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Investing in Silver Coins

Buy Silver for the Long Haul

Written by Brian Hicks
Posted November 18, 2013

Investors are hungry for silver coins right now. Why? They are cheap and have a long term potential to deliver great returns.

2010 american silver eagleActually, silver coin sales will likely hit an all-time high in 2013, according to a recent report by consultancy Thomas Reuters GFMS, reported in the Wall Street Journal.

Investment demand – along with demand from the industrial sector, which accounts for 45% of silver consumption – is rising, while prices are declining. Prices hit a three year low in June at $18.24 per troy ounce. They continue to be low, with a recent drop of 1.6 percent on the Comex in New York for December delivery at $20.442 an ounce.

With prices so low and demand continuing to grow, it’s the perfect time to invest in silver. And there are many ways to do so. You can purchase silver bars, silver coins, silver ETFs, silver stocks, or you can invest in silver companies. But silver coins and certain companies may be the best investments now.

Silver Coin Investment

Buying silver coins is the most convenient way to invest in physical silver. With silver bars, you must make special arrangements for transportation and storage. Silver coins are much easier to transport because they are smaller, and they are also much easier to store; most investors keeping the coins themselves in coin protectors.

The most popular silver coin this year is the U.S. Mint’s American Eagle silver coin. Sales of this coin have already passed the total for 2012, and they're creeping closer to the record set in 2011.

While most investors often seek gold coins, silver is winning this time around. For one thing, silver coins are much less expensive than gold. Actually, they're 60 times less expensive.

Investors who love a volatile investment are also drawn to silver. Volatility is even more pronounced with the back and forth of the Fed QE tapering. Whenever there is some mention of tapering, silver reacts quite aggressively.

Just last week, for example, Fed chair nominee Janet Yellen announced there wouldn’t be a taper because the economy was too weak; however, there was some worry a taper could come in December because of numbers showing economic improvement. This sent silver down almost 5% to $21.87. As long as there is talk that taper is coming, silver will continue to react to any mention of it.

But there’s a problem. As prices drop for silver, mines will start to deal with the repercussions. Production costs rise, and with too little money coming in with silver sales, mining companies can start to close. Coeur Mining Inc. (NYSE: CDE), for example, received 61 percent of its revenue from silver in 2012 but only 55 percent this year.

This has led many investors to stay clear away from mining companies. Not Silver Wheaton (NYSE: SLW) though, as it has a different strategy that seems to spark the interest of many investors. Silver Wheaton is in the business of purchasing future silver streams. It purchases from companies that mine silver as a byproduct. Once the company buys for a set price, it can turn around and sell it for a higher price.

Mining companies are on board with this because it helps them with production costs, keeping them operating through the silver price slumps. Silver Wheaton makes money by selling silver for more than it paid for the production.

Silver Wheaton is the biggest precious metal streamer in the world. In 2013, it’s expected to pull in as much as 33.5 million in ounces of silver.

Investing in Silver

Silver is a long term investment. You’ll see a lot of volatility in the next few years with the precious metal, so you won’t be able to purchase it now and make a good return in a couple of weeks. It's possible you'll have to hold on for a couple of years for a decent return. But it may be worth the wait.

Silver is in a slump now, and as coin investors take this opportunity to load up, you should too. Buying silver now means you are getting it for a lower price – think of it as a sale. Will silver go lower? Most likely yes. But right now, it’s at a low enough rate that it will be a decent investment for anyone.

Look into streamers like Silver Wheaton as an investment possibility as well. Silver Wheaton is a smart company, and it projects considerable growth next year and each year afterwards. The company is on to something with streaming, and you might as well try to benefit from it too.


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