Strategies for Investing in Silver
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Strategies for Investing in Silver

There is a big interest with investing in silver. Many feel that silver has much more to gain than gold does at this time.

While gold has been the hot topic, there is an increasing interest with strategies for 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, the gold to silver ratio is at 47.36. Gold is $1,368 and silver is $28.90, so it would take 47 ounces of silver to buy one ounce of gold. 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.

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.

How to Short Silver when Silver is Falling

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.

© January 5, 2011 Sam Montana

Resources

Gold/Silver Ratio Reconsidered

Gold/silver ratio – World of Wall Street

Gold/silver ratio – Goldprice.org

Investopedia - Understanding the gold to silver ratio

Kitco - Current gold to silver ratio

Perth Mint

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Comments (6)

What a wonderful article Sam: informative, knowledgeable and holds attention well...especially to a "goldfinger" and long john silver as myself. Great writing.

The gold/silver ratio comes from how many ounces of silver there is in the ground vs gold which historically is thought to be about 15.

A very interesting and informative read Sam.

The gold/silver ratio can be confusing and fascinating. If you enjoy charts and technical analysis it is fun to look at. Many traders watch and use it. I added a few more web sites under the resources section with charts and current thoughts on the recent and past moves in the gold/silver ratios.

Good article. USA today had a feature on silver recently. I found a 1922 silver dollar at the car wash, of all places, last year. As soon as I picked it up and I knew what I had by the heft of the coin.

Bought 10 ounces today as the price is swinging up again.

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