A Silver Investment Problem: No Silver

Creating and building your silver investment used to be as easy as driving to your local coin shop and buying some coins or bars. You could usually count on them having a dozens if not hundreds of ounces on hand.

But times are changing. Investment demand has risen sharply with the economy in turmoil and with silver prices under $10/ounce.

Sean Brodrick at Money and Markets writes about his recent experience trying to secure silver:

At the first one, I was told that silver bullion coins (I asked for silver Eagles) were unavailable. At the second one, I was told they were available, but “not at any price you’ll want to pay.”

How much was that? Oh, about 60% more than I expected to pay.

“That’s outrageous!” I sputtered.

“Call me next week,” the dealer told me. “Maybe we’ll have more then.”

And…

A 12-to-16 week lead time for delivery? Un - freaking - real. And while that may sound crazy, it pales compared to the lunacy of not being able to get American Eagles and Canadian Maple Leaf coins until March of next year!

There’s always ebay.

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Silver Investment Prices Low, If You Can Get It

Thomson Reuters reported today that India is seeing a surge of silver purchasing in light of the very low spot price for silver.

“Indian traders may not be buying much gold with prices close to all-time highs, but are scrambling to stock up on silver that fell to its lowest in a little more than a year, dealers said.”

The article seems to imply that the people who are driving this demand are all in the jewelry business. I’m wondering how many of these buyers are buying the silver purely for silver investment purposes?

At any rate, silver can not be flown into India fast enough.

“‘Now they are not being able to arrange supplies.. whoever reaches them first or those who have good contacts are getting the little silver that is coming in.’”

With the world’s second largest population struggling to get silver, is it only a matter of time before this demand substantially drives up the price?

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Silver Investment News for Saturday, October 18, 2008

* Jason Hommell is trying to auction off several bags of 90% silver and some bars, and The Tulving Company has offered him $4/ounce over spot price to take it off his hands.

* A jewelry importer from North Carolina is no longer buying silver from Indonesia because their government-regulated price is 22% higher than the market price available in Singapore or Bangkok.

* John Embry discusses gold and silver price manipulation (PDF) in the environment of the Wall Street bailouts in Investor’s Digest.

* Franklin Sanders offers a light-hearted rant about the stock market, and the price of physical silver and gold compared to “paper” silver and gold at The Money Changer.

* Jim Iacono also talks about the disparity between physical silver price and “paper” silver.

* 2 articles about oil discuss commodities prices and how they are affecting gold and silver. LBO.lk and The Independent. From LBO.lk: “Gold plummeted even though it is seen as a haven in times of economic turmoil. Its performance weighed on other precious metals, with silver, platinum and palladium striking multi-year low points.”

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Silver Investment Teapot

Recently, my sister asked about a few boxes of silver she had lying around her garage. We’re not talking bullion investment silver, we’re talking old pieces of dinnerware and ornamental pieces. She was wondering what to do with it?

In particular, she had a teapot and a small pot for coffee and tea cream just sitting around taking up space in her dining room. I have seen these items, but it has been some months since I’ve been in her house. I do not have any expertise in antiques whatsoever, but I did let her know that the silver content in the items probably made them worthwhile to take to a dealer.

While she was thinking these items might be good for a garage sale, I was thinking they might be worth more than anything else she would sell.

With a digital postal scale, she was able to weigh the items and tell me they totaled about 20 ounces. Now ounces are not quite the same as troy ounces, so the conversion gave us an amount of about 18.2 troy ounces.

Of course, these items were not .999 pure silver, but the Sterling variety that weighs in at .925 percent silver. So the actual amount of silver in the items is about 18.2 x .925 = 16.8 troy ounces.

Next, if we take the price of silver, about $9.30/troy ounce as of this writing, the silver value of the items comes to $9.30 x 16.8 = $156 and change. Not bad for a teapot that was just lying around the house. This would not be my ideal choice for investment silver, but it’s not the worst either.

But where would she go if she actually wanted to trade the teapot for $156 cash? She has a couple of options.

First, I advised her to have an antiques dealer or auctioneer take a look at the items. If the company name were stamped on the items, or if it included other identifiable marks, she could be in for an “Antiques Roadshow” moment.

