20 Reasons Why a Significant % of Your Investment Portfolio Should Be In Silver

So writes Mark Thomas (www.silverpriceadvisor.com) in edited excerpts from his original article* as posted on Seeking Alpha under the title 20 Reasons To Consider Silver For The Long Term.

This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Thomas goes on to say in further edited excerpts:

Many gold investors deride silver as the “poor man’s gold” because of its low relative price to gold. They also don’t like the fact that because it is used primarily as an industrial metal it can be negatively affected by a cyclical downturn in the economy. This is opposite of gold which is viewed almost entirely as a precious metal.

Many years ago, the silver market was so over-supplied because there were huge artificial inventories of silver. The U.S. took currency (coins) out of circulation due to its physical silver content and because of this artificial situation, huge surpluses hung over the market until these excess inventories were depleted. This led to silver prices crashing as low as $2 and then traded around $5 for years. Because silver had so decoupled from the price of gold during this period, it began to be thought of as just another industrial metal and not a precious metal.

There are still skeptics who think of silver as just another industrial metal. However after a 600% rise in price from $5 to $30 since 2003, it has begun again to be viewed as a precious metal. As this transformation continues there will be additional significant moves higher in price. That will attract more investors to silver again until it once again retains its true status as a precious metal…

Below are 20 reasons why it is prudent to think of silver as an ideal investment for the long term:

