Investing in Silver: How to Start

Are you a new collector or investor who’s looking to start collecting silver bullion? The coins featured below are common and highly popular bullion coins, which hold much lesser premiums compared to numismatic coins or rare silver coins. I’ve included some details on each coin, and how to take care of them.

Investing in Precious Metals can be quite nerve recking especially for a beginner or first-time buyer. Make sure you do your market research properly, and don’t buy or spend more than 30% of your financial assets on precious metals. Start small by purchasing a few 1 oz. silver coins initially. You can take a look at Ed Freeman’s Silver Snowball Program which is a good way of purchasing Gold and Silver Eagle Coins (with International Shipping).

I highly recommend new collectors or investors to read Mike Maloney’s Guide to Investing in Gold and Silver.

Guide to Investing in Gold and Silver

The Current Price Of Silver, And Why It’s A Good Time To Buy.

As the current precious metals bull market continues and the dollar price of gold continues to skyrocket, silver metal prices will see even more dramatic gains that gold. Today, for the first time ever, the amount of silver available to investors is less than the amount of gold. One of the reasons for this is that most of the gold that is mined continues to exist, in the form of jewelry and money. Only around 11% is used for industrial and medical purposes. Silver, on the other hand, is used for industrial purposes in far higher rations than gold is. That means that most of the silver that is mined is actually discarded as waste and usually not recovered.

Historically, the price ratio of gold to silver has always averaged around 12:1, which means that gold was valued about 12 times more than the prevailing value of silver. The reason for this can be assumed to be that, on average, the supply of silver was 12 times greater than the supply of gold. The free market always balances these things out naturally. However in modern times, the amount of silver available to investors is far less than the amount of gold; the amount of silver being mined is far less than the amount of gold; and government reserves of silver are almost nonexistent compared to their reserves of gold.

So if silver is currently rarer than gold, why is the gold price higher? It’s because everybody thinks it’s supposed to be lower. People’s perception of silver is that it is the poor man’s gold, a cheaper metal with less intrinsic value than gold. Because of that perception, people are quicker to put their money into gold as an investment. Gold is glamorous. Gold signifies wealth. Silver seems mediocre. But these are mere perceptions, and once the market corrects the price of silver based on the law of supply and demand, the price of silver will skyrocket even more than gold will.

Think of it this way. The historic average price ratio of gold to silver has always been 12:1, as mentioned above. But the current ratio at the time of writing is about 73:1. This is despite silver being scarcer than it has ever been, even more scarce than gold. Even if we are conservative and say that the price corrects itself to the 12:1 ratio, that would be a huge gain in the silver price. And in all likelihood, silver will see far greater gains than that. Some even expect the price to match or even to surpass the price of gold.

I’ve been gradually increasing the amount of silver I buy for my family because I think that only as the gold price climbs very high will people start to realize the potential of silver to increase in value. Silver prices per ounce are currently very low, so the time to start buying is NOW.

Though many are bullish on Precious Metals for the next 10 years or more, it is also important to predict futures with a right mind-set. Predict them realistically, and most importantly know why you are buying physical metals. Do not be too greedy and do not be too fearful at the same time. If you have done your research properly, you ought to stay firm on your beliefs and change your investment/collection goals with the long-term trend of the world.

Silver Maples,Silver Eagles And Perth Mint Silver Coins Do Very Well as Legal Tender Silver Coins Worldwide. Also, Kilo Bars And Ten Ounce Bars Do Well Too! Remember Silver Is Still Silver At The End Of The Day, But It Would Be Wiser To Buy The Most Common Silver In Whatever Market That Country/Region Prefers.

The year of a coin/bullion does not matter (in fact sometimes older coins tend to hold slightly more value to newer ones), precious metals are ultimately precious metals. They can be exchanged/traded as long as the Silver content and purity stays the same. Numismatic coins are more for collectors who really like the coin/bullion itself and as such are not recommended for investments and beginners due to the high premiums they hold. In good times, the value of numismatic coins goes up in price. But in bad times like a currency crisis, a numismatic bullion is usually worth only for its metal content.

FAQ: Why Can’t I buy Silver at Spot or Below Spot?

This is the exact same question I asked myself when I first started in Precious Metals. Your answers are below.

1. There are dealer premiums to pay, shipping, insurance, taxes, bank forex losses and risk.

2. Most countries do not have a silver or gold mine. Even big dealers like Monex pay premiums for their metals. The ones who garner huge profit are those mints who buy precious metals by the millions of tons below spot, and sell it at a mark-up above spot. They make and play by the volume.

3. The same weight of Silver cost more to ship than Gold. Gold no doubt is slightly denser than Silver, yet when combined together, Silver takes a whole lot more space compared to Gold.

I’ll continue with more details on the various options for purchasing and investing in silver in another post.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.

