8 reasons why silver is a better investment than gold
1. The historical relationship between the price of silver and gold was 16:1, but in recent years, silver has become relatively cheaper, ranging from around 40:1 to 80:1. On October 12, 2009, with silver at $17.75/oz. and gold at $1,057 an ounce, the ratio is 60:1. This means that silver is currently undervalued and cheaper than historical norms and therefore a better investment than even gold if you want to “buy low and sell high”.
2. The fundamentals of silver supply and demand are extraordinary. There has been a continuous silver supply/demand deficit for 12 years. The industry consumes more silver than is produced by mining and recycling combined. Some say that this shortfall dates back 60 years and has consumed virtually all of the silver known to have been mined since the beginning of the world. The annual deficit has recently ranged between 100 million and 200 million ounces per year. Annual supply is approximately 650 million ounces and annual demand is approximately 800 million ounces.
3. Considering the known reserves of refined and mined silver, there is much less silver in the world than gold. Approximately 150 million ounces of silver vs. 4 billion ounces of gold.
4. Most of the silver, 70 to 80% that is traded, is extracted as a by-product of copper mining, gold mining, or zinc and lead mining. There are very few primary silver mines in the world, as most are actually copper or gold mines. Therefore, slight increases in the price of silver will not lift substantially more silver out of the ground. A lot of money is consumed in photography; electronics, medicine and many other industries. So little silver is used in any application (cell phone, photography, electrical terminal), that silver price increases are not likely to reduce demand. With relatively inelastic supply and relatively inelastic demand, a dramatic explosion in price will be required to rebalance the supply and demand deficit.
5. Famous investors have bought silver in recent years. In 1997, Warren Buffet bought 130 million ounces of real silver, due to favorable “supply and demand fundamentals” he bought as much as he was legally allowed to buy, but his purchase was with about 2% of the value of his purse. . George Soros owns a large percentage of Apex Silver (SIL). Bill Gates owns a substantial position in Pan American Silver (PAAS).
6. In the gold market, there has been a huge increase in paper futures contracts being used to suppress the price. In silver, the relative amount of paper contracts is much higher. In other words, there are more paper shorts that will be caught in a hopeless situation when the price of silver actually starts to rise due to the fundamental gap between supply and demand. They will be forced to buy silver or go bankrupt. Either action will cause a dramatic increase in the price of silver. If they fail to honor silver contracts, that will signal to the world the dire shortage of silver and signal a great investment opportunity.
7. One of the cheapest ways to buy silver: You can buy US coins dated 1964 or earlier, $1,000 face value (4,000 quarters, or 2,000 half dollars, or 10,000 dimes), at a “bag” of “junk silver”, containing 715 to 720 ounces of silver, depending on the wear of the coins. In the early 1980s, when silver was $30 to $50 an ounce, a bag of silver could be used to buy a house! We could see that day again, soon!
8. But historically, a silver dime was a day’s wage, either 100 years ago or in Roman times when a denarius was a day’s wage. This means that a silver dime, worth $1.27 today, could be worth more than $150 (which is a day’s wages in today’s money) or more now that silver is scarce. In fact, in 1926, a silver dime could pay rent at a 5-star hotel for a month! That’s worth around $6000 to $10,000!
You get a lot of money for your money. A bag of scrap silver weighs about 55 pounds and is about the size of a bowling ball. If you invested $100,000 in junk silver coins, at $12,450/bag, that would give you 8 bags each weighing 55lbs, or about 440lbs total. Can you imagine moving so much around your house if you had to move? Silver is so cheap that it creates physical problems for investors today!
Sometimes you’ll find quarters in a bag dating back to the late 19th century. In the early 1900s, you could work ALL DAY for a salary of ONE QUARTER OF SILVER. Imagine being able to buy a day’s wages of real money for less than a dollar of today’s money! Today, in 2009, a day’s salary exceeds $100. Another way of saying it is that the dollar has lost more than 99% of its purchasing power over time. However, because silver is undervalued, you can get 100 times the value of your money and labor if you invest in silver. Imagine if today they paid a day’s wages of $100 in silver quarters; they should give you about 100 quarters today. The implications are that if silver returns to its historical valuations, the value of silver will have to go up about 100 times, to $450 an ounce. Silver is really a bargain.
I have studied silver for 14 years. At the risk of sounding like a conspiracy theorist, the price of silver has been manipulated and kept artificially low for years. The United States used to have the largest strategic reserve in the world: more than 3 billion ounces. Today we have essentially zero. Today, some reports put the amount of silver available on the COMEX at 60 million ounces. (COMEX stands for Commodity Exchange, which is a division of NYMEX – New York Mercantile Exchange. This is where precious metal futures contracts are traded.)
This presents an investment opportunity of a lifetime. In reality, silver today is more likely to be the greatest investment opportunity in the history of the world.
* Never before in human history has the entire world stopped using silver as money.
* Never before in human history has the entire world consumed nearly all of its silver for use in electronics.
* Never before in human history has silver become so cheap.
* Soon, never before in human history, have we virtually run out of available silver above ground.
Silver is theft! It’s cheap, too cheap!