1. The amount of silver consumed annually and bought for investment exceeds currently exceeds total annual mining output and has for years. That gap has been filled by sellers willing to sell from existing inventories and as prices rise. As time passes this will naturally push prices significantly higher until this fundamental imbalance reaches a true equilibrium price where supply is closer to demand.
2. Both industrial and investment demand for silver is growing in excess of the annual increase in mining production growth. The available inventory is low and will get even tighter over time. These two factors will lead to a continued tighter supply-demand situation going forward.
3. The lower price of silver at $31-32 appeals more broadly to small investors relative to more expensive gold at $1,650-1,700, especially if gold prices continue to rise.
4. Most silver is not found in mining sites in any significant concentrated form. It is usually chemically bound to other metals; much of it is actually the byproduct of mining for lead, copper, etc. In the last few decades this made it less attractive from a profitability standpoint to invest in a pure silver mine. Now prices have finally recovered enough to make new projects feasible again. So there is new investment in the sector but it is a lengthy multi-year process to bring on significant new production.
5. The last time silver was found in huge concentrations or veins that dramatically affected the amount available and therefore significantly lowered prices was in the Comstock Lode in Nevada in the late 1800s. The Comstock Lode produced tons of ore that was very pure with concentrations of 25-50% silver. Silver mines today have much lower concentrations, usually always less than two ounces per ton of refined ore.
6. Silver is the most conductive metal on earth. Gold is also conductive but is prohibitively expensive due to its much higher price for most industrial uses compared to silver.
7. Silver is an industrial metal with over 10,000 commercial applications. Because it is one of the best electrical and thermal conductors, that makes it ideal for electrical uses such as switches, multi-layer ceramic capacitors, conductive adhesives, and contacts. It is used in some brazing and soldering as well. Silver is also used in solar cells, heated automobile wind shields, DVDs and some mirrors.
8. Silver is an essential element in the electronic gadgets that are a growing part of our digital age. It is in every cell phone, smart phone, tablet, computer keyboard, solar cells and every radio frequency if ID device (RFID). This makes it an essential element going forward as the world becomes more addicted to gadgets. The growth and rising living standards of people in the emerging economies will drive long-term growth of new customers that will demand more and more electronic gadgets.
9. Silver’s industrial demand should increase 60% to 666 million ounces per year by 2016 from 487 million ounces in 2010. Current annual mine production is only around 700 million ounces per year growing a few percent annually.
10. Of a total of fifty billion ounces of silver that have been mined in history, only two ounces (estimate) or 5% remain in above ground inventories available to be bought and sold. This is due to silver being used up in industrial applications in very small quantities, which makes it unprofitable to recycle at today’s prices. A lot of silver is used in minute quantities in industrial products which are used up and discarded without being recycled.
11. This is unlike gold where five billion ounces have been mined and two and half billion ounces (estimate) are still available in all inventory. Since gold is hardly ever discarded because of its very high price, used mainly in jewelry or for investment purposes, the total inventory is so much larger than silver.
12. The supply demand equilibrium in silver is extremely tight. There is now less than one year of inventory of silver, compared to over eleven years of inventory in the 1970s.
13. Exchange Traded Funds (mainly SLV, SGOL, PSLV and CEF) have opened precious metals investing in silver to millions of investors around the globe. When an investor makes net new purchases, the ETF purchases physical silver and removes it from the available market, which increases the scarcity of available supply. This is the first time many investors worldwide are not required to actually buy physical silver bullion and coins and store it themselves. Now they have an investment vehicle that offers liquidity and ease of trading to get exposure to precious metals.
14. Silver also has many medicinal applications. Roman soldiers long ago noticed that if water is kept in silver cups, it wouldn’t become stagnant. Today silver in “colloidal” form is used as a broad spectrum antibiotic. It can be used in bandages to treat burn victim’s wounds and also in colloidal form, actually swallowed to target microorganisms in one’s gut. It is also used in water purification systems.
15. The US Dollar has lost 31% of its purchasing power just since 2000. The dollar has lost a staggering 82% of its value since the US was taken off the gold standard in 1971. Since the Federal Reserve was created in 1913, the US dollar has lost 95.6% of its purchasing power. When you compare the historical appreciation and more importantly, the retention of real purchasing power of precious metals versus the dollar in those same time frames, those facts alone should convince you that significant exposure in precious metals is necessary to protect your wealth. The primary and overarching reason you should have a significant percentage of your investment assets in precious metals is simple: to protect the real purchasing power of your accumulated wealth. In this age of governments abusing their privilege of excessively printing currency, on a magnitude and scale not seen for decades, only gold and silver can protect and actually grow your wealth.
16. Gold and silver are such unique elements with so many uncommon properties. Therefore the chance of a gold or silver substitute being developed is almost impossible. It hasn’t happened in thousands of years and it probably never will. That is what makes them exclusive; they can’t be printed, manufactured or copied. They can only be mined, purchased from a willing seller of the world’s existing inventory and from recycling.
17. Unlike an account at a bank, a dollar bill or a bond, these are all both an asset and liability to counterparty. This includes every other financial instrument and derivative man has created in history. Precious metals are the only asset class with no counterparty risk if you have physical or very secure possession. They will always retain some value and can’t go to zero like any other investment.
18. The total amount of silver available to trade in the physical silver market is only about $70 billion versus the total gold market which now exceeds $4.3 trillion. As you can see from these numbers, the total market size of the silver market is only 1.6% of the size of the entire gold market. This lack of liquidity and use of extreme leverage in its respective futures market produces wild volatility in price fluctuations of silver.
19. The total gold market is 61 times the size of the silver market, yet as interest in silver increases this sets up a situation where prices could soar higher.
20. Since World War II, the U.S. government has sold over five billion ounces of silver and currently has no reported stores. Now that vast stockpiles are gone, the supply demand equation has changed dramatically.

If one want to get exposure to silver in a brokerage account you should consider the exchange traded funds such as Ishares Silver Trust (SLV), ETF Securities Physical Silver (SIVR) and Sprott Physical silver Trust (PSLV).

Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://seekingalpha.com/article/1103421-20-reasons-to-consider-silver-for-the-long-term

Register HERE for Your Daily Intelligence Report

1. It’s FREE
2. Provides the “best of the best” financial, economic and investment articles to be found on the internet
3. Is in an “edited excerpts” format to provide brevity & clarity to ensure a fast & easy read
4. Don’t waste time searching for informative articles. We do it for you!
5. Register HERE and automatically receive every article posted
6. “Follow Us” on twitter & “Like Us” on Facebook

Related Articles:

1. Alf Field Sees Silver Reaching $158.34 Based on His $4,500 Gold Projection!

This article was prompted by a question enquiring what the silver price might be if my gold forecast of $4,500 proved to be correct [see my article entitled "Alf Field: Correction in Gold is OVER and On Way to $4,500+!" and I have settled on] a target price of $158.34 for silver. [Let me explain how I came to that specific price.]

