Tips on Buying Silver: The “Poor Man’s Gold”

A prominent silver analyst recently stated that he thinks that at its current price, silver is the most undervalued commodity in history, but here are some things prospective silver investors might not know.

Buying and Storing Physical Silver

You can buy silver bullion bars and coins from many qualified dealers both in the U. S. and abroad. By “qualified” we mean dealers who offer defined buyback programs and secured storage options along with your purchases. Two popular dealers are American Precious Metals Exchange and KITCO in Canada. Both feature great selections, competitive pricing, quick delivery (if you choose), and excellent buyback policies, along with secure storage options. Bullion silver bars and coins are.9999 pure silver and trade at modest premiums to their intrinsic (or melt) values. You can also purchase what is known as “junk” silver, which means United States silver coins minted prior to 1965 (1970 for the Kennedy Half Dollar). Junk silver coins contain 90% silver and 10% copper, and are generally sold in random denominations in different sized “bags.” Premiums over melt value can vary greatly among dealers, so you should shop carefully. Some dealers also offer uncirculated US silver coins, but these coins have numismatic value and so are universally sold at higher premiums over their intrinsic value.

Advantages/Disadvantages of Silver over Gold

Many anticipate a collapse of the dollar as the U.S. unit of currency at some future point. Fiat currencies (those based only upon faith) have never stood the test of time, and history is replete with almost 4,000 examples of failed fiat currencies. If and when the dollar ultimately fails there will almost certainly be a period during which silver and gold coins will be used as currency. Silver coins will have more utility than gold as a replacement currency, but gold can be more easily stored. It is not possible to predict the relative future values of gold and silver, but holding some of both metals is probably a wise policy.

Alleged Silver Price Manipulation

Many traders believe silver prices have been artificially suppressed by major money center banks acting in collusion with the Federal Reserve since 2008. The Commodity Futures Trading Commission (CFTC) began investigating charges made by traders against JPMorgan Chase in 2008 after the bank acquired large silver short positions as part of its acquisition of Bear Stearns, and separate federal lawsuits were filed against JPMorgan Chase and HSBC (a large foreign bank) in October, 2010, charging silver market manipulation. The suits alleged that the banks illegally manipulated silver prices by periodically “flooding the market” with sell orders to suppress market rallies. The suits were dismissed in 2011 on grounds that unless and until the CFTC completed its investigation the Courts had no basis for any findings against the Banks. The CFTC investigation remains unresolved today, five years after it began, and as of this date JPMorgan Chase still holds short positions representing over 20% of the entire Comex silver market. Veteran traders believe price suppression continues, but remain confident that demand will ultimately overwhelm the Banks’ short positions, and that silver prices will then dramatically spike to their true market values.

Summary

There are many alternatives for buying silver, and decisions to enter the silver market deserve careful thought, planning, and preparation. We hope you will find this information useful if you are contemplating an investment in silver.

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