More About The Common Fallacies of Gold

We already covered 15 of the most common fallacies and myths behind holding and investing in gold held by the general public. Surprising, there are even more myths ingrained in the minds of people. However, holding a few of them shouldn’t stop you from purchasing and investing in gold, silver or other precious metals. Odds are, you already know the value of gold and silver, or at least, your parents or grandparents do.

More often then not the question is where to purchase gold, what types to purchase and how to store it safely and securely. I’ll return to that topic in another article.

Meanwhile let’s continue with some other common myths about gold and other precious metals.

Here are some more common myths about gold and owning gold:

16.  There is not enough gold in the world to use as money.

Wrong.  Twice as much refined gold exists in the world today as there was 30 years ago.

There is “not enough gold” only for those people who have none.  If that describes you, you should buy gold immediately!

If you are a liberal socialist, or communist, remember to avoid buying “more than your fair share,” which is 7/10ths of an ounce, or seven tenth-ounce gold coins.  At $320/oz., that’s $224 worth.  (130,000 tonnes, or 4.18 Billion ounces of gold in the world, divided by 6 Billion people, is .69 oz. each.)

Of course, that price reflects today’s low valuations.  If gold were to be valued the same as dollars (100 times more), then there would be $22,400 worth of gold (the same 7/10ths of an ounce) available per person on earth.

17.  There is too much gold in the world today to use as money.

Wrong.  With $8 Trillion dollars in M3 in the U.S., and $1 Trillion worth of Gold in the world (valued at today’s prices), there is certainly much less “gold value” in the entire world than there are dollars in the U.S.  Gold will jump up in price quite nicely for those who hold it.

18.  The supply of gold is not flexible enough to use as money.

Wrong.  There is always enough of gold to use it as money.  When there is little gold, the gold has more value, which, in turn, causes a mining boom, which brings out more gold.  When there is a lot of gold, it has less value, and mining slows down.  Gold is inherently both flexible enough, and stable enough, to use as the perfect money.

19.  Nobody accepts gold and silver.

Wrong.  As recently as 1964, 90% silver coins were in use in the United States, and for over a hundred years previous to that.  The U.S. Constitution says gold and silver are the only forms of lawful money.  Worldwide, gold and silver are probably more widely traded and recognized than the U.S. paper dollar.

20.  Gold is a bad investment because you can’t spend it, I mean, the supermarket will not take it.

That’s bad reasoning.  You can’t spend a bond, or a share of stock, or the title to a piece of land at the supermarket either, but those are all accepted as investments.  In fact, if you negotiate directly with any store manager or owner, you’d have a greater chance of getting them to accept precious metals as payment than any other investment vehicle.  Gold is the most liquid investment available; it is the very definition of “liquidity”.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.

Clearing Up More Common Myths About Gold

Last week, we went into detail into some of the common fallacies and myths behind holding and investing in gold held by the general public. And we offered our reasons why these beliefs are false and erroneous, and even dangerous: You certainly wouldn’t want to be caught holding on to worthless pieces of paper when a depression or hyper-inflation starts, would you?

Today, we’ll continue with some of the other common myths about gold and other precious metals.

Here are some more common myths about gold and owning gold:

6.  The only reason gold might go up in value is a potential war in the Middle East.

Wrong.  Gold must go up for a long list of fundamental, long term, systemic reasons related to supply and demand factors.  The media falsely claims that war, or short term political tensions, are the only reason gold “might” go up because most political worries are temporary.  For the most part, political worries or rumors of war are distractions from the real risks, which are pervasive, systemic, and long-term.

7.  The U.S. government still has gold; and that still backs the dollar at least somewhat, right?

Wrong, and this brings us to the fundamentals.  If the 7700-tonne (248 Mil. oz.) U.S. gold reserve still exists (and some seriously doubt that it does), it would only provide an ounce of gold for about every $33,000 dollars that exist as M3, the most comprehensive measure of dollars available.

Source of M3: http://www.federalreserve.gov/releases/h6/Current/

Source of gold at the U.S. Mint: http://www.fms.treas.gov/gold/index.html

This is not opinion here.  Look up the numbers and do the math. (8.3 Trillion dollars in M3 / 248 million oz. = $33,467/oz.)  If you really think that U.S. gold reserve is backing the dollar, then you must value gold at over $33,000 per ounce as a necessary logical consequence of what the numbers actually are.  Stated another way, if gold is valued at $334/oz., only 1% of U.S. dollars (as M3) are backed by gold, and that’s IF the U.S. gold reserve actually exists.

Now the concept of “gold at $30,000/oz.” doesn’t mean that an ounce of gold will have the purchasing power that $30,000 does in the year 2002.  It will probably be much less.  One “myth” is that we tend to think of the dollar having a relatively stable value.  By the time gold hits $30,000/oz., the value of the dollar will be much lower.

And I am also not saying that an ounce of gold in the future will have the same purchasing power it does today.  Not all of the price change will be due to dollar devaluation.  Gold will probably be much more valuable than it is today, and that is extremely difficult to quantify, and it certainly cannot be quantified in dollars which are not a stable unit to measure anything.

