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May 18, 2021

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Should I Buy Silver? How Do I Buy Silver? - Questions Answered With Charts And Historical Data.

Is silver a good investment? Why would someone buy silver?

It’s natural and even prudent for a prospective investor to deliberate if a particular asset is a good investment. This is especially true for silver, since it’s such a small market and doesn’t carry the same gravitas as gold and some other precious metals.

However, at this point in history, there are some compelling arguments to add physical silver to your portfolio (and only one of which is because the price will rise). Here the top 10 reasons why every investor should hold some silver.

#1  Physical Silver is Real Money

Silver may not be part of our currency, but it is still monetary. In fact, silver, along with gold, because it cannot be cultivated 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. These 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 a third party to make good on a contract or promise. This is not the case with stocks or bonds or virtually any other form of popular investment.

• Never been defaulted on. If you own physical silver, you have no default risk. Not so for almost any other investment you make. This provided some extra cushion to financial security.

 • Long-term use as money. A scan of monetary history shows that silver has been used in coinage more often than gold. This creates a strong trend.

Owning some physical silver provides you with a real asset that has served as money for the larger part of a millennium.

#2 Physical Silver is a Hard Asset

Of all the investments you own, how many can you hold in your hand and feel their worth?

In a world of paper profits, digital trading, and even currency creation, physical silver stands in contrast as one of only few assets that you can carry in your wallet anywhere you go, even another nation. And it can be as private and confidential as you deem fit. Physical silver is also a tangible hedge against all forms of hacking and cybercrime. There’s no “eliminating” a silver coin , for example, but that can certainly happen to some digital assets:

#3 Silver is Cheap

What if I said you could buy a hard asset at roughly 1/68th the price of gold—and it would protect you just as well against inflation?

This is what you get with silver! It is much cost effective and affordable for the average investor, and yet as a precious metal will help maintain your standard of living as good as gold during periods of monetary dilution which throughout history, happens every 8 years. 

See also
'Unretirements' Continue to Rise as More Workers Return to Work

If you can’t afford to buy a full ounce of gold, silver can be your ticket to holding some precious metals..

#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, too.

Perhaps you don’t wish to sell a full ounce of gold to meet a small financial requirement. 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 coins and bars bullion can be sold virtually anywhere in the world.

#5 Silver Outperforms Gold In Bull Markets

Silver is a very small market compared to all other IRS approved metals—so small, in fact, that a little cash 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 historically falls more than gold. Though, in bull markets, silver will soar much further and faster than gold. It plays a roll in the supply and demand regime. There is far more gold than silver being mined now and throughout history. Meaning that when it pops in a bullish direction. The momentum is much stronger.

In this photo you can see how much more silver gained than gold in the two biggest precious metals bull markets in the modern era: Notice how it always comes on the end of a major economic event? ( The stagflation 70's & the housing crash )


Gain from 1970 low to 1980 high 

 Gain from 2008 low to 2011 high







We can expect this outperformance to repeat in the next bull market, too, because the silver industry remains small in comparison.

The next bull market may come on the tail end of the 2020 pandemic or some of the economic recovery plans set fourth by each country.

#6 Silver Inventories Are Falling

Governments and other institutions were holding large inventories of silver. But today, global stockpiles are at all time lows. In fact, the only countries that warehouse silver are the US, India, and Mexico.

Look what has happened to those inventories since 1996.

Government Silver Inventories: Just 3 Weeks of Mine Supply

(Source: goldsilver.com)

The amount of silver held by governments worldwide is equal to only three weeks of mine supply. Talk about an in demand precious metal.

Another reason governments don’t hold a lot of silver is because coinage is no longer made from the precious metal. But if future industrial needs are difficult to meet, governments will be ill-equipped to support them.

#7 Industrial Use is Growing

Believe it or not, you don’t go one day without using a product that contains some silver.

It’s used in nearly every major industry, from consumer electronics and medical applications to car batteries and  industrial solar panels. Silver is everywhere, going unnoticed and helping drive our world.

Due to these rare characteristics, the number of industrial applications recently for silver has skyrocketed. In fact, industry now buys up more than half of all silver demand.

Silver Biggest Use is Industrial

Silver is used in a wide number of industries and products, and many of those uses are still growing steadily. 

• The average cell phone holds about one-third of a gram of silver, and cell phone use continues to climb rapidly around the globe. Gartner, a top information technology research and advisory firm, estimates 5.7 billion mobile phones were purchased between 2016 and 2019. That means 1.916 billion grams of silver, or 57.49 million ounces, were used just within this sector. Do you think cell phones are going away anytime soon?

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(VIDEO) Will Fed Raise Interest Rates in 2022?

• The average electric vehicle uses between 25-50g of silver per vehicle—nearly twice the amount of an internal combustion engine. With optimization in recent years, these number have been dropping. Growth in electric vehicles is projected to be so high that the Silver Institute estimates automotive demand will become one of the top 5 largest sources of industrial demand for silver by the year 2024. 

• Silver use in photovoltaic cells (These are the main essential components of generating solar electricity) was close to zero in 2006, and now owns a market share of more silver than any other applicatory sector. And since the cost of solar installation has fallen by 90% during that time, it has only become more of an attraction to both governments and consumers.

• 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, a third more silver will be needed by 2025 than what was used in 2020.

There are many more examples like the ones stated above like this, but the overall message is that due to its unique characteristics, industrial uses for silver continue to expand at a pace which supply cannot keep up. Which means we can reasonably expect this source of demand to remain robust.

Demand is not the whole story… unlike gold, as much as 30% of silver used for industry is destroyed during the fabrication and cultivation process or the product is simply thrown out after use. It’s just not economic to recover every tiny flake or sliver of paste from millions of discarded products. As a result, that silver is gone forever, and enforces limits on the amount of supply that can return to the market through recycling.

It’s even worse if you look at all the silver ever mined through history.

Almost Half of All Silver Mined Is in Landfills

Source : Goldsilver.com

So not only will the ongoing growth in industrial uses keep silver demand strong, millions of ounces cannot be reused. Or found for that matter. 

#8 New Supply is Falling

The silver price crashed and corrected after peaking in 2011, and over the following five years it fell a staggering 72.1%. As a result, mining companies had to be resourceful to cut costs and turn a profit. One of the areas cut dramatically was exploration and development of new silver mines.

It doesn't take a well versed economist to understand that if you do not have the money to go looking for more metals, you won't find any new ones. Exploration can, in some cases account for 25% of a companies expenditures. The chart below can depict this in a way that simplifies understanding.

Mine Production from Top 10 Largest Silver-Producing Countries

Changes in Annual Silver Mine Supply: As Negative As Its Every Been

Part of the explanation to the drop is that about two-thirds of silver mine supply comes as a byproduct from base metal operations (copper and zinc, for example). But these miners have also spent less on mine development—which means they will produce less silver, too.

Byproduct Producers of Silver Will Invest Less in Mines

Meanwhile, low silver prices have affected how much scrap metal is available, too—there’s less incentive to turn in scrap metal if the price is lower.

Silver Secondary Supply Sources in Decline

These findings have set the stage for a peak in silver supply. If demand stays at current levels, it will be hard for those who want silver to get as much as they need.

See also
The Fed Just Guaranteed a Stagflation Crisis in 2022 - Here's How

 Don’t look now, but…

#9 World Demand is Growing

Despite the effect of the global pandemic in supply chains, global demand for silver is growing at the same trajectory . Nearly all major government mints have seen record levels of purchases, with most already operating at peak production to start the year.

Surging demand is nowhere more evident than China. This behemoth market has a long history of cultural affinity toward precious metals. And with its population growing, its insatiable appetite will continue.

Silver Industrial Demand in China Up 50% in 10 Years

Record demand doesn’t happen in a vacuum. Sooner or later there will be consequences when springing demand meets choked supply—and those consequences are all positive if you own the silver.

#10 The Gold/Silver Ratio Favors Silver

Gold/silver ratio (the price of gold divided by the price of silver) can give valuable insight about which metal might be the better buy at any given time. Especially when the ratio reaches an paradoxing level

The gold-to-silver ratio averaged 47:1 in the 20th century. It’s averaged 56:1 since 1968, so a ratio above that level makes silver a good buy relative to the price of gold.

You can see that the ratio dropped to almost 30 at the peak of the bull market in 2011. It reached as low as 14 in early 1980 ( consequence of stagflation). This compression in the ratio shows just how much silver can outperform its cousin gold. It also confirms it is undervalued compared to gold.

For more insights on deciding Silver or Gold please read -  Gold and Inflation - A Historical Truth

• When you add up these 10 reasons, silver just might be one of the buying opportunitys 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 bull rush.

How to Invest in Silver

Buying physical silver is relatively straightforward. You can buy from a local coin shop, but believe it or not costs are usually lower at online stores like Augusta Precious Metals. That’s because overhead is much lower, and shipping and insurance costs are usually included with a minimum order (which isn’t all that big).

Setting up an online account is not much different than establishing an investing account. Once you remit a payment, your metals can either be shipped to you or deposited into a storage facility for a nominal fee..

Is Silver Always A Good Investment?

Silver has not historically performed as well as gold during recessions and stock market crashes. As mentioned above, this is due to its high industry applications—if economies weaken. demand for this portion of silver normally declines at a respectable level.

There are a number factors working in silver’s favor for the foreseeable and distant future. And like gold, silver is a monetary metal and thus will respond to monetary dilution and fiscal unrestraint. Until the current system is recalibrated to discourage gross currency creation and politicians are more financially responsible, history says silver will remain a strong asset to own.

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Nathan Rosevear

Nathan offers insights and reviews around the highest rated precious metal IRA specialists. He is an investor in gold and silver industry.
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