Buying Silver

Let’s take a look at silver bullion:

On the whole, silver bullion, whether in 1oz., 100oz. or 1000oz. bars is pretty much directly tied to current silver prices. This means if the spot price for silver drops some 15% as it did over a 2 day period in April, 2013, the value of your silver drops as well. It doesn’t much matter if your bar has the basic hallmarks for purity and actual weight or if your bars were made by a mint or a private firm, silver bullion is only going to be worth what the silver market says it is. If you’re looking at silver from a very strict investment standpoint, this could well be the answer you’re looking for as the buy-in is relatively inexpensive and storage and transport is fairly straightforward.

However, when you take a look at silver coinage, especially coins that were not designed to be a “replacement” for silver bullion, the investment angle takes on a whole new perspective. When you take a look at coins such as the Morgan silver dollars and half dollars, Mercury dimes, Canadian silver coins and a variety of other silver coins from other countries, the investment angle shifts from a strict silver value to the age of the coin, the rarity of the coin and the condition of the coin.

As an example, the current melt value for a common Morgan silver dollar in poor to fair condition is running right at $17 (give or take a few cents). This is based on current silver prices and the fact that a Morgan dollar is actually 90% silver. However, as a coin, a quick scan of eBay shows you’re not going to get one in pretty much any condition for less than $25. To complicate that even further, when you start looking at the rarity of the coin, especially when you’re trying to track down those with a CC (Carson City) mint mark, the price jumps dramatically with some coins in “perfect” condition running over $800 each.

Overall Bullion Vs. Coins

Granted, the buy-in for coins will be higher than purchasing straight bullion bars. However, since coins are valued by far more factors that strictly spot silver market prices, your money is actually somewhat safer since coin prices do not fluctuate nearly as significantly as metal prices. This not only gives you a safer investment but, as most trends show, coin prices rarely drop. As a matter of fact, with the exception of price spikes during the mid-1980s, the price for a MS65 Morgan silver dollar has remained pretty much in the $100-150 range, especially over the last decade. If you’re looking for a great way to conserve capital while keeping a solid investment portfolio, silver coinage definitely has a much more solid platform than bullion.

2013 Silver Market

saw some of the heaviest silver price drops seen in recent years, actually taking the price of silver below prices seen in 2010. For those hoping for a better 2014, you may want to rethink your stocks and bonds strategy and take a harder look at gold as an investment source instead of silver.

2013 Silver Marke At A Glance

Although silver started off the year at a good level, when gold dropped $200/oz. in a 2 day period in April, 2013, silver took an even worse battering percentage-wise. With gold running at $2,000/oz dropping 10% was bad enough but with silver, dropping $4 to go below $25/oz was devastating to investors with a drop far above the 10% level. This meant that many silver mining companies cut back production dramatically to prop up prices and silver streamliners saw a significant drop in throughput. For corporate investors, this was a major blow and for individual investors who purchased silver at over $30/oz, it was an unmitigated disaster.

What Happened?

Although both gold and silver have seen a solid ROI over the last few years, both metals are heavily dependent on what the Federal Reserve does. While the Fed has been strong in bond buys the last few years, they tapered that back in 2013 and the fears of more tapering drove both gold and silver prices lower. Although silver does have industrial purposes that gold doesn’t, thereby giving silver markets that gold doesn’t have, the overall result didn’t provide the support silver investors hoped for. Because of the Fed’s reluctance to continue to be strong in the bond markets, both metals suffered, however the silver market suffered the brunt of the blow.

So, What’s Coming?

2014 won’t be a banner year for silver, although there are hopes it will be somewhat stronger than 2013. The actions of the Fed are pretty straightforward at the moment as they wind down the supports they’ve had in place for gold as an inflation hedge. Current results showed an uptick at the end of 2013, although it isn’t quite as strong as the recovery in August and September of 2013 . As the market continues to settle, prices for silver should further stabilize and start to climb, possibly reaching over $25/oz by the end of 2014. For those buying in now, this could show a good ROI, although this trend may not stick depending on changes to Fed activity.

All in all, the silver market remains volatile and the industry involvement in silver isn’t going to have a major impact on overall silver pricing. What the Fed does, especially when you take the housing market into account and actions pertaining to withdrawal from the metals marketplace, will have an effect on current trends and could stall or even reverse current gains. For long-time players in the silver market, this may be an extended blip on your radar, but for those who are thinking about silver as a new investment strategy, coins or stocks may be a better play, especially as a short-term prospect.