( 
)Why Silver is a good investment
1. Miracle metal
Silver is a miracle metal. It has the best conductor of heat and electricity and best reflector of light. It also can be used as Catalyst for many industrial applications and in medical application as well.
You can check the wide range of silver usage at silverinstitute website. Silver institute is a non-profit organization. Some of the usage of silver is in
Traditional Area:
Coinage
Photography
Silver Jewelry
Silverware and Table Settings
Industrial
Batteries
Bearings
Brazing and Soldering
Catalysts
Electronics
Emerging
Medical Applications
Mirrors & Coatings
Solar Energy
Water Purification
Gold as compare to silver does not have such a wide range of industrial application. Thus, most of the silver mined is used up by the industry while most of the gold mined still remained as inventory. Since the 1940s, when many of the silver application were found, silver are consumed largely by these industry. Once these silver are consumed by industry, it is gone forever. It will take enormous amount of time, energy, money and effort to recycle back the silver from dump site.
2. Silver mining
75% of the silver mines production are a by-product of copper, zinc or lead mine. In the event of recession, the demand for copper, zinc and lead will go down. Mining companies may shut down these mines. Thus, this will reduce the supply of silver to the market as well. Thus, during recession period, the supply side of silver will goes down faster than the demand. Silver is price inelastic.
Mining is an expensive project. New mine will take years to build before it is able to provide a constant supply of silver. Miner does not rush to start a mining project. The estimated production cost of mining silver is USD$6.00-$7.00 per oz for a good mine and USD$10.00 to USD$12.00 for an average mine. Mining require a lot of natural gas for electricity, thus the mining cost is also directly associated with the price of natural gas.
3. Declining Inventory
Sixty year ago, US had six billion oz of silver in her stockpile. One to two billion oz are consumed in the WW2 effort. US has never fought a modern war with zero silver stockpile. Not Korea, Not Vietnam and not gulf war. None of the modern weapons of war could exist without silver. On 23rd July 2002, President Bush signed into law the authorization for the US Mint to buy silver on the open market to produce Silver Eagles and other silver commemorative coins. After 23rd July 2002, all the 6 billion oz of US stockpile is totally used up.
In 2002, Central Fund of Canada purchased 4 million oz of silver for immediate delivery. COMEX warehouse becomes the supplier of last resort because nobody can supply that much of silver. Silver inventory which has been accumulated since 5000 years of mining was total used up in the last 50 years. Thus, it has a great potential for price increase.
Prior to 1965, all US coins has 90% silver content. In 1965-1969, only half dollar has a 40% silver content, then in 1970 – 1976 only a selected number of US one dollar coin has a 40% silver content. After 1976, silver was removed from US coinage.
4. Signal of Silver Shortage
Long Delivery Time on Order
The delivery time for physical delivery has increased. Since August 2008, it takes 2-5 months before the silver is delivered. Many coin shop in USA and Canada runs out of silver bullion. It only took 1 week to deliver a product anywhere in the world using Fedex.
Increased Premium
On Sept 2008 onwards, various mint and vendor such as Kitco, AMARK etc added a premium of USD4/= for each oz of silver eagle and silver maple.
Rationing
In Sept 2008, US Mint started to ration the American Silver Eagle coins among its reseller.
5. Market Capitalization Ratio
In March 2008, we have a total inventory of 5 billion oz of gold and 1 billion oz of silver.
At the price of USD1000.00 per oz of gold and USD20.00 per oz of silver, the
Total value of gold = USD1000 x 5 billion = USD5 trillion
Total value of silver = USD20 x 1 billion = USD 20 billion
The market capitalization ratio for gold to silver is 250 times (USD5 trillion divided by USD20billion). If 1% of the money from gold goes to silver, there is not enough silver to buy from. Thus, silver has a big potential for investment. It could easily reach USD100.00 per oz once people realized the potential.
There is no more than 1/8 of oz of silver per person remaining on earth today.
6. Current trend
India are forced to buy 1000 oz bars because all the smaller size silver bar, coin has been sold out in London and USA. Each plane to Mumbai is fully book with 5 tons of silver.
It is extremely difficult to convert your paper silver or silver certificate into physical silver. Many vendors gave a lot of unnecessary reason discouraging user from converting to physical silver.
