By DIAN VUJOVICH
Article originally appeared in the Palm Beach Daily News
Friday, December 25, 2009
It’s that time of year when all that twinkles aren’t only the lights on your tree or the returns on gold. Look at how silver has performed this year — and surprise, surprise, it sparkles, too. In fact, it has actually outperformed gold.
Who knew?
Some might say this versatile metal doesn’t have the sex appeal of gold. But when it comes to making money, why care about sex appeal. That seems to follow quite naturally as one’s fortunes mount. But enough about that: Let’s look at the numbers.
At the beginning of 2009, silver was trading at $9.46 an ounce, according to Silvercoins.com. By the close of business on Dec. 2, it had reached $19.21 — more than doubling in price. Gold, on the other hand, was up about 60 percent.
During the past 10 years, silver’s price has gone from a low of $4.02 to a high of $20.79 — an increase of more than five times. Gold’s prices ranged from roughly $280 to $1200 an ounce. While impressive, silver’s gain was greater.
“Both gold and silver are viewed as safe-haven assets and both have been used throughout history as mediums of exchange,” says Nicolas Brooks, head of research and investment strategy at ETF Securities in London. “When investors are concerned about the macro economic environment, rising fiscal deficits, they look for alternatives to the U.S. dollar. Like gold and silver to act as a hedge when currencies are weakening or there are concerns about inflation.”
While silver may not carry the same cachet, it typically performs better than gold during precious-metal bull markets like the one we’re experiencing, but doesn’t garner the same amount of news or advertising attention as gold. That’s too bad, for like gold, silver provides an alternative to a currency play and performs well in times of high inflation.
If there’s one primary difference between the two metals, it’s in usage: Unlike gold, most of silver’s uses are industrial.
“Silver is unique in that it’s a hybrid between a precious metal and an industrial metal,” adds Brooks.
In 2008, for instance, 53 percent of silver production was used in industrial applications because of its strength, malleability electrical and thermal conductivity and reflectivity — think mirrors here; 19 percent for jewelry; and 13 percent, photography — that figure is likely to a decline going forward as the world changes from film to digital cameras; 8 percent, coins and medals; and 7 percent silverware, which includes everything from candle sticks to platters and silver-service sets to chandeliers.
Silver’s presentation, therefore, may be beautiful or barely noticed.
And you’ll find no shortage of mining locations for this metal. The top eight silver-producing countries last year were Peru, Mexico, China, Australia, Chile, Poland, Russia and the United States.
Although production has dropped, silver is still inexpensive, serves as a good indicator of manufacturing cycles, and historically has been used as money more than gold has.
According to CMIGS, a Web site dedicated to educating investors about the benefits and dangers of the precious metals markets, “In something like fourteen languages, the words for silver and money are the same. ”
Earlier this month, Paul Urban brought an ornate six-piece sterling tea set and 14-piece sterling buffet set to Tobina Kahn at the House of Kahn Estate Jewelers in Chicago for her to appraise and sell. Urban, who produces ice-skating shows and at one time was a professional skater himself, has traveled the world performing. Throughout his journeys, he and his wife would make purchases of gold and silver wares and bring them home.
“Being in show business, we did a lot of entertaining, ” said Urban, who is also a talented magician. “But we’re not entertaining as much anymore so I’m beginning to unload a bit of what we have. ”
Reluctant to say precisely how much he paid for the either set, Urban is well aware of the profits a sale could bring. He also isn’t selling all of his silver. “I have other things, like silver chargers and silver chaffing dishes. But I also own an apartment complex and my taxes are due on it.”
Like every other kind of investment on the planet, no profits can be had until you sell what you own.
So given the current rise in silver prices, Urban’s expecting the sale of his sterling to provide him with more than the amount needed for his taxes. No abracadabra necessary.
But investing in silver isn’t without its risks. Play this precious metal and you’ll be playing with volatility. On the other hand, demand for it will continue to grow as world economies do, production lags and, when there’s a rally in gold, there’s also likely to be one in silver.
“Silver is trading very much like an industrial metal now,” says Brooks. “If we see an asset correction based on concerns about growth, I think silver gets hit. But, if the U.S. government debt continues to rise, its price is likely to rise. It does, however, tend to be a more volatile commodity than gold.”
Given that reality, Brooks suggests investors with a diversified portfolio of stocks, bonds and other assets, keep the weightings in silver in their portfolios, less than that of their gold holdings.
The Lone Ranger
If you remember the television show The Lone Ranger, you’ll no doubt recall Tonto, the Native American who saved his life in the popular series that began in 1949.
Together, the Lone Ranger and Tonto performed a number of heroics, but perhaps one of the most remembered was when they saved a silver-white stallion from being gored by a buffalo. As the series showed, they nursed that horse back to health and then set him free. But the horse would have none of that and followed them. As a result, the Lone Ranger decided to keep him and name him Silver.
If you remember the series, you’ll also remember hearing the Lone Ranger’s hearty exclamation of “Hi-yo, Silver, away!” as they rode toward the golden sun set in each episode.
Investing in silver is a little bit like that, whether your investment is in silver bars, tea sets, stocks, ETFs, medallions, coins or future’s contracts — at the end of the day, its price follows that golden trail.
WAYS TO INVEST IN SILVER
There is no shortage of investment choices when it comes to silver. From bullion to stocks, Exchange-Traded Funds to coins, there’s something for every investor no matter how much money they have to invest.
Suggestions from The Silver Institute include:
* Bullion. Consider silver in the form of bars that are at least 99.5 percent pure.
* Official Coins and Medallions.
* Futures and/or or Forward Contracts: An agreement made on an exchange to take or make delivery of silver at a set date in the future.
* Options: The right, but not the obligation, to buy or sell silver or a financial security linked to silver on a specified date in the future.
* Exchange Traded Funds (ETFs): These represent a basket of equities linked to silver, i.e. the physical metal, producers, refiners, etc. ETFs are traded on exchanges throughout the trading day.
* Mutual Funds: An open-ended fund that holds a basket of silver-related equities that are priced once daily.
Back to the ETFs. Silver ETFs have seen enormous growth recently and while investment strategy of some is to basically reflect the price of silver, others use more intricate strategies. So, make sure to do your homework before purchasing shares.
A few ETFs that invest in silver and trade on the New York Stock Exchange include: The ETFS Silver Trust (SIVR); iShares Silver Trust ETF (SLV); PowerShares DB Silver (DBS); E-TRACS UBS Bloomberg CMCI Silver ETN (USV), Ultra Silver ProShares (AGQ); and ProShares UltraShort Silver ETF (ZSL).
Learn more about investing in silver at The Silver Institute’s Web site, www.silverinstitute.org/investing_in_silver.php. And at CMI Gold & Silver at www.cmi-gold-silver.com/buy-silver-bullion-coins.html.
Article originally from the Palm Beach Daily News. View the original article here.
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