Precious metals like gold and silver are resistant to inflation because their value is derived differently from paper money or fiat currency. At current low prices and increasing demand for silver today, this precious metal offers a great way to hedge against inflation and hyperinflation.

If you have been following the silver market lately, you may have noticed that many precious metal dealers and mints around the world have been out of stock in silver bullion for a while now. There has been a shortage in supply of mined silver as silver mines around the world are being shut down due to the coronavirus outbreak.

Why Invest in Silver?

The spot price of silver has fallen to its lowest in 10 years just over a week ago on 18th March 2020, at the price of US$11.74 an ounce. With inflation rising to a peak and a global financial crisis in sight, precious metals could be an ideal commodity to use as a store of value and safe-haven asset.

Given the current low price of silver, this is an opportunity for both new and experienced investors to take advantage of.

Precious metals behave a little like insurance during financial crises. As little as 5% of your portfolio invested in silver could do very well when times go bad. For one, it helps me sleep better at night, knowing that a portion of my assets is in physical silver. Not stocks, not mutual funds, or any of the other financial instruments revolving around currencies.

What about gold? Gold remains one of the best commodities as a safe-haven asset. However, its relatively much higher price could be a barrier to entry for those considering starting out in precious metals at today’s rates.

The current gold-to-silver ratio of around 1:95 suggests that silver is undervalued. This also means there is plenty for silver to catch up to, and as history has shown, with such spike in the ratio, it is often followed by a retracement to a more average gap between these two precious metals. A spike in silver prices would make this happen.

Silver is also an industrial metal with wide-ranging applications and will always be in demand. In fact, this demand is continuously rising, as silver is used in everything from smartphones and consumer electronics to solar panels and antibacterial garments.

How to Invest in Silver?

For those who are new to silver and are considering this precious metal as an investment or portfolio insurance, the following serves as a guide to steer you in the right direction and help you avoid the common pitfalls.

#1: Buy physical silver

There are a few ways one can invest in silver – there is the physical silver bullion, exchange-traded funds (ETFs) backed by the physical metal, mutual funds that include silver mine stocks, and silver-backed cryptocurrencies, amongst others.

Personally, my advice would be to consider buying only physical silver. This includes coins and bars in their various forms.

ETFs and other paper forms representing silver and other precious metals expose the investor to many disadvantages and risks. New investors (even smart ones) sometimes make the mistake of assuming that holding ETF shares that track the price of silver is equivalent to actually owning the precious metal itself. This is simply not true.

If one goes through the fine print carefully enough, one would probably come across a few clauses that free the fund of any responsibility in certain situations. This poses a huge counterparty risk to the ETF holder.

#3: Understand the terminology of the trade

If you’ve just started exploring silver, you may come across a few terms that you have not encountered before. I will list a few below to get you started:

• Argentum: The Latin word for silver, abbreviated as Ag on the periodic table of elements.
• Assay: A test to determine the quality and purity of a silver product. When a silver bar ships with an assay, it is a guarantee from the assayer that the item contains the described mass and purity of silver.
• Bullion: Any piece of highly concentrated silver at high purity (usually 99.9%) minted or cast into coins or bars for the purpose of physical precious metal investment.
• Brilliant Uncirculated: Often denoted by the abbreviation BU, this means a coin is in pristine and immaculate condition and has never been in circulation or use.
• Circulated: Coins which have been released into circulation for use by the public and are generally in varying degrees of worn condition.
• Constitutional/Junk Silver: Pre-1965 half dollars, quarters and dimes and other similar coins which contain up to 90% of silver.
• Gold-Silver Ratio: The amount of silver one can purchase with one ounce of gold based on the current spot prices of both metals. E.g. if the current prices per oz. of silver and gold are $20 and $1,000 respectively, the Gold-Silver Ratio or GSR is expressed as 1:50.
• Legal Tender: Face value of coins that can be used as national currency, usually much lower than the value of the metal itself and stated on the face of the coin. A 1 oz t silver coin may show a value of 1 dollar or 5 dollars.
• Mint: The refining company which fabricates silver (and gold) bars, coins or rounds. E.g. The Royal Canadian Mint, The Royal Mint, The Perth Mint etc.
• Mint State: A condition given to coins at a certain level of immaculacy, graded between 60 and 70 on the Sheldon Grading Scale as determined by a grading company such as PCGS and NGC. The Sheldon Grading Scale developed by Dr William Sheldon in 1948 grades a coin from lowest at PO-1 (poor) to the highest at MS-70 (mint state) depending on its condition.
• Proof: A coin that has been struck with greater pressure using special dies during minting to create a highly polished and pristine appearance. Usually collectibles that are traded at much higher premiums than the standard coin of the same type.
• Purity: The content of silver in a coin or bar. A .999 and .9999 indicate a 99.9% and 99.99% purity.
• Obverse: The front (head) side of a coin, usually bearing the head or face of an important person.
• Reverse: The rear (tail) side of a coin, usually with a distinguishing icon or design that indicates where the coin was minted, as well as other details such as the coin’s purity and weight.
• Round: A term used to differentiate and describe silver in coin form that is not formally legal tender issued by a sovereign government mint.
• Spot Price: The live, up-to-date price of silver (or gold), determined by the latest trades on the futures market as well as over-the-counter (OTC) markets.