Next, I suggested a coin shop or scrap metal company. It’s unlikely she would get the full value for the silver, but she could expect about 80% of the value and have the cash in hand.

Finally, I suggested eBay. The auction site is a great resource to unload pieces such as this. She would want to take sharp, detailed pictures of the pieces, including any print that appears on the items, especially relating to the silver such as “Sterling Silver” or “.925 Silver” or the manufacturer’s name or logo. In this way, she would be attracting both the silver investment market on eBay, as well as the collector’s market.

There are other places to send your silver, or gold, or other jewelry and precious metals. We see them everyday advertised on television and magazines. There is a billboard about 500 feet from my house proclaiming, “Send your precious metals. Top dollar paid. We pay shipping.”

These are bad choices because they are spending a ton of money on advertising and this money is made up in the low prices they offer for your metal. If you choose the local dealers or eBay, you will most likely get a very good deal with very little effort. And if you check with an auctioneer or antique shop, who knows? Maybe you have a true treasure.

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Trading The 401k For The Silver Investment

I received an email today from one of my closest friends. He is considering starting his first silver investment. Like many employees right now, he is looking to cash in his 401k before it’s worth absolutely nothing. He asked me about the price of silver over the last year, and the volatility of it compared to gold. Here’s my reply:

“Pretty straightforward. Silver is an industry metal, gold is an investment metal. Because silver is used so much in industry, its price is moved based on the needs of industry. Gold is primarily an investment metal, so its price moves based on the needs of investors.

“This is why the two metals move somewhat independently of each other in the market. If you are considering the $2,000 from your 401K, you should definitely consider gold. Basically, you are looking at 2.25 ounces which should be something you can probably get at a coin shop. There are .25 ounce gold coins available, so this would be fairly easy to come by.

“But many experts think silver is the better investment. One of the reasons is that it appears investment in silver is strongly picking up. This would account for eBay selling silver at around $18/ounce (before shipping costs) when it is listing at $11.

“The price of silver would rise if:

* Investment demand grows to the point of impacting industrial demand
* A financial crisis occurred where precious metals became the currency most sought after globally
* Industry demand grows
* Any mining company went out of business
* Any current mine dried up

The price of silver would drop if:
* Industry demand diminishes
* New mining companies appeared
* New mines were discovered

“Notice that investment silver demand can only impact the price of silver in one direction. There are four scenarios for our economy according to Michael Maloney: deflation, mild inflation, big inflation, and hyperinflation. Gold and silver rise in every scenario.

“Industrial impacts could lower the price, and I think that is what has lowered the price from last year’s high of over $20. But it can only drop to a point because there are so MANY industries that use silver and new uses are invented every day. Mining companies don’t appear overnight, and new mines are extremely unlikely to be discovered. Especially since silver is not something you mine for. Silver is a byproduct of copper, iron, or some other mining.

“The real point is that yes, silver has been a little up and down over the last two years. But even at $20/ounce, silver looks to be a bargain in the near future. Today, it’s at around $10.70/ounce. Remember, the object of this game is to buy low and sell high.”

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Today’s Investment is Silver. Buy It Now!

The silver price dropped sharply today, as low as $9.50 an ounce so far. If you have been putting off starting a silver investment, today is the day to start.

Most online silver dealers are temporarily out of silver, but will lock in today’s price and deliver in a few weeks (or months). Your best bet is to call around to your local coin shops and see if anyone has any silver.

A rapid drop in the price may be prompting many silver investors to dump their metal onto coin shops. Hopefully this will flood the silver investment market and reduce the premiums we’ve recently been seeing for investment silver. On eBay, the price is holding steady at $18-$21/ounce for small quantities.

Silver is primed to increase dramatically in price as the stock market continues to waiver and the value of the dollar gets more and more diluted. This price drop in silver spells a huge opportunity to grab as much precious metal as possible before a huge adjustment in the precious metals market.

Look for one ounce rounds and bars in coin shops, as well as five ounce, ten ounce, and 100 ounce bars that individuals may be bringing in.

Call your coin shop today before they unload them to industry buyers and take them out of the investment market for good.

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Silver Investment: 25 Reasons To Buy Silver

#1 A silver investment contains something real. It is not a piece of paper that represents something real, silver is real.