2. Silver Will Go to $50 and Then Explode Dramatically Higher! Here’s Why

There is a massive amount of energy underlying the silver market, and when it is ready to unleash, we will see price/value increases that will stun even the most ardent silverbugs…The real power of this expected move is likely to be released only some time after the price of silver has surpassed the $50/ozt. level. [Let me explain.] Words: 685

3. What Do Gold Measurements “Troy” Ounce and “Karat” Really Mean?

You have no doubt read countless articles on the price of gold costing x dollars per “troy ounce” or perhaps just x dollars per “ounce” but the difference between the two measurements is significant. For that matter, what’s the difference between a 24 karat gold ring and an 18 karat gold ring? Let me explain. Words: 863

4. History Says Silver Could Become the Next 10-Bagger Investment! Here’s Why

If you concur with the 159 analysts (see below) that maintain that physical gold is going to go parabolic in price in the next few years to $3,000, $5,000 or even $10,000 or more then you should seriously consider buying physical silver. Why? Because the historical gold:silver ratio is so way out of wack that silver should appreciate much more than gold as it goes parabolic in the years to come. Indeed, silver could easily reach $100 – $200 per troy ounce, maybe even $300 and conceivably in excess of $400 depending on how high gold goes. The aforementioned may be hard to believe but an analysis below of the historical price relationship between silver and gold suggests that such will most likely occur if gold does, indeed, go parabolic. Take a look. Words: 1423

5. If You Think Silver Is Going To Increase In 2013 Here’s How to Best Maximize Your Return

I am not normally a big fan of precious metals but in 2013 I am an unabashed fan of silver. If  SLV were to return 15% next year there is a 95% probability that a ProShares Ultrashort Silver ETF (ZSL) put option on SLV would return 80%+!  [Let me explain how I have come to that conclusion.] Words: 985

6. Silver: Another Decade of 500% Returns is Very Possible – Here’s Why

Silver has given returns of 584% in the last ten years and this article discusses the reasons for believing that silver can produce another decade of over 500% returns. Words: 954; Charts: 7

7. Silver: 5 Forces That Should Help Polish Off the Tarnish & Propel It Higher

The price of silver has been corroding for much of the past year but a variety of signals in recent months suggest that it may not be long before silver begins to shine once again. [This article identifies 5 such signals and/or reasons why that may well be the case.] Words: 643; Charts: 2

8. David Morgan: Gold to Go Up 10-20% in 2013; Silver By a Good 30%

According to David Morgan 2013 will be a bullish year in which a new leg up will start with gold going up 10% to 20% and silver a good 30%. That leg up is starting right now, although we probably will not see a substantial acceleration in the leg up like we saw in the first part of 2011 but, obviously, as soon as $50 is crossed an acceleration can be expected. [Morgan explains his position in article excerpts below.] Words: 912

9. Goldrunner: Silver to Rocket to $60 – $68 and Then Much Higher

Personally, based on the fundamentals at hand and the fact that Gold doubled its log channel around this point in the cycle; I expect Silver to bust up out of its log channel in 2013.  Initially, I look for Silver to reach the $60 to $68 level, first and hold open the possibility for Silver to do much more on the upside as the 70’s Silver Chart reflects.