N.B. Some of the terms above will apply more to the collector than the regular investor.

#5: Know the different types of silver

As a silver investor, you should always buy pure silver at the purity of 99.9%. Some mints pass purified silver through an extra round using electrolysis to bring it to 99.99% purity, but for the investor, either purity is fine silver.

Other than fine silver at 99.9% purity (hence 999 silver), there are also items made of sterling silver with 92.5% of silver content (hence 925 silver), and coin silver and constitutional coins with silver content ranging from 50% to 90%.

American coins such as the Roosevelt and Mercury Dimes, Washington Quarters, and Walking Liberty Franklin and Kennedy Half-Dollars that were minted in 1964 and before had 90% silver.

You may consider investing in this type of silver, but just be aware that 1 troy ounce of such items will consist of less weight in silver.

If you are just entering into silver as an investment, consider acquiring only fine silver at 99.9% purity at the lowest price possible.

#7: Choose your denominations

Minted silver coins are often sold in the usual denominations of 0.5, 1, 2, 5, and 10 troy ounces. Silver bars come in 1, 5, 10 and up to 100 troy ounces. You may also find in-betweens and odd denominations in hand-poured silver.

Silver bullion (bars and coins) are also sold in grams and kilograms.

The important consideration with denominations is choosing which ones to buy.

Premiums on larger silver bullions work out to be much lower when calculated on a per troy ounce basis. For example, it would cost less dollars per troy ounce for a 10 oz.t silver bar, than for 10 pieces of 1 oz.t bar.

Both denominations have their purposes. If you want to sell a troy ounce of silver in the future, having only a single 10 oz.t silver bar may prove to be difficult. On the other hand, you are not getting the best value for your money by buying 10 pieces of 1 oz.t silver bars.

It would be a good idea to buy both denominations for both situations, and maybe even the denominations in between, depending on how you plan to spend, keep and sell your silver.

If you’re starting with a larger budget, you may consider buying the larger denominations to get the best price at the lowest premium possible.

If you’re planning to set aside a portion of your salary to acquire silver bullion on a monthly basis and don’t have a big budget to begin with, you may consider buying them at 1 or 2 troy ounces at a time.

#9: Find your dealers and mint

There will usually be at least one or a few precious metal dealers in your city. Visit their websites and make a comparison of their silver prices. Look at the different silver products and denominations that they carry. Also, check how long they have been in business, and their reputation and trust ratings online before ordering.

If you happen to live in a city where there isn’t any shop or dealer, you may consider shopping online. Some dealers and private individuals operate their silver trading business online without a brick-and-mortar presence.

Even so, the same rules above apply, and you can usually tell how legitimate and trustworthy a seller is by how long he has been in business and the reviews left behind by previous customers.

When silver is out of stock at most mints and dealership as at time of writing, buying silver bullion from trusted sellers on eBay and Amazon can be a viable option.

“Interestingly, Argentina is named after silver, and is the only country in the world to be named after an element. The river that borders what is now Argentina was called the River of Silver. A Portuguese explorer named Lopo Homem first associated this territory with silver, and marked it on his map as Terra Argentea or Land of Silver, in 1554.”

I covered briefly above some of the reasons why silver is a good addition to your investment portfolio.

Beyond that, it is a good idea to also learn more about the health of our financial system and of global economies, and why silver and other precious metals could facilitate new transfers of wealth at best, or at the very least serve as good stores of wealth during an inflationary crisis.

BUY SILVER BULLION on eBAY

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