Further, I am not predicting gold will be $30,000/oz., and then stabilize at that price.  By the time fraudulent dollar excesses are blown off between now and the time gold hits $30,000/oz, in all probability there will be further increases in the number of dollars printed, and/or added to the electronic banking system.  For example, it will take some time for gold to move from $300/oz. to $30,000/oz.  If M3 increases by a factor of 10 in that time, then the real target price becomes $300,000/oz.

But not all the U.S. gold is for sale.  That hypothetical gold amount of U.S. Treasury gold above is simply used to point out the problem, and calculate that theoretical target price.  Since that gold is not for sale, or if that gold does not exist at all, then the dollar will drop in value to a point where the dollar gold price is much higher than $30,000/oz. gold.

Additionally, if the vast majority of dollar holders decide, due to a sudden burst of rational thought, to abandon holding the dollar in favor of holding gold, the dollar price may well exceed a million dollars per ounce.  And again, this doesn’t mean an ounce of gold will have anything close to the value of a million dollars in 2002.

As an example of the difficulty in determining changing values, a silver quarter was once a day’s wage.  Suppose that in the future, a silver quarter will be worth a day’s wage again, or over $80 (a day’s wage) in 2002 money.  But then again, due to mechanization and increased productivity, perhaps a day’s wage in the future will not be one silver quarter, but perhaps 4-5 silver quarters.  In that event, an ounce of silver in the future may well be worth about $80/oz., as measured in 2002 dollars, up from $4.30/oz.

8.  Now that Gold and Silver are no longer backing the dollar, the metals are just like any other commodity, and are therefore no longer money.

That’s absolutely false.  Precious metals are unlike any other commodity.  They are extremely scarce, are not destroyed by dividing into smaller units, can be melted together again, and don’t rust away or spoil.

Most other commodities have less than one-year supply above ground, and are consumed or spoil in less than a year, and are unfit to use as money.  Grain is an exception, as it can be stored for up to 20 years, and grain was also used as money in historic times.

Gold has 50 times as much above ground supply (130,000 tonnes) than is mined each year (2500 tonnes).

GOLD IS MONEY, and remains as money throughout the world, used by banks, central banks, governments, and people.

If gold truly were just like any other commodity, then those people who create the economic propaganda would be just as pleased that “consumers are spending” whether they were buying gold or cars.  Obviously, gold is very different.

9.  Gold inflates just like paper currency.

No, it does not.  The supply of gold worldwide increases by about 2% per year, about the same rate as the increase in world population, so that the amount of gold available per person remains at a constant of about 7/10ths of an ounce.

So, while the supply of gold has increased by a factor of 2 in 30 years, the supply of dollars in U.S. banks (M3) has gone up about 30 to 100 times!  They say that the dollar inflation rate is low at about 3%, but those are government statistics that don’t include the cost of housing, fuel, and food; in other words, lies. 

A more accurate inflation rate for dollars created might be obtained by looking at M3 increases.  From 1980 until 2000, this grew at 6.7% annually.

And actually, the supply of Silver (available for sale at the COMEX) has decreased dramatically. 

In 1990, total world silver was an est. 1,340 million oz.

In 1995, total world silver was an est. 850 million oz.

In 1996, total world silver was an est. 700 million oz.

In 1998-99, total world silver was an est. 400 million oz., and people were predicting that in five years, there would be no more silver. 

I’ve been watching silver since 1998, and I’ve watched COMEX inventories fall from 400 million oz. down to a low of 70 million.

10.  Gold does not do anything; it just sits there.

Wrong.  In contrast to all other paper investments or paper contracts, Gold can never lose all of its value.  That’s quite an amazing accomplishment, and a very unique and valuable property.  In contrast, every paper currency ever created in the history of the world has always gone to its intrinsic value, which is zero.  Gold keeps men honest, and prevents the theft of your wealth through inflation.  In fact, gold cannot even be taxed away, (like land), because governments have no way of detecting whether or not you actually own any gold. 

Those are three amazing qualities of gold, that when considered all together, make something wonderful; gold’s value can’t go to zero, and it can’t be inflated away or taxed away.

Investors wanting to buy gold or silver should go with the bullion coins: American Eagles, Maple Leafs, or Krugerrands. These coins move dollar for dollar with the world price of gold, and are easy to buy, sell, and trade or redeem. Additionally, tracking the value of these coins is easy. No “expert” has to look at them: they are widely recognized and accepted from money changers to coin dealers in all parts of the world today.

For a trusted and reliable source of U.S. Gold and Silver Eagle Coins that is the only sure way to protect your family’s finances from inflation and recession, we put our stamp of approval on the Silver Snowball Program promoted by Ed Freeman and Dr. Tom O’Brien. International shipping is also available to all investors for a flat rate of $6. Silver Snowball – The World’s Most Affordable Gold and Silver Program.