7. Why price is still low?
It is due to manipulation. Price is determined by volume of purchases. In COMEX trading, London is trading at 129 million oz per day. The physical silver market is 820 million oz per year in 2007. Thus in 6 trading day, the amount of silver traded is equivalent to 1 year of world-wide mine supply. Most of the silver trading in COMEX is not for delivery of physical silver but it is just mainly paper trading and gambling. Currently, existing inventory with 2-3 months delay are still able to fulfill the physical silver demand. Once these inventories dried up, silver price will go up like a rocket.
8. Coming Depression
Paper money becomes more and more useless as day goes by. Since 1800 till 1932, the price of 1 oz gold is averaging about USD20.67. Now in 2008, the price has gone up to about USD1000 per oz of gold. Thus, USD has lost it value by 98% since 1932. You need to keep something which has a stored value and cannot be printed by any government, thus only Precious metal can full-filled this requirement.
9. Need for small exchange
Historically, 1 oz of gold will be able to buy 1000 load of bread. The smallest denomination of gold coin is in 1/20 oz, it is too small to carry, may get easily lost and in the event of pre-long use it will loses some of its gold content. However, 1/20 oz gold is has a premium of 37 – 40% compare to 1 oz gold coin. Thus, it is not a very good choice for small exchange considering the premium involved and the coin value. 1/20 oz gold will buy you 50 load of bread. It is still too big for any exchange. Thus, the only way for good exchange is using silver coins in smaller denomination such as ½ or ¼ oz silver.
10. Action Now
Having known all these, you should start to buy some silver for your own investment or as a future insurance policy. Please do your own homework first before you buy. Now you know silver is a good investment, the next thing you should know will be
10 a) What type of physical silver you should buy?
10b) What is the reasonable price to buy it?
10c) At what price you will sell the silver? How long can you hold to the silver?
Thank You for reading. Give me some vote for this review ok. If you have anything, please message me via the ebay messaging.My ebay link
11. Acknowledgement
Some of the content in this document is taken from Ted Butler commentaries from Investment Rarities and Jason Hommel ‘s silver stock report. If you have the time, read Jason Hommel’s article 2008 and 2007 archive first. After you have gain some knowledge then you can start reading Ted Butler article which will give you a deeper insight. I have read most of their articles.
1. Miracle metal
Silver is a miracle metal. It has the best conductor of heat and electricity and best reflector of light. It also can be used as Catalyst for many industrial applications and in medical application as well.
You can check the wide range of silver usage at silverinstitute website. Silver institute is a non-profit organization. Some of the usage of silver is in
Traditional Area:
Coinage
Photography
Silver Jewelry
Silverware and Table Settings
Industrial
Batteries
Bearings
Brazing and Soldering
Catalysts
Electronics
Emerging
Medical Applications
Mirrors & Coatings
Solar Energy
Water Purification
Gold as compare to silver does not have such a wide range of industrial application. Thus, most of the silver mined is used up by the industry while most of the gold mined still remained as inventory. Since the 1940s, when many of the silver application were found, silver are consumed largely by these industry. Once these silver are consumed by industry, it is gone forever. It will take enormous amount of time, energy, money and effort to recycle back the silver from dump site.
2. Silver mining
75% of the silver mines production are a by-product of copper, zinc or lead mine. In the event of recession, the demand for copper, zinc and lead will go down. Mining companies may shut down these mines. Thus, this will reduce the supply of silver to the market as well. Thus, during recession period, the supply side of silver will goes down faster than the demand. Silver is price inelastic.
Mining is an expensive project. New mine will take years to build before it is able to provide a constant supply of silver. Miner does not rush to start a mining project. The estimated production cost of mining silver is USD$6.00-$7.00 per oz for a good mine and USD$10.00 to USD$12.00 for an average mine. Mining require a lot of natural gas for electricity, thus the mining cost is also directly associated with the price of natural gas.
3. Declining Inventory
Sixty year ago, US had six billion oz of silver in her stockpile. One to two billion oz are consumed in the WW2 effort. US has never fought a modern war with zero silver stockpile. Not Korea, Not Vietnam and not gulf war. None of the modern weapons of war could exist without silver. On 23rd July 2002, President Bush signed into law the authorization for the US Mint to buy silver on the open market to produce Silver Eagles and other silver commemorative coins. After 23rd July 2002, all the 6 billion oz of US stockpile is totally used up.
