While gold is always a hot topic, there is an increasing interest with investing in silver. Along with its precious metal value, silver is also used more in industry than gold is, and any economic rebound could mean more silver is needed. Silver can be very volatile but could produce a larger percentage gain than gold could now.
There are numerous strategies for
investing in silver:
- Invest in old US silver coins
- Buy silver bullion coins
- Invest in stocks of silver mining companies.
- Buy an ETF that follows the price of silver or the price of silver miner companies
Gold to Silver Ratio Strategy
Many of those investing in the
metals look at what is known as the gold to silver ratio. This ratio is how
many ounces of silver it takes to buy an ounce of gold. The ratio is
used by many traders as a way to determine when to buy and sell gold and
silver. Others don’t like using this ratio since the ratio fluctuates and could
cause them to sell when they should have held.
As of today July 6, 2014, the gold to silver ratio is at 62.46. (Gold is $1,317.30
divided by silver at $21.09.) Many newsletters assume this ratio should be 16
and that means that silver still has a long upward trend to catch up to gold.
It could also mean gold has a long way to fall to make the ratio at 16.
But the gold to silver ratio of
16 is a historical average going back hundreds of years, while a more recent
ratio is in the 40s. If the gold to silver ratio interests you as a
strategy for investing in silver, you should become familiar with it and the
historical ratio numbers.
Investing in Silver Coins and Bars
You can physically own silver in
the form of bullion coins and bars. You can buy silver bars in various sizes
ranging from 1 ounce to over 1,000 ounces. The most popular coins are the
1-ounce coins like the:
- Canadian Silver Maple
- American Silver Eagle
- Austrian Silver Philharmonic
- Mexican Silver Libertads
- Chinese Silver Panda and numerous other silver bullion coins
These are known as bullion as opposed
to owning a collectable old silver coin, which not only carries the value of
the silver but also how collectable the coin is.
You can invest in what are called
“junk silver coins”. A collectable coin derives its value from the age of the
coin, denomination, the mint mark, grade or condition of the coin and the
amount of silver and the current price of silver.
With junk silver coins, most of
their value comes from the amount of silver in the coin and their face value. These
would usually be very common 1964 or before US coins like Roosevelt
and Mercury dimes, Washington Quarters, Franklin and Kennedy half-dollars. You
can buy bags of these silver coins from dealers in usually $100 or $1,000 face
value bags. Keep in mind you will pay a premium or commission from these
dealers when buying these silver bags. A $100 face value bag could be 1,000
dimes or 200 half-dollars.
Investing in Silver Mining Companies
Investing in the actual companies
who mine the silver can be another strategy for investing in silver. Like
owning stock in any company, you need to take a look at each company for the
usual things like their bottom line, equipment costs and management. Some of
the well known mining companies are:
- Silver Wheaton (SLW) of Vancouver, British Columbia, Canada is a company that has done very well recently for its investors.
- Coeur D’Alene (CDE) of Coeur D’Alene, Idaho is engaged in the mining of both silver and gold in several South American countries, Alaska, Nevada, Mexico and Australia.
- Silver Standard Resources (SSRI) of Vancouver, British Columbia
- Pan American Silver (PAAS) of Vancouver, British Columbia with mining operations mostly in Mexico, Bolivia, Peru and Argentina.
- Hecla (HL) of Coeur D’Alene, Idaho.
Investing in Silver Exchange Traded Funds (ETF)
There are numerous ETFs that can
track the price of silver itself or a basket of silver mining companies.
- iShare Silver Trust (SLV) is the best known of the silver ETFs. It tracks the price of silver.
- Power Shares DB Silver Fund (DBS) which tracks the price and yield of the Deutsche Bank Liquid Commodity Index - Optimum Yield Silver Excess Return
- Global X Silver Miners (SIL) is a new ETF that is gaining in popularity. This ETF holds and tracks the price and yield of 25 silver companies.
- ETFS Physical Silver Shares (SIVR) follows the price of silver bullion.
- ProShares Ultra Silver (AGQ) is the double-long silver ETF.
There are also a number of mutual
funds that invest in baskets of silver companies. One popular fund is the
Vanguard Precious Metals and Mining, but like the name says it invests in a
basket of all precious metals, not just silver.
Perth Mint Silver Certificate
When you invest and buy silver
and take possession of all of this silver yourself, it can present the problems
of safety and storage. With the Perth Mint Certificate you can own silver that
is insured and vault protected for you. The government of (the state of) Western Australia guarantees these certificates. You can learn more by
contacting them or Asset Strategies International Inc. in Rockville, MD.
Investing in a Silver Bear Market
Maybe you believe silver is about
to fall or you just want to hedge your profits. You can also buy put options on
many of the above companies and ETFs. Or you can short silver by buying the
ProShares UltraShort Silver (ZSL) ETF.
Conclusion
Investing in silver can be very
profitable, but you should remember that silver itself and the silver mining
stocks can be very volatile in price movements. You should research each of
your strategies for investing in silver carefully.
Copyright © 2011-2014 Sam Montana
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