Another One Of My Favorite Investments
September 10th, 2012 by Aaron Koo
Silver is a bit of an odd one since it shares the same purpose as gold in a portfolio, but the monetary value of the metal is only just being realized. I won’t be going over why it’s handy to have, since it’s basically the same reason as gold, but I will tell you why you might want to buy some now, rather than later.
Just A Quick Overview
Back in the day, silver was favored as money, just like gold, because of its malleable, shiny qualities. During the 1900s, it fell out of favor when huge deposits of the metal were found in America. Because of this, the world feared a huge drop in the value of silver and switched to the gold standard. Despite this, silver has held on to be an economic anchor in the world even though its value is minuscule compared to gold.
Why You Might Want To Buy It
Unlike gold, the ultimate value of silver has yet to be realized. The value of our dollar relative to a silver coin remains to be seen. Silver, like gold, has been mined for much more than currency. It’s used heavily in jewellery, cutlery and technology. The future value of silver is so speculative for a few reasons.
First, silver has been mined to the point where we’re now left with only 5% of above ground deposits. At the same time, the demand for silver has only skyrocketed. There isn’t a technological device that doesn’t have silver in it, whether it be your laptop, your cell phone, or your television. On top of that, new applications are being discovered every day, putting that much more strain on the current supply of above ground silver.
People have known this for a long time. In 2010, silver traded at $20 an oz. People saw the ratio of supply and demand shifting in the favor of investors and bought. As with any investing, the idea is to buy low and sell high. This is called hedging. And those who bought silver in 2010 because they thought it was going to go up were right and they saw a 76% return as silver shot up in value to $32 an oz.
Only One Direction to Go
Consider that a gold coin has shot up in value to be worth $1700. Silver is only at $32. Being in the situation we’re now, if you had bet which way the value of silver would go, what would you say? Knowing that, what reasons would you have to buy or not to buy?
Filed under Money.
Too much speculation in silver, it’s too common and I don’t think it will become the rare mineral you believe it will Aaron. I see it being an under %50/oz commodity for more years then I will be alive to enjoy any profits from it.
Don’t forget that silver is meant to preserve your capital. It’s not a hot stock tip so much as it is a great opportunity to buy silver while it’s very affordable for most.
But the Nexus 7 is affordable, should I run out and buy it? The Kindle Fire is being sold at fire sale prices, should I go out and get one because they are affordable?
Of course not, even though I am in the technology field, I don’t just go out and get something that may seem affordable just because it is. I will disclaim that I do have a Fire because it was given to me as part of work related support duties. So, I do have it and do like it to some extent for some things and not for others, but I would not just go get one right now at the $159 fire sale prices.
Another way to think about it is, if I gave you an option of choosing to have $10k in silver or $10 in cash, the only stipulations being that it had to be locked away for 10 years, which one would you go for?
$10 cash money. It will be worth $10 (don’t spout about inflation and cost of living) if I give you the $10 bill you will give me the current $10 value.
The silver could be worth $1,000 or $1.00. Sorry, but it’s not worth it to have less in 10 years than I already have. Plus, I wouldn’t agree to lock it up for 10 years. You need flexibility to move things around when you feel you have to.
You’ve interpreted my response as a call to action. I was replying to your concern that the price of silver is a volatile investment, which it is not. Like gold it is meant as a hedge against volatility and inflation, which has proved itself true for almost 3000 years.
You mentioned that $10 cash will be worth $10 cash in the future. I agree. I believe it would be fair to say that the purchasing power of that $10 cash would be reduced significantly. However as I mentioned above, the buying power of a silver coin will remain the same. I was only using 10 years as an example. Use whatever time span you wish.
I also like silver coins, but I bought them to own them and their value it’s not so important to me.
I’m glad to have some gold,silver and diamonds, but I do not consider them too much as an investment
Good point. It should still be comforting that if the shit hit the fan, you do have that asset.
I am a collector .. I’ll be crazy, but sometimes this craze makes me feel good.
And among the many collections, I own something of value, but do not consider them as an investment.
Of course, if I were to lose everything, I might start selling some good