Investing in Silver - For Beginners

Updated on November 13, 2019
TessSchlesinger profile image

Tessa has had an interest in alternative currencies and different economic systems for some four decades.

Fine silver (pure silver) coins are a good way to ensure that the value of currency is retained.
Fine silver (pure silver) coins are a good way to ensure that the value of currency is retained. | Source

Silver can be bought in many different ways. It can be bought in coins, in bullion, and in ingots. Silver, like gold, is often used for speculation.

  1. Before buying silver, watch the prices for a year.
  2. Buy at its lowest price.
  3. Silver tends to be priced lowest in January.
  4. Decide between silver bullion, silver coins, or silver stock market investments.

Siver bullion can be kept privately and stored as a means of wealth preservation.
Siver bullion can be kept privately and stored as a means of wealth preservation. | Source

When to Buy Silver

Generally, the time to buy is at the beginning of the upward trend. The difficulty is in knowing when a currency or commodity has peaked and when it is at its lowest. The only way to develop this expertise is to watch it rise and fall over a period of about a year before entering the market.

It also helps to speak to those who are already in the market. Other silver investors, especially those who have been dealing in it for a long tiem, will be more informed. If silver is beginning to gain value, it's a good time to buy. Investors will speak about this. So keep an open ear.

Historically, silver has tended to be more lowly priced in January, early April, and early July. Silver is generally priced the lowest in January.

Silver bullion is bought from silver bullion dealers. Not all governments permit the sale of bullion.
Silver bullion is bought from silver bullion dealers. Not all governments permit the sale of bullion. | Source

Differences Between Silver Bullion, Silver Coins, and Silver Bars (Silver Ingots)

There are different ways of purchasing silver.

Silver bullion are bars of solid silver which are rectangular in shape. They are also known as ingots. They come in different weights, e.g. 100 oz or 1000 oz. The 100 oz silver bullion ingot weighs 6.86 lbs and so is easier to carry than the 1000 oz silver bullion ingot which weighs about seventy pounds. Obviously, the 100 oz silver bullion bar is easier to carry around than the seventy pound one! So if you're planning to leave a country on the quiet, it might be wise to consider the weight!

The purity measurement of solid silver is known as 999 fine silver. Britannia silver has a millesimal fineness of 958. The French produce silver at a milesimal fineness of 950. Sterling silver, the one we are all familiar with, has a milesimal fineness of 925 which means it is only 92.5% pure silver, and the rest is alloy.

Silver coins have a lesser purity and a higher alloy mixture. This is because they need to be harder. Many countries used to have silver coinage in the 50s and 60s, but these have now been removed from circulation as they are expensive to produce. The millesimal fineness if silver coins is generally 900. So while silver coins are an easier currency to carry and trade in, the purity of the silver is not fine, and it therefore results in a lesser price.

That said, a silver coin can also have historical and rarety value. It's not only the silver content of the coin that matters.

How Silver is Refined

Silver Bullion Price

Silver hit its highest price at the end of the 70s when it was trading at $48.70 per ounce. It crashed shortly after that, and for a while now, it has been stable at a considerably lower price. For some time now, it has been trading at about $15 per ounce which makes it an affordable investment - both for use in times when fiat (paper) money has lost its value, and for a long term investment as minerals and commodities grow more scarce.

Silver Coins

A numismatist is a person who collects coins - and sometimes trades in them. In the past all coinage used to be made of rare metals. However, as metals have become more and more expensive, the practice has changed. Even silver coins these days possess only a small fraction of silver. So, buyers of silver coins need to know exactly what they are doing when purchasing silver coins from a coin dealer. It’s also helpful to know some of the language used.

Numismatists put the value of the coin, not so much on the metal the coin is made of, but on what is printed on the coin. In other words, it has to do with rarity. While, on occasion, the coin may be made entirely of silver, the historical and rarety value of the coin might be a thousand times the price of the silver it contains.

