Thursday, September 18, 2008

Buy Silver Bullion

Currently there is a shortage of silver in the world which makes this a good time to buy silver bullion.

Unlike gold, which is primarily used as stored value, silver is, for the most part, used in industry and photography. This means that, whereas gold is always around in one form or another, with silver there is a regular percentage of 'loss' of the worlds silver which does not find its way back into the silver market. The production of silver from the ground is falling yet the demand for silver is rising.

Most silver is produced as a by-product of mining gold, copper, zinc, or lead. Higher silver prices might not substantially promote the increase of silver mined each year. Consider, in 1980, when silver prices went up to $50/oz., less silver was mined than in 1979!

Current silver mines produce something on the order of 650 million ounces of silver each year. Just over 200 million ounces is recovered from recycling and around 100 million ounces come from investor or government sales. That's a total of just over 1000 million ounces. Of that total almost half is used by industry, about 20 percent by photography and almost 30 percent by jewelry. That leaves around 5 percent for silver bullion coins, bars and medallions. As the demand for industrial and photographic silver increases each year and the amount being dug out of the ground diminishes then the quantities left over for silver coins and bars is going to reduce and this will increase the demand for people to buy silver billion.

Interestingly, at the time of writing, one cannot now buy Silver Maples from the Canadian Mint or Silver Eagles from the US mint. Other mints are also starting to have difficulty supplying silver coins and this is now affecting dealers in silver also. The demand for silver is out stripping the supply.

This many not be readily seen, with the daily spot price of silver not reflecting the value and demand for silver in the real world.

Historically the price ratio of silver to gold has been 10 ounces of silver was equal to one ounce of gold, a 10:1 ratio in other words. Just recently, the ratio has been around 50:1. With the shortage of silver slowly becoming more apparent this ratio will eventually revert back to the historical levels. This means that silver is going to increase, proportionally more than gold. And that should pick up the ears of even the most laid back precious metal investor.

Of all the silver you can buy, silver coins, silver rounds, silver dollars, silver maples, silver bars, biscuits and so forth, silver bullion at spot price is perhaps the best silver you can buy. The larger the bars the better and the closer to spot price the better.

And if you can buy silver bullion without the hassle of transport and storage that is even better. Many dealers can arrange storage for you alleviating the issues with transport and security but you would need to check them out thoroughly.

In this day and age with the faltering economy and the decreasing value of the dollar, it is a wise fellow that sets out to buy silver bullion and put it away for a rainy day!

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