10. Availability Of, and Demand For, Silver vs. Gold Suggests MUCH Higher Future Prices for Silver

The current availability ratio of physical silver to gold for investment purposes is approximately 3:1. So, why is it that investors are allocating their dollars to silver at a much higher ratio? What is it that these “smart” investors understand? Let’s have a look at the numbers and see if it’s time for investors to do as a wise man once said and “follow the money.” Words: 1052; Tables: 1

11. Why You Should Now Invest in Silver vs. Gold

The price of silver is going to go much, much higher – much higher – over the next decade [relative to gold according to Jim Rogers and I concur. Below are 5 solid reasons why I believe that is the case.] Words: 767

12. Silver’s Price Could Outpace That of Gold – Here’s Why

The value of silver has skyrocketed in recent decades –leading many investing experts to believe that silver’s price could outpace gold for the first time in history. This infographic covers silver’s meteoric increase and the factors that have led to silver’s exploding value…[and] takes a nod to the future to see where silver’s price may be headed based on the most up to date demand data.

13. I’m A Crazy Silver Bug…Why Aren’t You?!!

It’s true that there are “NO SURE THINGS” in life…but an investment in SILVER comes DARN CLOSE! Yes, you’ll have to ride the tidal wave of price manipulation but when the waves die down you will fully appreciate the power and value of SILVER. Let me explain.

14. Moolman: Long-Term Chart Suggests Silver Will Comfortably Pass $150 By End of 2013

Thanks to this similarity in events, as well as the similarity in sequence, of the price movement of silver from the beginning of 1966 to the beginning of 1980 with the end of 1999 to the end 2013, my analysis suggests that silver will comfortably pass $150 by that date. Let me explain my rationale. Words: 338

15. The Dollar is Toast! The Future is Silver

Psychologists tell us that there are five stages of grief over loss of whatever kind, usually death, or breaking up with a loved one, which are: denial, anger, bargaining, depression, acceptance. I’ve applied these to the loss of the dollar, as I see most people today are still stuck in denial, and here’s how to deal with that. Words: 1100

16. The Silver Series (Part 2): Supply & Demand

Of the 1040.6 million troy oz of silver produced in 2011, 84% was used in over 10,000 modern industrial applications (16% used as an investment) of which approx. 33% was used in the traditional forms of fabrication such as jewelry, coins, medals, and silverware with the remaining 66% actually being consumed. While the actual amount is unknown, some experts believe as much as 90-95% of all the silver ever mined has been ‘lost’ to landfills.  For this reason, there is likely less silver available above ground than gold (98% of all gold is accounted for today). For more interesting information regarding the supply of, and demand for, silver please refer to the infographic below.

17. Part 1: The History of Silver As a Currency – and More

Silver has thousands of industrial uses and is considered a store of wealth by investors. The infographic below illustrates silver’s history as a currency in the past and as an essential component in industry and technology today.

18. Silver Projected to Reach $100/ozt. As Soon As Late 2015! Here’s My Rationale

There are many predictions for the price of silver. Some say it will crash to nearly $20, and others proclaim $100 by the end of 2012. The problem is that some predictions are only wishful thinking, others are obvious disinformation designed to scare investors away from silver, and many are not grounded in hard data and clear analysis. Other analyses are excellent, but both the processes and analyses are difficult to understand. Is there an objective and rational method to project a future silver price that will make sense to most people? Yes, there is! [And here it is!] Words: 1071

19. What You Need to Know Before Investing in Silver

I believe there is more opportunity in the silver market over the next two years relative to gold and, as such I’m now advocating accumulating a large overweight position in silver relative to gold because, over the long-term, there is such a great demand vs. supply situation developing….Before investing in silver, however, there are a number very important things that you must understand about the silver market. Let me explain. Words: 899

20. The Top 10 Silver Producing Countries & Companies – and Investment Options

Silver has been an important metal for thousands of years, often used as a medium of exchange or jewelry in ancient times….Today, silver still finds its way into jewelry and coins but it is now also a key ingredient in many ‘modern’ applications as well….Due to this multitude of uses the metal has continued to be a popular investable asset…[as well] as a store of value and an inflation hedge. Below are a list of the top 10 silver producing countries, the top 10 silver producing companies and a definitive guide as to the multiple options of investing in the metal. Words: 2091