Silver revisited

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ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Silver revisited

I just finished reading Michael Maloney's "Guide to Investing in Gold & Silver".  On pg. 193, he says:

"One more thing regarding silver: Always buy 0.999 fine silver.  This is what I call "investment grade" silver.  It's the silver that industry needs, and with the world running low on supply, it is the silver they will pay dearly for.  Do not buy old U.S. 90 percent silver coins (unless you collect them as a hobby) or other forms of un-pure silver such as sterling silver.

If you sell silver that is not 0.999 fine back to a dealer, the dealer will usually sell it to a refinery.  Between 1979 and 1981, when silver's price was quite high, so many people were selling so much old silverware, jewelry, and such along with 90 percent silver coins, that all of the silver refiners got jammed up for more than a year.  I'm pretty sure that this will happen again, and if it does, your junk silver might sell at a significant discount to pure silver."

The web site below, on the other hand, describes shifting premiums on junk silver vs. .999 fine silver and makes more of a case for buying junk silver under certain circumstances. 

http://www.cmi-gold-silver.com/90circulated.html

I'm just wondering if anyone who is very experienced in the silver market (or has some additional insight) has any comments to make on this issue.  I hold both but am trying to arrive at a decision as to where to direct future purchases.  By the way, I'm presently finishing up writing a concise publication on Guidelines for Buying Gold and will soon start writing a companion publication on silver so I want to make sure I examine points of view that I hadn't previously considered.  Thanks for any help.

 

Jim H's picture
Jim H
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Joined: Jun 8 2009
Posts: 2379
Re: Silver revisited

I like pure silver.. US eagles for best immediate liquidity.  I consider the 10% premium small at this price point, considering where the silver price could go in a crisis.  I think what you do would depend on your motivation... I hold PM only as a hedge against the worst economic outcome... hence I want the best, most liquid forms... eagles and buffalos, etc.  I am not a collector.. and I want minimum bulk.  Tulving has silver eagles for $1.99 per coin premium in lots of 500... you can't beat that....

The real tough question is whether gold will do better than silver in a dollar crisis.... I know that the gold:silver ratio is out of whack relative to the historical mean...   and I like that silver has industrial uses.  Then again, you don't read about hedge funds taking positions in Silver.. but they do seem interested in gold... hmmmmm  

 

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Re: Silver revisited
hannah_351 wrote:

I like pure silver.. US eagles for best immediate liquidity.  I consider the 10% premium small at this price point, considering where the silver price could go in a crisis.  I think what you do would depend on your motivation... I hold PM only as a hedge against the worst economic outcome... hence I want the best, most liquid forms... eagles and buffalos, etc.  I am not a collector.. and I want minimum bulk.  Tulving has silver eagles for $1.99 per coin premium in lots of 500... you can't beat that....

The real tough question is whether gold will do better than silver in a dollar crisis.... I know that the gold:silver ratio is out of whack relative to the historical mean...   and I like that silver has industrial uses.  Then again, you don't read about hedge funds taking positions in Silver.. but they do seem interested in gold... hmmmmm  

Thanks for your comments Hannah.  I'm just wondering though, if you hold silver only as a hedge against the worst economic outcome, may I ask why would you pay a 10% premium for eagles when junk silver can be had, at times, for under spot?  In a crisis, U.S. coins such as junk silver would be even more recognizable to the populace than eagles and are also broadly available in smaller denominations.  If you're looking to hold .999 fine silver for price appreciation, why wouldn't you hold bars with a much smaller premium than eagles?

Also, while hedge funds aren't widely known to be taking positions in silver, there is historical precedent for "smart" money holding silver including the Hunt brothers and Warren Buffet.  Unfortunately, both of these trades ended badly for these respective investors. 

 

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
Re: Silver revisited

I've invested heavily in silver bullion for two reasons.

1.) In one ounce denominations silver will be easier to trade or sell than gold.

2.) I truely believe some form of Executive Order 6102 will be reinstated making gold illegal to own in any large quantity.

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