If silver coins are intended to be used for currency, then it is the silver content that matters and not the historical or rarety value.

In a market where money has lost its value as a means of exchange (and many say that time is coming), it’s not always convenient to use a silver bar to buy a loaf of bread when a silver coin would do. In other words, silver coins are easier to carry around and to use as a means of exchange for smaller purchases.

The best silver coins to purchase are those minted by the government. The Canadians mint the Silver Maple Leaf. America mints the Silver American Eagle. Austria mints the Philharmonic , Australia mints the Kookaburr, and China mints the Panda, Many private mints also make silver coins. However, they tend to charge for the commemorative print value and not keep to the spot silver price. A spot price is the price that is paid at a particular moment.

American dimes, quarters, and half dollars, prior to 1965, contained 90% silver. If you have any of them, hang onto them. They will be worth a lot more than their face value in times of trouble.

Silver Will Increase in Rarity

Why Silver Is a Good Investment in the Stock Market

Most people who invest in mineral wealth look at the currency value of the metal. Silver has a much lower currency value than gold. However silver is used in industry in many different applications. Silver is used in the creation of solar panels, water filtration, electrical contacts and conductors, mirrors, window coatings, photographic and xray film, and various medical instruments.

As silver begins to be mined out, and as the population grows, the value of silver will escalate. All forms of silver investment will become increasingly profitable as the population increases, silver becomes more rare, and there is a rising requirement for solar panels and water filtration.

Silver Thursday: When the Hunt Brothers Hoarded Silver

The price of silver was artifically inflated towards the end of 1979 by the three Hunt brothers—Nelson, Lamarr, and William—attempting to buy up all the silver in the world. They managed to buy one third of it, the price of it rising from $6.08 per ounce to $49.45 in a matter of a year between January, 1st, 1979, and January, 18th, 1980.

There was an outcry by their hoarding of silver as this meant various industries could not produce their products without paying a 713% increase in the price of silver. As a consequence, new rules were introduced, and because the Hunt brothers had borrowed in order to buy silver stocks, they could not meet their obligations when the price of silver fell (due to the new rules).

The moral of the story is that it's not that easy to artifically inflate the price of minerals.

Would you prefer to use solid silver coins in real life to cheap metals?

See results

Inflation When Minerals No Longer Back Fiat Money

When I was young, silver coins were made of silver. That is why they were called silver. I recall my late father telling me that the silver in a five shilling coin was worth more than five shillings.

I also recall when the gold standard was replaced by industry.

The bottom line is that money was more than representative of value (as it is now) more than half a century ago. The value of the currency was actually equal to the exchange.

For this reason, an investment in silver coins may be a good thing - provided the value is in the silver content of the coin and not the historic value of the coin.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2019 Tessa Schlesinger

Comments

Submit a Comment
  • TessSchlesinger profile imageAUTHOR

    Tessa Schlesinger 

    6 weeks ago

    I totally agree - but I was writing for beginners, and I didn't really want to say to invest small amounts each month to leverage the overall outgoings. :) You're right, though! :) Hopefully readers wll read through the comments.

  • dougwest1 profile image

    Doug West 

    6 weeks ago from Missouri

    Tessa:

    One of the best ways I have seen to invest in gold and silver is to buy the same dollar amount each month - dollar cost averaging. Since it is impossible to know when silver is at the low for the year, dollar cost averaging allows you end up the year with your average price per ounce slightly below the yearly average price. The American Silver Eagle and Canadian Maple Leaf one ounce coins are the most liquid form of silver in the United States for the small investor.

  • TessSchlesinger profile imageAUTHOR

    Tessa Schlesinger 

    6 weeks ago

    Yup, sometimes the small steady things are better investments that the things that have a lot of hype! :)

  • Eurofile profile image

    Liz Westwood 

    6 weeks ago from UK

    This is an interesting and well-presented article. I have often read of people investing in gold, but not in silver.

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