In 2002, Central Fund of Canada purchased 4 million oz of silver for immediate delivery. COMEX warehouse becomes the supplier of last resort because nobody can supply that much of silver. Silver inventory which has been accumulated since 5000 years of mining was total used up in the last 50 years. Thus, it has a great potential for price increase.
Prior to 1965, all US coins has 90% silver content. In 1965-1969, only half dollar has a 40% silver content, then in 1970 – 1976 only a selected number of US one dollar coin has a 40% silver content. After 1976, silver was removed from US coinage.
4. Signal of Silver Shortage
Long Delivery Time on Order
The delivery time for physical delivery has increased. Since August 2008, it takes 2-5 months before the silver is delivered. Many coin shop in USA and Canada runs out of silver bullion. It only took 1 week to deliver a product anywhere in the world using Fedex.
Increased Premium
On Sept 2008 onwards, various mint and vendor such as Kitco, AMARK etc added a premium of USD4/= for each oz of silver eagle and silver maple.
Rationing
In Sept 2008, US Mint started to ration the American Silver Eagle coins among its reseller.
5. Market Capitalization Ratio
In March 2008, we have a total inventory of 5 billion oz of gold and 1 billion oz of silver.
At the price of USD1000.00 per oz of gold and USD20.00 per oz of silver, the
Total value of gold = USD1000 x 5 billion = USD5 trillion
Total value of silver = USD20 x 1 billion = USD 20 billion
The market capitalization ratio for gold to silver is 250 times (USD5 trillion divided by USD20billion). If 1% of the money from gold goes to silver, there is not enough silver to buy from. Thus, silver has a big potential for investment. It could easily reach USD100.00 per oz once people realized the potential.
There is no more than 1/8 of oz of silver per person remaining on earth today.
6. Current trend
India are forced to buy 1000 oz bars because all the smaller size silver bar, coin has been sold out in London and USA. Each plane to Mumbai is fully book with 5 tons of silver.
It is extremely difficult to convert your paper silver or silver certificate into physical silver. Many vendors gave a lot of unnecessary reason discouraging user from converting to physical silver.
7. Why price is still low?
It is due to manipulation. Price is determined by volume of purchases. In COMEX trading, London is trading at 129 million oz per day. The physical silver market is 820 million oz per year in 2007. Thus in 6 trading day, the amount of silver traded is equivalent to 1 year of world-wide mine supply. Most of the silver trading in COMEX is not for delivery of physical silver but it is just mainly paper trading and gambling. Currently, existing inventory with 2-3 months delay are still able to fulfill the physical silver demand. Once these inventories dried up, silver price will go up like a rocket.
8. Coming Depression
Paper money becomes more and more useless as day goes by. Since 1800 till 1932, the price of 1 oz gold is averaging about USD20.67. Now in 2008, the price has gone up to about USD1000 per oz of gold. Thus, USD has lost it value by 98% since 1932. You need to keep something which has a stored value and cannot be printed by any government, thus only Precious metal can full-filled this requirement.
9. Need for small exchange
Historically, 1 oz of gold will be able to buy 1000 load of bread. The smallest denomination of gold coin is in 1/20 oz, it is too small to carry, may get easily lost and in the event of pre-long use it will loses some of its gold content. However, 1/20 oz gold is has a premium of 37 – 40% compare to 1 oz gold coin. Thus, it is not a very good choice for small exchange considering the premium involved and the coin value. 1/20 oz gold will buy you 50 load of bread. It is still too big for any exchange. Thus, the only way for good exchange is using silver coins in smaller denomination such as ½ or ¼ oz silver.
10. Action Now
Having known all these, you should start to buy some silver for your own investment or as a future insurance policy. Please do your own homework first before you buy. Now you know silver is a good investment, the next thing you should know will be
10 a) What type of physical silver you should buy?
10b) What is the reasonable price to buy it?
10c) At what price you will sell the silver? How long can you hold to the silver?
Thank You for reading. Give me some vote for this review ok. If you have anything, please message me via the ebay messaging.My ebay link
11. Acknowledgement
Some of the content in this document is taken from Ted Butler commentaries from Investment Rarities and Jason Hommel ‘s silver stock report. If you have the time, read Jason Hommel’s article 2008 and 2007 archive first. After you have gain some knowledge then you can start reading Ted Butler article which will give you a deeper insight. I have read most of their articles.
Guide created: 03/18/09 (updated 04/16/09)
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