#2 Silver is easy to store. Nearly all investment silver is either coins or bars. Coins can be wrapped in rolls, bars can be stacked, boxed, and wrapped together.

#3 Silver is portable. At $12/ounce, there are few forms of property that carry as much value for the weight, unless you have upgraded to gold and platinum.

#4 Silver is cheap enough to be used as real currency. Should the dollar completely fail, gold will be a somewhat impractical form of money, while silver represents much smaller denominations for payment of everyday expenses like food.

#5 Silver is beautiful. Holding silver in your hands is intoxicating because of it’s shiny brilliance, it’s mass, it’s smooth texture. Mints stamp unique and creative designs on their coins and bars to take advantage of these qualities.

#6 Silver is recognized as wealth worldwide.

#7 Silver can be exchanged for cash in almost any county in the U.S. at a local coin shop.

#8 Silver can be exchanged for the local equivalent of cash in many European banks.

#9 Historically, silver and gold have risen sharply at times of economic crisis when the dollar has been devalued.

#10 Silver is disappearing. The majority of silver is used for industrial purposes such as photography, electronics and in health care. Much of this silver is unrecoverable.

#11 Silver mines cannot keep up with the demand of industry, much less for investment silver.

#12 During the Great Depression, some of the biggest fortunes were made by people who recognized the economic situation and bought as much gold and silver as possible.

#13 A stock can become worthless, silver cannot.

#14 Silver can be purchased in numerous places including coin shops, national coin dealers, and a huge market on eBay.

#15 Silver is difficult to conterfeit. Lead-filled silver-plated coins lack the ring of a true silver coin and coin shops can spot them easily.

#16 Silver is easy to identify. Rounds (coins) and bars state that they are “.999 pure silver” right on the product. U.S. coins minted before 1965 contain 90% silver, and U.S. coins minted between 1965 and 1970 contain 40% silver.

#17 The weight of silver is clearly stamped on the product. Rounds are clearly marked “one troy ounce,” bars are marked with their weight, and even bars used for industry are marked with their exact weight such as “11.3 troy ounces.”

#18 The value of silver is easy to calculate as the silver’s weight (in the U.S.) is always stamped in troy ounces, and the national market price of silver is always displayed as the value per troy ounce.

#19 Silver can be obtained in small amounts, such as a single round in a coin shop, or in large amounts, such as a 1,000 troy ounce bar from a major retailer.

#20 The price of silver is very low. While silver topped out at $20.79 last year, it has fallen to $12.15 today, a drop of 41%.

#21 Collecting silver is fun. Silver can be bought purely for investment, or you can choose rounds or bars based on their design. “Numismatic” coins like the Silver American Eagle demand higher prices than ordinary generic coins. These type of coins have a collectible value in addition to their silver content. But even generic “rounds” contain many different designs that are enjoyable for an investor to collect.

#22 Silver can be passed on from generation to generation without any paperwork.

#23 Investment silver does not lose its value when it tarnishes. Sulfur in the air causes silver to yellow or blacken. This does not affect the properties of the metal, so the silver value of the coin or bar does not decrease, however a numismatic coin may lose value.

#24 Silver has history. From the oldest civilizations to today, silver has always played a prominant part in currency, in metalwork, and in investments. When you buy silver, you may be buying something that was made from the same silver used for forks, spoons, or weapons hundreds of years ago.

#25 You don’t have to spend a lot of time investing in silver. Instead of sitting in front of the computer looking through stock summaries, investor analyses, corporate earnings report, and scandalous executive indictments, you could sit in front of your computer watching the cold, calculating, impersonal price of metal…scandal-free.

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#1 Reason To Start A Silver Investment

A silver investment starts with as little as $12.50 and a quick search to find the local silver dealers, otherwise known as coin shops. As of this writing, the silver price in the U.S. is $11.38 for a troy ounce, and if you are lucky enough to find a silver dealer who is not currently gouging customers, a one-ounce silver coin, or round, can be yours for about a buck over the spot price.

But that isn’t the reason to start a silver investment. There are other types of investments where you can make small purchases, such as DRP stock investments that charge no fees and no commissions.

With a stock, you end up with a piece of paper, or a transaction on a computer with a value based on the U.S. dollar. With silver, you get an actual piece of metal!

