Buy Silver in 2019 ☛
This article is for newbies and experienced hands alike, who wish to buy silver in 2019.
We will walk you through all you need to know about making your investment in silver a successful one.
Not only that but we'll reveal the best way to invest in silver in 2019 (and, crucially, how NOT to invest in silver!)
Even though silver, like gold, at the time of writing is at 5 year lows (read: great time to buy, folks!) it is a very different type of investment than you would find in gold. For one thing, silver has more applications of its use. It has also been used more than gold as coined money throughout history.
There are also differences in the dynamics of demand between gold and silver. Let’s take a look at a comparison between these two investment options.
Silver vs. Gold
These are some things to consider when you are choosing whether you want to invest in gold or silver:
Is Silver Better than Gold for Investing?
Silver has far more demand and diversity in its industrial use than gold does. Only 12% of gold is used in industrial applications whereas half of the silver supply is used in the field of industry.
Silver is something that is used in most aspects of our lives. Just think about the items that you use on a regular basis. There are probably numerous things that you use daily that have some silver in them.
Even something seemingly simple as batteries or basic electronics will have silver elements to it. This fact alone shows how wise of an investment it is because it is something that is necessary to everyone’s lives.
The problem here is that silver is usually destroyed when it is being used, unlike gold which is often melted down to be used again. That means there is a limited supply of recyclable silver left over. Industrial needs are also very dependent on the economy and whether there is a prevailing recession or not.
What is the Return on Silver Investment?
There are periods when silver will perform better than gold and times when the opposite is true. For that reason it is best to consider long-term performance.
In the period between 13 June 1996 and 11 Feb 2016, the price of Gold per ounce rose from $383.59 to $1246.76. That's a 225% gain.
In comparison, during the same period, silver rose from $5.13 to $15.74: a 206.82% rise.
OK, so, slightly more modest historical gains for silver. But what's in the future for gold's apparent "poor" cousin? For me, that is the exciting prospect. Especially when you consider the somewhat surprising factors we'll cover in the remainder of this article.
What's Rarer: Gold or Silver?
Given that (at the time of writing) the spot price of silver is almost 50 times lower than that of gold, you'd be forgiven for assuming that gold is rarer than silver.
But you'd be wrong. It's not.
Silver is such a commodity in the industrial world, but it is actually far more rare than gold is. Gold is something that people want and yearn for, but silver is something that is more of a necessity.
When the markets wake up to this fact, some experts say that we could see silver prices rising to more of a par with gold!
Another random fact is that, interestingly, only around 35% of the silver supply is mined from pure silver mines. The rest of this supply is comes from being a by-product of minding lead, gold, zinc and copper.
Is Silver a Volatile Asset?
Investing in silver is perhaps not for someone with a tendency to get anxious. Silver is a volatile asset. This means that its value is prone to rise and fall frequently (even though the general trend over the longterm has always been upwards). This may be difficult for some to tolerate.
My philosophy on this is twofold: I try to only look at the medium to long-term trend, rather than at daily fluctuations. And secondly, I remind myself that silver (and gold) are kind of "anti-currency".
What I mean by this is that they represent a safe haven from and a hedge against fiat currency. "Fiat" just means that they are not backed by anything (as many once were) and are inherently worthless. Unlike fiat currency, bankers and governments cannot print more precious metals at will.
When Should I Buy Silver?
So, how can a smart investor know when it is a good time to buy silver?
Well, fortunately, you don't have to stumble about in the dark -- there are a few indicators that you can use to judge the best time to dive into silver.
The Gold/Silver Ratio
When purchasing silver, some investors look at the silver/gold ratio to gauge the right time to buy.
The gold/silver ratio is simple to calculate; just divide the price of gold by the price of silver. The higher the resulting number is, the more undervalued silver is in comparison to gold. The lower the number is, the more overvalued silver is.
So for example when we have a high ratio like 70 or 80, then this is a great point to buy silver as it is worth much less in comparison to gold.
When the ratio between the two metals is lower, e.g. around 50, then this would be considered a good time to buy gold instead.
At the time of writing, the ratio is high (just under 80) and that is why personally, I am currently purchasing silver!
The silver/S&P ratio compares the value of silver to the stock market in general.
To calculate this metric, we first multiply the price of silver by 100 and the divide that number by the S&P index value.
When you compare silver to the S&P share index, when the number is lower than 1.0, that means silver is undervalued in comparison to the S&P. If this number goes up to 2.0, 3.0 or beyond, there should be great care when considering your investment into silver.
So with the numbers as of today: (100 * $15.45) / $1,917.48 = 0.8.
This, being below 1.0 is another strong signal to buy.
Finally, we can plain old look at the historical price data.
As far as historical comparisons are concerned any price that is lower than $20 per ounce shows that silver is undervalued, which is especially true when you consider inflation.
Of course, this is only an estimation and none of these considerations guarantee whether or not investing in silver at that time is a good idea.
What Influences the Price of Silver?
