Last Updated : 25 November 2011 at 20:30 IST
'Think about silver before investing'
When I first discovered why I should buy silver and protect myself from the coming devaluation of our currencies, it still took me a few months to act because there is a lot of misinformation surrounding this precious metal.
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When I first discovered why I should buy silver and protect myself from the coming devaluation of our currencies, it still took me a few months to act because there is a lot of misinformation surrounding this precious metal. This article will help those that are still unsure about buying silver by laying out the facts about what has been dubbed as perhaps the greatest investment opportunity of our lifetime.
If you are paying attention you will have noticed that gold has been increasing steadily in value since the beginning of the last decade. This trend is set to continue throughout this decade as smart investors realize that gold is a protection against inflation and the destruction of the purchasing power of all currencies.
If gold is set to rise, then shouldn't you be buying it? Perhaps, but many people believe that silver is a far better profit opportunity due to some astonishing fundamental reasons.
(1) The Gold-Silver ratio: Throughout history the ratio between gold and silver has been in the range of 12:1 to 16:1. What this means is that for every ounce of gold you would be able to exchange it for 12 to 16 ounces of silver. This was generally the case because there is approximately 12 to 16 times more silver in the earth's crust than there is gold.
Although this ratio has remained quite constant, the current ratio is 50:1. With one ounce of gold you can currently buy a whopping 50 ounces of silver. What this means is that silver is currently extremely undervalued compared to gold. As gold gains in value over this coming decade, silver will gain even more as the ratio of silver to gold reverts to the mean. This provides a massive profit potential for those that are informed. Here is a good resource to learn more about this ratio -Silver to Gold Ratio.
(2) Above ground supply: In 1950 there was 10 billion available above ground ounces of silver. By 1980 that number shrank to 3.5 billion ounces. Now in 2011 it is estimated that above ground supply has dropped to approximately 500 million to 700 million ounces.
The reason that the supply of silver is shrinking is because it has become the second most used commodity in our society. Currently there are around 10,000 applications for silver including but not limited to; electronics, photography, jewelry, mirrors, and solar panels. The only commodity with more applications is oil which currently has about 30,000 applications.
(3) Non-recyclable: Silver is used in 10,000 applications but almost all of these applications use microscopic amounts of silver. For example most computers use approximately 1/10th of an ounce of silver. At $30 per ounce that silver has a value of $3 and is thus not economically viable to retrieve. As a result most silver is not-recycled and is lost to landfills forever. This only places more pressure on the supply side.
In conclusion, most people are putting their cash into this precious metal because of the coming inflation but there are many other reasons for investing in silver such as the reasons listed above. As with any investment there are risks that you should consider, so do your homework, and good luck!
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