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Historical silver prices reveal there’s still much pent-up potential in silver. Silver is sometimes called the poor man’s gold. One of the reasons is that it trades at a notably lower price per ounce than gold. Historical silver prices put gold selling at anywhere from 30 times to 15-16 times the rate of silver, depending on your sources and how far back you run the data. Silver traded at a low of $15.14 on February 8, 2010. Just 14 months later, in April of 2011, it had already triple and was selling for over $45 per ounce! But even as it approached $50 an ounce, gold was working on $1,550 per ounce. While silver has come off an absurd ratio of 60:1 or better, historical silver prices still show that the 31:1 ratio of the first half of 2011 calls for silver to at least double, even if gold stand still! But, there are a number of reasons why it could get even better, and why historical silver prices do not tell the whole tale this time around.
Historical Silver Prices Do Not Account For The Supply Crunch
The simple fact of the matter is that the above-ground reserves of silver are at some of the lowest levels seen in decades. Industrial uses have increased. Moreover, the number of people placing a demand on the products that use silver is rising with the onset of developing nations increasing the standard of living of its people. Thus, you see people looking to buy silver or ETF silver products.
Historical Silver Prices Do Not Account For The Unprecedented Demand
As if that’s not enough, investor demand is rising significantly. Even countries like China are encouraging their people to hoard precious metals. Moreover, a massive source of silver buying stems from the rising popularity of ETFs. The exchange traded funds allow the average, everyday investor who’s never bought bullion to simply play the silver bull market with the ease of buying a stock. But ETFs like SLV are taking the funds and buying silver. This is a lot of silver coming off the market. And this is at a time when industrial demand already nearly consumes mine production each year!
Historical Silver Prices Do Not Account For The Current Level Of Industrial Applications
Even while the natural law principles of supply and demand are on the side of silver’s continued epic rise, there’s less of it coming out of mines. Unfortunately, silver is not easily replaceable or substituted. Silver simply has some of the best electrical conductive properties of any metal on the planet. What makes it especially useful is that it doesn’t give in to corrosion like a lot of other metals. Not surprisingly, silver is instrumental in electronic devices of all sorts. Everything from your favorite laptop to your cell phones, right down to kitchen appliances and televisions contain silver. Truth is, about half of all silver produced each year goes to electronics.
While electronics accounts for a massive consumption of silver, the plastics industry is heavily dependent on the white metal as well. This massive industry has influenced and infiltrated every aspect of our life. It’s a stretch to think about, but silver, as a chemical catalyst, likely had a part to play in everything right down to children’s toys. The practical uses for silver simply far outpace gold. Historical silver prices were never previously based on this level of industrial consumption.
At last count, there are less than two dozen actual silver mines in the entire world. The inability of silver mines to keep pace with demand and consumption is what’s eaten into the above-ground stockpiles. What used to be billions of ounces of silver in reserve has dwindled to a few hundred million. So, we have the classic increasing demand in the face of decreasing supply. This is a dual force pushing prices higher.
Historical Silver Prices Can Be Played In A Number Of Ways
These days, there are any number of ways to invest in silver in light of historical silver prices and where we’re headed. However, they are not all created equal. The obvious first place to start is with silver bullion in your own two hands. That’s the real asset that they can’t create on a printing press.
If for whatever reason you do not want to get physical metal, today there are ETFs that are tied to the spot price of silver. While they are designed to track the price movement, there is an inherent tracking error. If you buy bullion, you only pay the premium over the spot price, and there are not other fees to hold. By contrast, the ETFs have fees that have to be paid by selling the fund’s assets, which is silver. As a result, the ETF never has an amount of silver in it equivalent to the money paid into it. Aside from that, there’s nevertheless the overriding concern as to whether the fund has all the silver it possible could even after fees. There’s simply the possibility that the fund can sell shares at a greater level than that at which silver can be purchased to support it.
Alternatives to this include ETFs that are linked to a group of mining stocks that produce the silver, rather than the silver itself. Like any ETF, there are fees. But there is also the inflexibility of the ETF tracking a basket of stocks in an index. This prevents the freedom to buy and sell individual companies as the market may dictate.
Mutual funds that contain silver companies would be yet another option. These are actively managed. The mutual fund manager can buy and sell at will. Underperformers can be exchanged for better plays. Of course, there are disadvantages to everything. The mutual funds aren’t traded exactly like stocks, so they lack some of the flexibility of the ETFs. You’ll find there are no real-time quotes, no put or call options, and no intra-day trading. However, folks who find mutual funds appealing are not generally looking to trade options anyway.
Coming full circle, folks may as well just end up getting some bullion and selecting individual stocks. With quality guidance, picking individual stocks is absolutely the best way to go. It’s all I do. There’s freedom to cull at will, and no excessive fees for companies held in the context of a fund.
The take home message is that historical silver prices will pale in comparison to where things end up, so it’s imperative that you own some silver. If you want some options for owning bullion, there are plenty. If safety concerns have you wanting to hold your metal away from home, there are a number of storage facilities that exist. In fact, you do not even ever have to take custody over the metal. You can purchase through companies that offer both segregated (“pooled”) accounts and unallocated accounts where your metal is held as part of the “general population.” There are even certificate programs with the backing of the Australian government. Whatever method you choose, it’s important to own silver to be a part of what will be epic, new historical silver prices.