When it comes to silver, there are outside factors that do have a huge impact on how well silver is doing in the market. These are some of the outside influences on the price of silver:
The Need for Silver
Supply and demand has a huge impact on the price of silver. Supply affects the price because if there is more of a supply or little demand for what supply there is, this will negatively affect the price of silver as it would with any other commodity. If there is a limited supply with a large amount of demand, this will make the price of silver move higher.
Supply comes from a few different sources. One source of obtaining silver is through pure silver mining. Though in the grand scheme of things, only a small percentage of silver is obtained this way. It also comes from other metal mines as a by-product of mining. A final way of obtaining it is through scrap collections and recycling.
Demand is the side of this equation that will fluctuate more than the other.
Demand for silver comes from things like industrial uses, investing purposes, and for making jewelry. Demand for silver is a big factor when considering your investment.
Does the Economy Affect Silver?
The economy has a huge impact on the price of silver. This is because demand is so reliant on the economy. If the economy, more specifically the industrial portion of the economy, is thriving, than silver is something that will increasingly be needed.
However if the economy is failing, then the price of silver can drop quickly and make it not so wise of an investment and this is why it is such a volatile commodity.
How Does the Stock Market Affect Silver Prices?
Silver is very similar to other investments in the sense that interest of customers will affect the price of silver. If the stock market is not performing very well, people will start looking for alternative means to investing their money.
If the stock market is doing well, silver may not be as successful because people are happy with their more traditional investments.
How Does Inflation Affect Silver Prices?
Whenever inflation occurs or even the anticipation of inflation occurs, silver ends up becoming a popular choice for investors. Silver will even outperform gold for the most part during this economic time.
As an example, when inflation was around 14%, silver hit a record high. This occurred in 1980. This means that if you think a time of inflation is incoming, investing in silver would be a great choice for you.
What's The Best Way to Invest in Silver?
My answer to this is always, always, always: physical metal.
I would consider storing a small amount securely at your home; come silver coins perhaps. Then store the rest -- probably silver bars in various denominations -- in vaults in a safe jurisdiction overseas (Singapore for example).
Should I Buy Silver ETFs?
When you are investing in silver, we recommend that you only invest in physical silver rather than ETF (exchange-traded fund) or “paper” silver.
Whether you actually take delivery of your silver or store it with a custodian here or abroad, you actually have ownership of your investment. With an ETF, you cannot take delivery of your investment. It is "trapped" in a bank vault somewhere.
This is not an assurance that you will get from paper ETF silver. The company that issued your paper ETF could go bankrupt and you could be left with nothing to show for your investment.
Why Are Silver ETFs Risky?
One purpose of precious metal investment is as a hedge against paper currency and financial calamity. In a financial calamity, markets could close for a period of time; indeed we have seen this on several occasions in recent times, around the world. When this happens, you won't be able to access your investment, since ETFs are a traded asset.
Physical on the other hand does not require a market in order to get access to it.
ETFs are also the least private way of investing in precious metals. If the government imposes capital controls on precious metals -- as it has before -- then ETF funds are one of the first places they will look.
Is the Price of Silver Being Manipulated?
Many commentators claim that financial institutions are actually manipulating the price of silver and gold in order to keep them artificially low and thus make paper "money" appear more attractive. This cannot go on forever and when it ends, those holding precious metals will be in an enviable position.
Another reason that it is a wise investment is because silver is often destroyed after it has been used (disposable batteries for example) and the supply may end up under what the demand needs are.
After this manipulation by the financial institutions has run its course, the price of silver will inevitably rise. This means that now may just be the perfect time to settle down and invest your silver.
How Are Gold and Silver Prices Manipulated?
How do financial institutions manipulate gold and silver prices? This is done in two different ways.
In one scenario, they will actually “bomb” the Comex, which is done by using the trading floor or the electronic Globex trading system. This has the effect of causing sharp sell-offs through massive futures sell orders, and this will generally occur during times when economic reports are released and during times of low liquidity.
Another method uses price capping. This is done by meeting periods of increased demand from buyers along with an added supply of futures.
Why Are Gold and Silver Prices Manipulated?
Why do they manipulate these prices? The answer is that the government nor the banksters want silver or gold to undermine the legitimacy of their paper currency.
This would disrupt the huge wealth transfer mechanism that is utilized by the corporate, political and financial elite and these are people who really love their money. This has gone on so long that it will almost definitely end soon and this is great news if you are looking to invest in silver.
Buy Silver: Conclusion
Silver is a great option for you if you are looking for an investment choice that is not your traditional investment method. While it is a highly volatile commodity in the short term, you could set yourself up for big gains if you stick with it for the long term.
Just remember that when you invest in this type of commodity, there will ups and downs that can make the feint-hearted go a little crazy. If you are willing to ride the storm along with your investment, it can really pay off.
John Wilson, Editor
eGoldAdvisor Editor is John Wilson. John is an accomplished online and offline businessman and investor. He has significant personal holdings of precious metals and also real estate.
Some time ago, John came to the painful realisation that the government does not have our best interests at heart; least of all our wealth. Read more...