Is Silver a Good Investment?

Investing in precious metals in the current economic times is actually a sound economic investment for the medium to long term. While you could be looking to make a quick buck from a silver investment on the short term market, you will need to check the broker or trader’s fees to be sure that you come out on top. Investing in precious metals will not produce any cash flow and interest as such; however silver differs from gold in that its use in manufacturing is far more widespread. The facts are interesting, first of all where does silver come from and is the supply line guaranteed, and what have been the historic prices?

How has the investment in silver fared historically?
The first indexes that have been agreed to be reliable were produced in 1840 and have continued to track market value up to the present day. At that time, silver had an index price compared with gold where gold was worth 15 times the value of silver. By 2010, the relative values show that gold is worth 60 times the value of silver for the same weight.  These ratios have fluctuated up to a 94 to 1 relationship with gold as recently as 1990.

An investment in silver is very much a speculative investment and such an investment is a good hedge against inflation, the same could be argued for gold. Actually the opposite is true, in the case of gold, its value rises when there are concerns about the world economy or the currencies of leading world economies, for example a run on the US dollar, reducing its value will often cause investors to invest in gold stocks. Conversely, the price of silver tends to rise when the economic situation is positive and the reasons for this become clear when you study what gold and silver are used for.  It is no coincidence that silver prices with relation to gold were at their all time high in the 1970’s and 1980’s periods of strong worldwide economic growth.

How silver is mined, collected and used?
Silver has many uses; particularly in the latest electronic equipment. In addition, it is used in many other industrial processes; this is in extreme contrast to gold. It is surprising that only about 3% to 4% of total production went in coins and silver bars, 30% on average per year is used in jewelry while the use in the photographic industry consumes 26%. Because of its industrial use, a large amount of silver is literally thrown away; the silver components could be too small to warrant recycling. However, recycled silver is pumped back into the economy with about 20% of total annual production coming from recycled stocks. Silver recycling can have a direct impact on the value of your silver investments because both mining and recycling operate on generally marginal profits, the supply volumes can reduce and increase dramatically. The best time to be investing in silver is at the start of an economic recovery and in particular, industrial recovery as production capacity can be outstripped by demand as the production plants work up their output capacity to meet the demand.

As the world economy returns to steady growth, an investment in silver is an extremely good idea, emerging economies have a demand for consumer electronic products such as mobile phones, LCD TVs and many other products of this type use silver in their production. It is estimated that demand will outstrip supply for the forthcoming years by as much as 20%. Considering that the total annual production value of silver is much less than $750 million today, an investment in silver will gain you a far higher percentage share of the overall metal market than with other metals such as gold or zinc.

Buying silver and creating your investment fund
Silver should be bought in 1oz silver coins, it is also available in bars, and normally silver can be bought at local coin shops. Take time to make sure you know the hallmark signs, example, 1oz fine 999 silver, to confirm you are buying the real product and that the trader is correctly licensed. Typically, you will be asked to pay a 10% commission on top of the price.  If you are not checking the market values daily of your silver investment, a good rule of thumb is that if world economies are growing in line with or over expectations, your silver investment will be a good one. If economic growth is expected to fall during the time you plan to cash in your investment, you would be advised to sell earlier rather than later to get a maximum return.

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