Silver prices this year have left me thinking of the good old days, when prices wouldn’t stop climbing. But, here’s why this low phase is temporary.
how to buy silver coins
Believe it or not, investing in silver right now could double your money.
Think about it: In April 2011, silver prices rose by 170% in just 7 months. Anyone investing in silver during that period pocketed huge gains and spent a lot less than they would on buying gold.
And right now, it looks like the silver market is on the cusp of doing the same thing all over again.
According to our research, the next stop for silver prices could be $40 by year's end, and $60 by 2014.
And much higher after that.
We get a lot of great questions from Money Morning Private Briefing readers. But there's one in particular I want to share with you today.
Andy F. writes:
- “Bill, I know this is a very basic question, but you have me interested in silver. My question is … what kind of silver? I like the 999.9% rounds and bars, but is it better to purchase coins with 40% to 90% content? Then, if I go that route, do I buy cull, junk or do I need to learn collector values? ... I am enjoying your work, thanks!” – Andy F.
This is an important question; I hear some iteration of it all the time from my subscribers, especially as the fear of inflation sets in. Here’s the answer.
Start the conversation
Investors have been buying silver coins at a lightning-fast pace this year. The U.S. Mint even sold out of 2013-dated American Silver Eagles in early January.
January Silver Eagle sales hit a record 7,498,000. After suspending sales Jan. 17, the U.S. Mint has allowed investors to resume buying silver coins, but with limits on how many coins dealers can order.
The good news: You can still cash in on buying silver coins. But before you buy, you need to know the best deals out there - and the ones to avoid.
That's why Money Morning Executive Editor William Patalon III explained everything you need to know about buying silver coins in this accompanying video.
Silver is one of the hottest investments this year, leading many investors to ask how to buy silver coins before the white metal soars to new highs.
Indeed, investors have been buying silver coins at such a rapid pace, the U.S. Mint announced Jan. 17 it had sold out of 2013-dated American Silver Eagles - just 10 days after opening sales to authorized dealers.
Opening day sales for the hugely popular bullion coins on Jan. 7 hit a record 3,937,000 coins. The tally of total sales over the 10 days the coins were available exceeded 6 million.
Sales resumed Jan. 28 after the Mint replenished its inventory, but on an allocated basis with limited orders. The Mint used the same method in 2009 and 2010 when demand among people buying silver coins also outstripped supply.
Today, silver has pulled back below $29 an ounce, giving investors another chance to establish a position before the metal makes its next move higher.
After all, the fundamental case for silver prices remains as strong as ever.
The U.S. dollar continues to weaken, inflation remains a concern, silver demand from industry and emerging markets remains strong even as supply shrinks - plus we're facing growing uncertainty over the outcome of the 2012 elections.
It's a perfect recipe for higher silver prices - most likely even higher than last year's peak at $50 per ounce.
But what's the best way to play the next upmove by the "poor man's precious metal"?
For the purist seeking to hold metals as a long-term store of value and a hedge against inflation and global turmoil, the first choice is always the physical silver itself.
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 MetalAlthough 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.
Since the financial crisis of 2008, silver prices have increased by 300%.
And that's only the beginning. Silver is on the verge of a massive "short squeeze". The last time something like this happened, investors pocketed upwards of 195% in just a few months - but more on that later (Or you can get a sneak peek of our new silver special presentation right now. You can find it here.)
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 much higher right now.
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. Even this more conservative estimate of silver prices vs. gold provides an excellent opportunity for investors to cash in as gold prices continue to rise.
How to Buy SilverLike gold, silver investments can be made in a variety of forms. Let's take a look at some of the most popular.
However, despite this blip, mounting inflationary pressures, a weakening dollar, and emerging market demand will see silver retest its record highs in 2012. In fact, this time around it could even climb as high as $150 an ounce.
The white metal has already gotten off to a strong start this year, with silver for March delivery surging 5.9% on Tuesday to settle at $29.57 an ounce - the biggest one-day gain in months.
And it's just getting started. So if you don't want to miss the next big bull-run, you might consider the following instructions on how to buy silver.
How to Buy SilverLike 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.
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: