Sunday, February 24, 2013

I’m on Board with Silver…Are You?

I’ve been seeing a lot of articles online lately regarding the popularity of silver. One in particular entitled “Silver Coins in Demand” from a North Dakota news agency recently caught my attention. It got me thinking about some of the things that are affecting the physical silver market lately. According to the article, "North Dakota people are buying silver at record levels the last two years.”

I’m jumping on the bandwagon too. Actually, I’ve been ahead of the curve on this trend and am content to ride along with it for a while. Recently I bought the kids a few of silver coins for the holidays, as did my mother.

Here are some of the reasons why it appears silver is becoming so popular as of late.

Economic Uncertainty
While things look okay at the moment, there is still plenty of economic uncertainty out there. The job market, Europe, the nation’s deficit and budget woes, inflation possibilities, housing, welfare, Social Security, Medicare, and more add to this uncertainty.

Metals and commodity investment can often be a good option at times of economic uncertainty. And while lately, the price of silver hasn’t been doing much, it’s often a strong hedge against things like inflation. While the Fed continues to pump money into the system, I look at silver as a strong asset to hold to help counteract some of the effects of this money printing. If the Fed is looking to push people toward risk by way of this monetary policy, I think that putting money into silver rather than the stock market is a smarter and less risky way to put money to work in a long-term investment that can be a tangible asset as well.

Lack of Supply
I’m a strong believer in the law of supply and demand. When there is less of a desirable commodity, its price tends to go higher. When I see things running out, like the supply of American Eagle Silver Bullion coins sold through the US Mint, forcing them to temporarily suspend sales in January of 2013, it tells me that demand is hot and supply might not be keeping pace. To me, this is a strong indicator of investor sentiment and one that I’m not willing to ignore.
While the price of silver is up significantly over the past decade, it is still largely affordable to the common investor. At around $30 an ounce, and easily purchased at coin or pawn shops, silver is an easily attainable asset for the common man or woman. According to the North Dakota news article I previously referenced:

"If nothing else, silver is a hedge for protection of your assets," said customer Wayne Papke. An avid collector, Papke buys silver as gifts for others and for his own portfolio. He`s one of a growing number of people investing in this precious metal.

A major reason is prices, which have jumped in the last ten years. In January 2003, an ounce of silver cost less than five dollars. By 2008, it was 15 dollars. This year, it reached 32 dollars per ounce, up more than 600% from a decade earlier.

With prices still rising, more North Dakotans are investing in silver eagle coins -- as many as 500, the maximum amount the Mint will ship at once.

While I’m not expecting such returns in the near term, I think that silver prices still have room to grow significantly both over the short and long term.

Burkett, Brenton. “Silver Coins in Demand”. February 9, 2013. February 14, 2013.

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