Silver Coin & Bullion

Why You Should Acquire Silver 

Although gold is a sentimental favorite among precious metal investors silver is more affordable and arguably has more upside potential than gold. In recent years it has become apparent that the world’s silver inventory has been steadily shrinking. In fact, it is now estimated that 90% of all the silver ever mined in the past 5,000 years has been used up in industrial applications like telecommunications and electronics. In 1980, the world had 325 million ounces in silver stockpiles. By 1995 this figure dropped to 260 million ounces and the COMEX inventory now stands at 90 million ounces, or less than $2 billion on world markets. This amount could be easily influenced by a mere handful of investors.

In late 2000, the US Defense National Stockpile Center committed its remaining ten million ounces to the US Mint for production of the American Silver Eagles. According to the US Geological Survey (USGS) there has been 46 billion ounces mined in world history and less than one billion ounces remain with 500 million ounces encumbered and only 500 million ounces available for fabrication and investment! Each year 900 million ounces of silver are consumed but silver mining only accounts for 680 million ounces. How is this shortfall met? Some silver is recycled, but more importantly warehouse inventories are being drawn down – and this is bullish for silver.

In addition to these statistics the silver market has been manipulated in the same manner that the gold market has been through “silver leasing” to bullion banks and mining companies in order to suppress the price of silver. Wall Street banks have also conspired to hold the price of silver down through a process of naked short selling on the COMEX in New York. A lesser known reason why JP Morgan Chase was encouraged by the Fed into a forced merger with the failed Bear Stearns investment bank and brokerage firm in March 2008 was because of their concentrated silver short position held at COMEX. Analysts predict that with no legitimate backing for this short position spot silver could have been pushed to almost $100 an ounce! The record now shows that in July 2008, JP Morgan Chase, Goldman Sachs and HSBC moved to short the silver market with 6,199 silver contracts on the NY COMEX. Within a month these banks increased their short positions by 33,805 silver contracts, which represented a five-fold increase and 88% more silver than COMEX had in its vaults with the result that silver dropped from $19 to $9 an ounce. According to silver expert Ted Butler, as of May 2010 just eight trading banks control 33% of the total silver bullion inventory and this concentrated short position is 27 times larger than the gold shorts! Due to heavy investor demand these efforts to control the price of silver are losing ground and at some point the supply and demand fundamentals will cause silver to skyrocket. Many financial experts are predicting $5,000 to $10,000 an ounce for gold and $300 to $600 an ounce for silver (based on a historical 15:1 ratio). Silver is not only a profitable asset but an excellent hedge against financial uncertainty and a practical barter item.

Introduced in 1986, the American Silver Eagle is one troy ounce (.999 fine) and its weight and purity are guaranteed by the US government. American Silver Eagles are considered legal tender by the US Mint which classifies these coins as “numismatic” since they sell for more than their symbolic face value. Coins are shipped in a US Mint box containing 500 coins (25 tubes each holding 20 coins) and weighs 42 pounds.

The Canadian Silver Maple Leaf is a favorite among investors and is one troy ounce (.9999 fine) minted by the Royal Canadian Mint. These silver bullion coins are usually priced the same as American Silver Eagles and can often trade for slightly less depending on prevailing market conditions. The Silver Maple Leaf is shipped in a mint box containing 500 coins (20 tubes each holding 25 coins) and weighs 42 pounds.

An excellent way to invest in pure silver is with “generic” silver rounds that are one troy ounce (.999 fine) and available in a variety of hallmarks. The Buffalo silver rounds minted by the Golden State Mint are gaining in popularity and are fast becoming a new standard silver round (the design is from the old Buffalo Nickel). Silver rounds are available in any quantity and are shipped in plastic tubes containing 20 coins each.

In addition to standard bullion silver coins you can also purchase the older US silver dollars like the Morgan and Peace Silver Dollars that are genuinely considered numismatic. The Morgan silver dollar is .77344 troy ounce (.900 fine) and was minted from 1878 to 1904 and again in 1921. Named after its designer George T. Morgan this series was replaced by the Peace silver dollar that is also .77344 troy ounce (.900 fine) and was minted from 1921 to 1928 and re-struck in 1934 to 1935. The Peace silver dollar (shown here) has the word “peace” on the reverse to commemorate peace after World War 1. Both of these coins trade for a nominal premium over spot silver.

Another consideration for silver investors are 100 ounce silver bars (.999 fine) that have very low premiums and are available in recognized hallmarks with a shipping weight of 6.86 pounds each. Engelhard silver bars are die cast and have been around since the late 1980s when they stopped production. Johnson Matthey ceased production of their struck silver bars in the late 1980s and currently offer poured silver bars (as shown here). Academy silver bars are becoming very popular and are manufactured with “computer numerical controlled” machine technology that results in precision cut bars that are identical in size and shape. This means that these bars can be evenly stacked (as shown here) and each silver bar has its own unique serial number. Silver bars are also available in 10 ounce and even 1,000 ounce bars and these silver bars are ideally suited for placing in a Precious Metals IRA account for safekeeping.

As mentioned earlier, the outlook for silver is very bullish. Most of the world’s silver supply has been used up, warehouse inventories are being drawn down, investor demand is high and price suppression schemes are failing to stem the tide. Like any commodity there will be periods of volatility but silver adds a silver lining to any portfolio in these uncertain economic times. We also offer pre-1965 “junk” silver coins (.900 fine) that are available in a full sealed bag ($1,000 face value) or half bag ($500 face value). We also offer foreign silver bullion coins like the Chinese Panda, Australian Kangaroo and the Vienna Philharmonic at competitive prices. For more information please contact our office.