The prevailing silver price volatility and surging stock market has investors asking, "Is silver a good investment right now?"
Silver prices have ranged from $15.785 an ounce to $18.31 in 2015. This is the norm for silver. Last year it was as high as $21.965 and low as $15.315.
The current price of silver is around $16.20 an ounce. It's up about 3.4% on the year, but has been up as high as 16.7%.
It can be hard as an investor to stomach that kind of volatility. But even with all these violent price swings, the reasons that make silver a good investment still hold true.
Simply put, silver serves as a crisis hedge. Stocks will still drive the bulk of your portfolio growth. But silver, like gold, provides a backstop against major portfolio losses.
"I have physical silver," Money Morning Defense & Tech Specialist Michael A. Robinson said last year. "I might have bought some at the top, but I don't care what the price goes to. I will not sell that physical silver. It's there for a reason - just like I have insurance on my car, I have insurance in case of a disaster."
So if you own some physical silver, and panic overtakes the current euphoria driving this six-year bull market, you'll have an asset class retaining value as equities fall.
Part of silver's value beyond investment demand comes from growing industrial demand - something stocks don't have. In 2014, 54% of total physical silver demand came from industrial uses, according to the Silver Institute's "World Silver Survey 2014." Industrial uses include electronics, automobiles, and jewelry.
The reason silver prices have slipped in 2014 is that investor optimism continues to fuel markets. If we look at just the past year, where silver has had a clear downward trajectory, it's also had a pretty strong negative correlation of -0.71 with the Dow Jones Industrial Average. That's typical of how silver and gold perform - when the Dow climbs, investors put their money to work in stocks, and show less interest in precious metals.
But the opposite is true when the Dow falls. That's why Robinson looks to buy silver on the dips. And right now is a great buying opportunity...
[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]
At today's price of around $16.35, silver is undervalued. The markets will take note of silver's current undervaluation... eventually. That's why savvy silver investors buy at lows.
Money Morning Global Resource Specialist Peter Krauth said metals markets correct when prices get too low.
One bullish sign for silver in the near term is the amount of investing interest in silver right now. Just look at the holdings of iShares Silver Trust (NYSE Arca: SLV), the most popular silver ETF.
"Investors have maintained remarkable interest in SLV, given the wild price gyrations of silver over the past four years in particular," Krauth said. "That means investors like to buy and hold their silver. They're very willing to hang on to both their physical holdings and ETF shares."
Shares outstanding over the last year for SLV have remained stable, as the accompanying chart shows. At Q1 2014, SLV had 345.7 million average-weighted shares outstanding. That bounced around and reached as high as 343.8 million at the end of Sept. 2014. The most recent numbers have that figure at 340.3 million.
And it's not just that investors are holding on to silver. It's that demand for physical silver is up as well. In 2013, the U.S. Mint sold a record-high 42.68 million American Eagle silver bullion coins. In 2014, buyers shattered that number. The sale of silver coins topped 43 million and the U.S. Mint temporarily sold out of the coins in November due to "tremendous" demand.
Avoid this gold scam and make sure you own the real deal – this video has seven steps to test your physical gold today:
Know What's Next for the Price of Silver: Following a multiyear price slump, a few catalysts have lined up to push silver higher in 2015. To find out how high silver can go, check out our 2015 silver forecast...
