Silver has often been called poor man’s gold as it is so much more affordable than gold. With silver trading in ranges of $28 to $45 per ounce over the last few years, and gold trading between $1500 and 1,800 per ounce silver is much more affordable for investors. Silver is highly undervalued over the last year, and appears to be in a consolidation pattern poised for growth. In 2011 silver prices rocketed to almost $50 per ounce.
Barclays Bank, Thomson Reuters GFMS both agree that the average price will be $45 in the near term. If you started buying silver today, at roughly $32 per ounce and the price went to $45 per ounce, you’d be making a 40% percent profit. Many believe once it gets to $50 per ounce it is poised to run up to a new high.
Silver is currently valued 55:1 to gold. Gold prices are 55 times the price of silver. Historically it has been 16:1. Silver hasn’t reached this full valuation since 1980 when it hit $144 per ounce. If it were to obtain that same valuation in today’s dollars, with inflation adjusted it would cap $500 per ounce. Many analysts believe silver will go this high for this exactly this reason.
The presence of inflation typically drives up prices of silver. In times of tough economy the Federal Reserve helps or eases lending by printing more money with what it calls “Quantative Easing.” With more money in the economy the dollar loses value with inflation. The price of silver historically has been a hedge during inflation and economic turmoil. The price typically trends up during inflation.
About 95% of the demand for silver comes from industrial applications such as cell phones, medical equipment, automobiles, water purification, solar panels, and hearing aids to name a few. There are more than 10,000 applications but because the amounts of silver used in each use are relatively small, it costs too much to recover. A large percentage of silver is used up by 95% of buyers in one time use! And the demand continues to grow from these industrial buyers and investors making up the other 5% of the growing demand.
Current growing demand uses up more silver than is mined. Existing silver inventories are rapidly diminishing. With low prices, silver exploration has almost stopped completely. There have not been any major discoveries in years. As silver supplies are reduced, investors will compete with corporate industrial buyers which will drive up the price of silver. Scientific American
predicts at current production all the silver in the world will be used up by 2029. With thousands of applications and no quality substitutes, what will happen when silver is used up?
Israel Friedman says, “It is only a question of time when the shortage of silver will come. The USA has enough gold for 1,000 years of future defense needs, and not one day’s worth of silver.”
As a respected mentor to silver Analyst Ted Butler he adds “There is no extra silver left in the world. When the [silver price growth] comes, it will go so high the whole world will ask how this could happen.”
Silver Prices Driven Down
Most people do not know that a group of banks have been under investigation for manipulation of silver prices since 2008. JP Morgan has been identified by the U.S. Commodity Futures Trading Commission CFTC as a key player in this scheme of manipulation. The bank has come under suspicion from its ownership of more than 25% of all short contracts on silver, betting on declining price of silver. These “naked shorts” are not covered by physical gold. There is not enough silver in the world to cover these shorts if needed. The activities of this group of banks appear to be manipulating prices as much as possible outside the jurisdiction of the CFTC. One of the CFTC commissioners remarked that any such activities will be prosecuted to the full extent of the law. When this prosecution comes out the price and control of silver might explode overnight.
How to Buy Silver
There are four basic ways to buy silver.
Buy direct from local coin shops
If you want to see your silver and buy it while seeing it go to your local coin ship and buy silver coins, rounds, or silver bars. Avoid numismatic, collectible coins. You will pay a premium for their vintage. Buy coins for their silver content.
Buy physical silver from a broker dealer who is reputable. The silver will be shipped to you after your purchase and you will take possession of it.
Buy silver coins from an online retailer. Be careful of fees. Some retailers sell at a large double digit percentage premium over spot price.
Buy silver on a periodic schedule of your choice and an amount of your choice to build up a savings. You can open an account to store your accumulated savings. When the silver quantity reaches a predetermined quantity, you can take possession usually having it shipped directly to you.
1) Why Do People Buy Gold?
2) Gold Investment Basics: Simple Ways to Invest in Gold