Baker’s Dozen – Silver… The Other Real Money

By Jon Swyers

In our latest Baker’s Dozen article, Rich Checkan set out the case for gold as the cornerstone of your precious metals portfolio. Today, we take a look at silver, which stands side-by-side with gold, as a critical component of the precious metals we offer. Silver, far from being an 'also ran,' is a very important addition to both your core (insurance) and growth (appreciation) precious metal allocations.

Silver is Real Money

Like gold, silver is considered real money and has been regarded as such for millennia. In fact, the first recorded coinage dates back to around 600 B.C. in Lydia… what is now Turkey. The electrum trite was actually minted from a naturally occurring gold/silver alloy.

Unlike other precious metals such as platinum or palladium, silver is currency that can be used in a crisis or for day-to-day living. While gold may be the pre-eminent precious metal as currency worldwide, silver has the benefit of easier divisibility and lower price entry levels for those building for the future, establishing a legacy, or adding to the holdings in a core portfolio. This divisibility and cost-effectiveness makes ‘Junk Silver,’ pre-1965 U.S. 90% silver coins, an excellent addition to your core holding allocation.

How much silver should you own?

Because the last 10 years have been generally good for securities and the U.S. dollar, it may come as a surprise to learn that a portfolio with a 71% allocation in stocks and bonds, and a 29% allocation in tangible and rare tangible assets, out-performed a portfolio with the standard 60%-40% stock/bond mix by roughly 10% over that period.

Essential to this out-performing, diversified portfolio is a 3% or more allocation to silver. While there's no question that gold prices set the trend for silver prices, silver has a higher upside potential that accounts for some of the better 10-year return.

The lower price of silver means a much lower capitalization of the silver market vs. the gold market. Silver prices display more volatile changes on thinner trading. Simply put, when gold prices change, silver prices move with deeper lows and higher highs. This gives silver a better chance of appreciation with a smaller investment… especially as we move up off long-term lows, such as we are doing right now.

Attention growth investors: Silver is an important industrial metal.

Hospital infection containment, solar energy, water purification, and catalytic converters all depend on silver. Right now, U.S. industrials are not performing well. But, when they do come back, silver will increase in demand as a fundamental raw material. The list of industrial uses for silver is incredibly long. The minute we see a true economic recovery, silver will benefit.

When that occurs, silver supply will not meet demand with ease. It is mined as a by-product of other metals and available in small quantities giving your investment an extra price kick when demand increases, due to this inelasticity.

The Gold/Silver Ratio

The typical silver to gold pricing ratio is 50 to 1. However, the price ratio has ranged from 78.60-83.29 to 1, in the past 30 days. This is an historic low in the price of silver compared to the price of gold.

We believe the market is undervaluing silver. World and market uncertainty is bolstering gold prices, which have recently broken through the $1,250 price barrier. But, this market uncertainty has not quite reached silver despite its strong fundamentals.

With the strength of the dollar, it may be time to convert some of your cash to silver. If you are a trader, this is a good time to consider selling some gold and using the proceeds to buy silver. But, leave your core holding (insurance) gold alone. It has another purpose.

Silver Products for Your Portfolio

For your core portfolio, consider ‘junk silver’ for its divisibility. Junk silver coins are not junk at all. They are U.S. government coins minted prior to 1965 (dimes, quarters, and half-dollars) containing 90% silver. They are called 'junk' because they are circulated silver coins.

Junk silver is well recognized as legal tender. There is no assay required with junk silver, and it is instantly liquid at any coin or precious metals dealer worldwide.

Junk silver arrives at your door or storage location in bags of $100 face value or $1,000 face value. $100 bags are easy for home storage and to allow you to make smaller purchases. At ASI, we offer FREE shipping and insurance when you buy $1,000 face value or more of junk silver at a time.

You can also purchase junk silver through our online platform, ASI Precious Metals Direct (ASIPMD).

Silver is also available to be added to your IRA conveniently through our Perth Mint Certificate Program, or precious metals IRA on ASIPMD. Both programs offer secure, safe, insured storage for your metals.

Like gold, silver does not replace equities. Nor, of course, does it replace gold. Silver is held in addition to these for improved portfolio performance, decreased portfolio risk, potential profit and wealth insurance.

Call us today at 800-831-0007, or email us to discuss how to take advantage of the current U.S. dollar strength to achieve your desired silver position.