triggering a selloff by the big accounts causing prices to plummet again. Silver is notorious for such volatility so the big players are very cautious about reentering the market. And prices languish.

That creates an exceptional opportunity for individual investors. Without a doubt the big accounts will soon come back, and their trigger point for selling will be ratcheted up much higher. Those who did their homework picking an investment partner are already getting in, and if the next surge is not the final breakout they will be alerted when it's time to sell.

The breakout will happen, though. It simply has to. Forecasts of silver's next ceiling vary from as low as $50 per ounce to the sky's the limit, with a great many estimates falling between $100 and $150 over the next few years. When it will happen is anyone's guess, probably within the next two years and quite possibly by the end of this year. That's an opportunity you might not want to pass up.

The Other Side Of The Silver Coin.

Short-term silver bullion investment for speculative gains can be extraordinarily profitable, but the inherent risk may be more than you are willing to take. Thankfully, silver too has a double-edged sword.

Even more so than with gold, investments in rare silver coins insulate investors from the vagaries of the market. Today even "junk" coins are selling for their silver content and that is drawing a lot of attention to the metal. The investment interest in rare silver coins, however, is still lagging far beyond that of gold, setting the asset up for explosive growth in the very near future.

Whatever your investment goal may be, silver is well worth considering in your strategy. Until silver prices reach equilibrium between supply and demand there can be nowhere to go but up. At today's prices, there's a lot of catching up to do.

Market forces will soon take back control over silver. When they do, this opportunity will be lost.

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