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- My two favorite ways to buy silver
- One good reason to buy silver now
- Why the price of gold won’t matter
- An insurance policy you can sell if you don’t use it
It’s full disclosure time! As
you might have realized, I’m long term bullish on gold and silver as well as
most other commodities. But over the past 6 months I’ve mostly been loading up
on silver.
As I’ve
said many times in past issues of the Resource Prospector I buy my gold
and silver from one of two online dealers: kitco.com
and Blanchard online. I have no
professional relationship and I don’t get any kickbacks from either of these
two companies – I’m paying full-board just like any other regular investor. I
can recommend them because I’ve had good, responsive and professional
experiences with both – AND they both have buy-back guarantees.
The only reason I’ll buy
from one dealer over another is when they’re running special deals or they have
a specific denomination of bullion that I’ve been looking for.
For instance, there’s a coin
that Blanchard currently sells that was minted by the Swiss government between 1897
and 1949 called the Switzerland Helvetia 20 Franc coin. For many years this
coin was traditionally gifted to newly married couples. At about 0.19 ounces (or just under 1/5 of an
ounce) it’s an affordable, yet generous denomination of coin. It just so
happens that my friend and co-worker Steve just got married to his long-time
girlfriend and high school sweetheart Mallory. I’ve been looking for one of these coins (pictured below) to give as a
wedding present.
But – I’m hesitant to buy
anymore gold, even as a gift, while it’s selling near all-time highs.
That’s one
reason I’m buying silver: it’s still cheap. Today, silver sells for under $19
an ounce.
In 1981, silver briefly sold
for over $50 an ounce. So if silver catches up to its historic, inflation
adjusted highs, it would sell for over $300 an ounce.
If you look at the modern
gold-silver ratio of 55:1 you can see that silver is currently about 20% too
cheap in comparison to gold:
Gold is much closer to its
inflation adjusted highs of about $2,300 an ounce. I don’t think gold will stop
at $2,300 – and I believe that its long term dollar valuation is somewhat
irrelevant. The long term trend is for gold to be worth near-infinite amounts
of paper dollars.
If
hyper-inflation is in the cards, the question of how many dollars can I get for
an ounce of gold just won’t matter. The better question will be: how many
gallons of gasoline can I get, or how many pounds of rice, or how many
cartridges of .357 ammunition? I mean, did anyone in Weimar Germany
really care about how many Deutsche Marks they could get for an ounce of
gold? No.
That’s somewhat off topic.
Right now, I’m buying silver
because it’s undervalued relative to gold, and it’s nowhere near its nominal
highs, let alone inflation adjusted highs.
One of the primary reasons I
own silver has almost nothing to do with its current valuation.
Silver has some more tangible
benefits in the event of a total currency meltdown. That’s because it has a
much lower value-per-unit than gold.
I’ll tell you now what I’ve
told my immediate family members. Tally up your living expenses (food, water,
gasoline, etc.) for three months, and buy the commensurate amount of gold and
silver.
I consider
physical gold and silver to be an insurance policy that you can cash in if and
when the dollar implodes. In that event, your daily expenses will likely be
more easily met by silver bullion than gold. A one ounce gold coin is a large
amount of money, so unless you’re buying food for a dozen people, it would be
tough to find daily living expenses that would require gold bullion.
Silver coins are much better
suited to daily expenses like food and gasoline.
I realize that this type of
discussion borders on the insane – but don’t think of it that way. Think of
your physical gold and silver as an insurance policy. You probably already have
fire insurance – though you don’t believe your house will burn down. If you’re
like most people, you have a life insurance policy that you’ve paid into
forever – though you’re hopefully not planning on dying in the near future.
So, I’m buying silver for
the same reason. In the event that the dollars in my bank account become
worthless, or near-worthless, I want to have something that I can fall back on
– as an insurance policy. Even if I’m wrong, and the dollar isn’t due for Zimbabwe or Weimar style inflation, I can always sell
back my silver and gold and recoup some of that insurance premium.
Try doing that with your
life insurance.
Have a good weekend,
Kevin McElroy
Editor
Resource Prospector
p.s. I’d be remiss if I
didn’t mention a low-cost American silver producer that my boss Ian Wyatt
recently added to the Small Cap Investor
Pro portfolio. This company JUST turned profitable at $16.75 silver, and
prices have been steadily rising since it last reported – so any further upside
in silver’s price will be a boon for shareholders. I’ll be discussing exactly
how you can buy this company early next week, so look for my update in your
inbox. You can take a test drive of Ian’s portfolio by clicking here.