Wednesday, April 6, 2016

Is Buying Silver a Good Idea?

Is buying silver a good idea?
A friend a mine recently asked if buying silver right now was a good idea. Since we were in a group of highly intelligent individuals I let them speak before I gave my answer - after all, I still consider myself to be a novice in precious metals investing. After listening to what all of my friends had to say regarding the question, I began explaining the value of silver in today's economy.

Silver Demand is High

Silver is unique in the sense that it has two different sources of demand: investor and industrial. Over the last couple of years, demand for buying silver American Eagle coins has been so high that the U.S. Mint couldn't keep up with the demand. What's incredible is that this hasn't just happened once, it's happened several times. This is a huge indication that investor demand is currently going strong.

At the other end of the spectrum is industrial demand. Silver is used in many industries including electrical, health, energy, and consumer-related products. This means that mining companies have to keep up with the demand of these industries for production of important gadgets such as cell phones and medicinal instruments.

Silver Supply is Low

The amount of silver that is available to mine is quickly dwindling. In 2014, The Silver Institute estimated that mining companies alone excavated 877.5 million ounces of silver. The total supply of silver for that year was 1,061.8 million ounces while the physical demand for silver was 1,066.7 million ounces. This left silver with a deficit of 4.9 million ounces. Demand has continued to rise over the last two years, but supply has been scarce and will continue to diminish.

Keith Neumeyer, top mining CEO, confirmed the deficit silver is currently facing in a recent interview:
Interestingly enough, we're only mining 10 to 1. For every 10 ounces of silver, 1 ounce of gold is mined. Silver is way rare than even we had thought it was 500 years ago and consumption is increasing every single year. The above ground supplies of the metal, you go back and look at what was above ground in the '80s, and there's about 5 billion ounces of 1,000 ounce commercial bars. That's down to just a billion ounces of silver that's accountable.

So we've consumed 4 billion ounces of silver in the last 30 years and it's gone. It's not coming back. It's not in recycle. It's in waste dumps, it's in the ocean, it's in stuff that will never be seen. Again, at that rate and as the consumption is increasing, and even if production stays flat, which it doesn't look like it is... but even if it stays flat, that deficit between mine supply is about 800,000 million ounces and that middle consumption 1.1 billion ounces is eating away at all of this above ground supply.

We're trading, right now, at 80 to 1, gold-silver. We're mining at 10 to 1, and we're in a deficit. How can that relationship last? We're going to have a racial compression, in my view, that's going to send the price...and I've said this 100 times... to triple digits. I know that at $14 or $15 silver that sounds stupid and it's probably hilarious to many people, but that's where I think it's going. That's why I put together a silver company 13 years ago and that's what I'm looking forward to and we'll see what happens. We'll see if I'm right or wrong, but that's what I think is going to end up happening.

Silver Market is Currently Bearish

The white metal is currently in a bear market despite the rise of demand. However, many precious metals experts, such as Keith Neumeyer, are expecting silver prices to rise. Given the low price per ounce, now is as good a time as any to start buying silver. Once the market turns bullish, investors who take advantage of the low prices now will be sitting pretty later.

Going back to the original question, buying silver right now is a great idea. However, if investors are looking for a quick return on their investment, they may want to consider a different avenue. Precious metals of any kind are not a means to get rich quick. If you're willing to hold on to your silver until prices rise, you'll be rewarded handsomely.

Monday, March 28, 2016

6 Benefits of Investing in Gold


Financial advisors often steer their clients away from investing in gold. I personally think this is a huge mistake. There are way too many benefits to having the yellow metal in your portfolio that far out way any negatives your advisor might spin up. The intrinsic value that gold holds should be enough of a reason to hold the precious metal, but some investors have a hard time seeing the truth behind the long-term benefits this metal possesses.

Before I present you with the benefits of investing in gold, I should provide a little backstory. Gold once held a very significant role in the world's monetary system. Currencies throughout the world required their money to be backed by metals, which lead gold to be seen as a symbol of wealth. The United States' government once held a gold standard requiring the U.S. dollar's value to be based on a certain weight of gold. With this standard, the amount of money an individual held signified how much gold or silver they stored in a bank. While currencies are no longer backed by gold, the metal still holds intrinsic value that individuals can benefit from today.

Major Banks Secretly Invest in Gold

Maybe it's not a secret, but not a lot of people are aware that major banks have precious metals reserves. If investing in gold didn't hold any value, why would banks, such as JP Morgan, have an active interest in precious metals markets? The answer is simple, gold is important to the global economy.

Gold Protects You Against a Declining Dollar

For some reason, people don't want to believe that the value of the U.S. dollar is depreciating. Yes, it's an important currency in the global economy, but it hasn't been the same since the last market crash. For this reason, many people begin investing in gold. They put their dollars into a commodity that hold more value in the long run, mostly precious metals.

Gold Holds Up During Inflationary Times

Inflation is terrible for the economy. However, it's great for gold investors. The yellow metal tends to appreciate during these hard times. Again, as soon as investors realize their precious dollar is losing value, they go straight to investing in gold. This increases demand for the metal and it suddenly becomes more valuable.

Political and Economic Uncertainty Makes Gold a Safe Haven Bid

All of this flocking towards the yellow metal during uncertain times makes gold a safe haven investment. This means that people believe investing in gold will help them protect their wealth. Depending on how bad a political or economic situation gets, gold can even be used to barter or trade. If you don't believe that investors flock to gold during hard times, just keep an eye at the news and the markets. When the news begin to headline political or economic turmoil, the precious metals market starts to experience some movement.

Gold will Diversify Your Portfolio

No one is asking you to fill your entire investment portfolio with precious metals. Holding a little bit of gold with your stocks and bonds is a great way to reduce risk and volatility. Let's think rationally for a moment. If your portfolio holds stocks for a particular company whose CEO is suddenly detained for embezzling, do you think that those stocks are going to hold the same value as they did before the CEO was caught? No, and if you don't have precious metals in your portfolio you've just lost a great deal of money. Conversely, if you do have gold in your portfolio, you better believe you're sitting pretty because news like that will have people flocking to gold in no time.

Protect Your Wealth with Gold

All of these great benefits to investing in gold all point to protecting your wealth. That's really what it comes down to. History shows that gold is stable in times of crises and that's going to matter when the dollar depreciates. The best way to protect the wealth you've worked so hard to build is by preserving it in a commodity with intrinsic value.

I won't deny that gold is a volatile commodity to invest in, but that's only in the short term. The real value lies in the fact that the precious metal maintains its worth in the long run. Consider investing in gold. Start out small, but diversify your portfolio with a little yellow metal.