Silver is real. Silver is something you buy and then take home, or to a safety deposit box, or to a self-storage unit, or to a vault. In the real world, silver has value beyond being traded as money. It is primarily used in industry, from electronics to medicine, and those industries are having a difficult time getting enough of the metal that conducts electricity better than anything else that exists.

The feeling of having your silver investment in your own hands is a powerful sensation. It is tangible, and not some abstract number listed on your computer screen or printed on a certificate. It has weight, brilliantly reflects sunlight, rings when you flip it in the air, and feels smooth and cold to the touch.

Find the silver dealers near you today and give them a call. See if they have any coins or “rounds” in stock and make the first purchase for your silver investment. Having an ounce of silver where you can see it reminds you of the importance of investing, and shows you how real those investing efforts are.

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The Lies About Silver Investment

You hear many things about the silver investment industry. And many of those things are lies, according to Jason Hommel’s latest article. Here are some of the highlights of his 50 Lies About Silver:

* Lie #3: You cannot verify whether silver is real without high assaying costs.

* Lie #14: There will be deflation, and silver does not perform well during deflation, and did not perform well during the depression of the 1930’s when silver was 25 cents per ounce.

* Lie #17: Most major coin shops are frauds, they will take your money and not deliver silver for months, so you are likely risking losing your money when you go to buy silver, if they go bankrupt.

* Lie #22: This one coin shop I know can buy all the silver I want, so there is no silver shortage.

* Lie #32: Who would want silver when you can buy silver in your brokerage account instead?

* Lie #34: If you store silver at home, the thieves will just come into your home and threaten to cut your toes off one by one unless you give them the combination to the safe, so you can’t store silver at home.

* Lie #35: You can’t eat silver.

* Lie #49: There is no inflation, the dollar will get stronger.

Clearly, Jason is in favor of silver investment, he makes an income from sharing his silver mining portfolio, so take his “lies” with a grain of salt. Still, it’s a fun list and worth a read.

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Your silver investment and the bailout

If you are one of the lucky people to have a silver investment instead of stocks or some other paper investment, you may want to hold onto it for a few more months.

Hopefully, your investment consists of cold, hard silver locked away in a vault or buried in the woods somewhere. Real, live silver and gold may be one of the most precious possessions in the coming months.

It might sound extreme, but the government just put $700 billion into play that was not being circulated a week ago.

To put this into perspective, the Federal Reserve stated that in 2004, the total amount of U.S. money in circulation was only $667 billion worldwide. Yikes.

This leads me to think that my taxes are about to go way up to pay for this, or the money in my pocket is going to be worth half as much very soon.

The silver investment market is taking off right now as a result. There is a demand for physical silver that is way outpacing supply. According to GoldPrice:

“The Silver Price closed at $11.27, down 20.5 cents, but to buy US 90% silver coin and wait 2-8 weeks to get it I would have to pay $15.18 per ounce, a 36% premium over the paper price. And silver American Eagles? Well, forget them. They cost $16.81, a 50% premium, and heaven only knows when I’ll get delivery.”

Traditionally, silver dealers might sell $.50-$1.00 over the spot price per ounce of silver, but right now, that’s way higher, immediately cutting into your return on investment (ROI).

But two things will probably happen to help the savvy investor add to their silver investment.

1) Silver mints will produce more coins and bars to help meet this demand. The lag time for them to produce the investment silver will be a few weeks to a few months.

2) The market hysteria will die down somewhat in the next few weeks, and many investors will part with some of the silver they just bought, pouring back into Wall Street. This silver will find its way to coin shops and silver dealers.

Either way, silver dealers will find themselves with a sudden abundance of physical silver and the price should come way down.

Exception: the market hysteria may only be the tip of the iceburg. It is possible that when the smoke clears, everyone will suddenly notice how absolutely devastated the economy is, in which case, all bets are off. If you have any physical silver, this would be a good time to load the station wagon and take a “vacation” to Niagara Falls…like on the Canadian side.

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Recent Posts

• A Silver Investment Problem: No Silver
• Silver Investment Prices Low, If You Can Get It
• Silver Investment News for Saturday, October 18, 2008
• Silver Investment Teapot
• Trading The 401k For The Silver Investment