Investors who are bullish on gold should be even more bullish on silver. The long term fundamentals for silver are significantly more bullish than they are for gold. Let's look at some reasons why silver is a better investment.
- One major difference between gold and silver is that silver is actually consumed. This is because silver is used in very small quantities in electronics. This as opposed to gold where almost all of the gold ever mined is still above ground in a recoverable state. Silver scrap is too difficult to retrieve at this point because prices are not high enough.
- Historically the gold to silver ratio has been 16:1. Right now, the ratio stands at about 53:1. The ratio of silver to gold in the world is roughly thought to be around 15:1. Assuming the gold to silver ratio corrects to a level such as 20:1 would mean that silver should be worth at least $85 an ounce today.
- Central banks do not have silver stocks to "suppress" any spike in silver. In gold, central banks own a significant amount of gold thus, if needed, they can sell gold to "suppress" the market. While central banks in emerging nations have been buyers of gold, they could also sell gold if they wanted to defend the paper banking system.
- Silver is still trading well below its all time high of $50 reached in 1980. Gold is trading much higher than its all time high of $850 reached in 1980. In fact, Gold has more than doubled from the high in 1980. If silver were to double its 1980 high, silver should we worth about $100.
- The mint has been reporting that silver sales have been about the same in dollar amount as gold sales. This means that the mint is selling 53 times more silver than gold.
Ways to buy SIlver?
- Local Coin Dealers
- U.S Mint
- SLV (silver bullion)
- PSLV (silver bullion)
- USLV (3x silver futures)
- AGQ (2x silver futures)
- SIL (silver miners)
Which is the best way to play silver? Personally, for long term investors, I believe that owning physical bullion is the best choice. For short term speculators who are interested in making a leveraged bet on silver, then AGQ, and USLV are the best bet. Shares of the minors in general have not kept up with gains in silver, and generally picking the right mining stock is very difficult. For this reason, i think it makes more sense to buy ETFs or bullion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.