Our inboxes have been overflowing following our recent talk about silver. At last count, 1,565 readers requested more information, or otherwise wrote in to ask questions or make comments.
There's definitely something about the bullish case for silver that gets peoples' attention.
We think silver is a bargain right now. In fact, I've been telling my Scarcity & Real Wealth subscribers that I believe a sharp move in silver could be in store for investors.
By some estimates, at current usage rates all known silver reserves will be mined out in less than three decades -- or much sooner if anticipated new usages and increased demand from emerging markets come to fruition. [For more on the bullish supply/demand for silver, be sure to read this StreetAuthority article on the topic.]
And don't forget about silver's special role as a currency. Silver doesn't represent a promise from a debt-laden government, as with paper money. Silver's the real deal, which could come in handy in an economic emergency. By now, you may have heard that the U.S. Mint has had to expand production of Silver Eagle coins in response to explosive demand. We blew away the previous annual sales record of 34.6 million back in October of 2011, and we are now knocking on the door of 40 million.
Meanwhile, the global proliferation of physical silver exchange-traded funds (ETFs) has been a true game-changer. Recently, cash inflows into ETFs had removed 448 million ounces of silver bullion out of circulation and deposited them into bank vaults. These funds didn't even exist just a few years ago.
All this doesn't leave much for industrial users -- and there are many.
But if you think a major move in the "white metal" -- a doubling in price or even more -- would be unheard of, consider that it's happened before, circa 1979-1980. And at least one of you out there caught the wave and profited handsomely.
This note came from Dan A. in Burnaby, British Columbia. With his permission, I present it here verbatim:
"...I always have a soft spot for silver. In January 1979 I had money left over from my summer job and paper route in a GIC that matured." (GIC stands for Guaranteed Investment Certificate, a financial instrument sold by Canadian banks.)
"Looking at the interest rates on offer at my bank I asked if there was anything else I could do that might have a better return. It was suggested to me that silver seemed to be going up at a higher rate than the GIC.
"I bought a 200-ounce silver certificate at $6.35/ounce and left the bank with instructions to cash it in one year... When I got my January statement with my balance I thought at first that some sort of mistake had been made."
Dan couldn't recall the exact price of silver at the time the certificate was cashed out, but "vague memory says the price was $35 over what I paid."
That would put the price of silver at a little over $41 per ounce -- a return of about 550% in 12 months.
Let me be very clear: No one is guaranteeing a similar performance over the next 12 months, but the outlook for silver is bullish.
How to invest in silver
Of course, there's the question of what's the best way to get your hands on silver. It was obvious from the comments you sent me that many of you wanted to know how to purchase the white metal. That included a note from Alan H. of La Jolla, California: "You convinced me that I should buy some silver but you didn't tell how to do it."
Action to Take --> Coin dealers sell 99.9% pure silver one-ounce American Silver Eagles, made by the U.S. Mint. This is likely the most popular way to buy physical silver.
But there are actually quite a few ways to invest.
The ETFS Physical Silver Shares Trust (NYSE: SIVR) is another option. Unlike other exchange-traded funds (ETFs), this fund doesn't invest in futures or shares of volatile miners. Instead it tracks the price of silver through actual silver bullion held in vaults in London by custodian HSBC Bank USA.
Some of you may be familiar with the phrase "junk silver," an informal term for those U.S. coins minted before 1964 that contain 90% silver. Depending on market conditions, the value of the silver can far exceed the underlying value of the coin. For instance, right now a pre-1964 quarter, which contains 90% silver, is worth about $5.30. (So be sure to check any loose change you might have been collecting for years.) The primary hunting grounds for junk silver: coin-counting machines, estate sales and coin collections. Also, currencies of other countries often contain varying degrees of silver.
Then there's my favorite: Silver Wheaton (NYSE: SLW), a silver streaming company that buys rights to silver production from miners.
But no matter how you get it, there is no arguing one point. Silver is in high demand, and they sure aren't making any more of the stuff.
N. Slaughter does not hold positions in any securities mentioned in this article. StreetAuthority, LLC does not hold positions in any securities mentioned in this article.
This article originally appeared at www.streetauthority.com.
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