Interested in investing in silver bullion but not sure of where to start? Provident Metals wants to ensure that you have all of the information you need to begin investing in the silver market, making educated investments that will benefit your portfolio.
SILVER IS CHEAPER THAN GOLD
For some time now, silver has been far cheaper than gold, whether to buy or to store it. This might not mean much financially, but it is useful to understand how you can make sound investments without taking high risks in regards to your finances.
At this time, gold is selling for approximately $1275/ounce while silver bullion is selling at around $15/ounce. Comparatively, silver is about 85 percent cheaper per troy ounce than gold at this time, while the average gold-to-silver ratio tends to generally stand at around 75:1.
Again, this doesn’t necessarily mean that silver is a better investment than gold, but it can make it a more profitable, or viable, investment for some investors. If you are worried about making such a high investment in gold, then silver can offer you a better, cheaper option, one that will allow your mind to be at ease while still investing into the precious metals market.
UNDERSTANDING THE SILVER SPOT PRICE
Spot price, which is often thrown around when talking about the price of commodities, is the live price of a commodity within the marketplace. This is determined by a number of factors, but it often relies on supply-and-demand economics, futures prices—contracts set in place for month-to-month trading by producers, suppliers, sellers and buyers—and other economic derivatives.
The New York Mercantile Exchange (COMEX) is one of the foremost places to keep up to date on the current spot price of silver bullion on a recurring, daily basis; however, while the COMEX used to set the standard daily spot price of precious metals when the physical market would come to a close, these commodities now go through variations on a 24/7 basis, often referred to as the “aftermarket” trading values. The reason this happens is due to the variety of factors that have an effect on the spot price of commodities, especially something globally traded, produced and sold such as silver bullion. Overseas markets, news headlines and other derivatives have a constant effect on the value of silver bullion, so the spot price is expected to change on a regular basis—which might sound difficult to track, but with the right eye, it can be easily followed.
WHEN TO BUY BY SPOT PRICE
You might question when the right time to purchase silver bullion is, and for good reason. It can be difficult to effectively time the market to your expectations, as the variety of factors and derivatives can make it increasingly difficult to decide when to buy and sell, and how much you should be liquidating or stockpiling at one time or another.
The most common phrase heard when dealing with either stocks or bullion is that of “buy low, sell high.” While this is a helpful idea to remember, it can still be difficult to follow with success.
A better option is to consider dollar-cost averaging, a method wherein you effectively negate price bumps by making considerate, continuous investments over the course of a month or quarter, thus keeping consistency and recuperating for any strange bumps along the way. Some investors might scoff at this idea, thinking that you should be committed “all in” to your investments, but it is for you to decide which scheme you most prefer.
KEEPING AN EYE ON SILVER AVAILABILITY
While keeping an eye on the silver spot price, you also want to consider the current global availability of silver bullion.
Silver bullion is commonly used for manufacturing purposes besides just investing, so it is important to keep an eye on how privatized and public interest is affecting the overall demand of the product. The primary reason you want to keep an eye on supply and availability is that a lack of availability and an increase in demand can lead to similarly increased premiums that will make silver bullion more expensive than it would regularly be. In such instances, it might be smarter for you to wait until the market stops fluctuating and settles back towards its regular price before you consider investing.
IS PREMIUM BULLION YOUR BEST OPTION?
As stated above, you should avoid paying increased premiums at all costs, unless you are a purist who seeks to receive some of the best silver bullion released to the marketplace. Increased premiums will be placed upon certain kinds of silver bullion, particularly that which has been sitting within the market or as demand becomes increasingly larger, all while availability remains stagnant.
Premiums usually begin to settle once new productions are introduced to the marketplace, as premiums will become relative, and those that were once high will often lower themselves to continue selling among investors and manufacturers. This happens as a direct response to public demand, and the premiums on products are affected by how people are interacting with the products—i.e., whether people are willing to pay certain amounts to purchase certain brands of silver bullion. If the commodity’s premium does not decrease, it won’t sell among the market so it must decrease to continue rivaling other silver.
HOW DOES NAME BRAND BULLION DIFFER?
Brand bullion might not be as popular as premium silver bullion among purist investors, but that does not mean there is anything wrong with it. Brand bullion is produced by larger corporations who introduce a significant amount of silver bullion to the market, making their products easily identifiable to both buyers and sellers.
The premiums on brand bullion are often expected to be lower than that of premium bullion, and that simply comes down to the demand and purity of the commodity. The premiums between the types of silver bullion—silver rounds and silver bars—tend to see similarities between one another, but their demand will differ greatly from the likes of items like American Silver Eagle coins, which tend to have a higher demand upon public investors.
IS GENERIC BULLION REALLY WORTH IT?
When first investing into the silver bullion market, it might be in your best interest to begin buying small amounts of bullion to get a feel for how the market shifts over time—in response to supply and demand. For this reason, generic bullion can be beneficial for the first-time investor, as it makes for popular silver bullion items that can still be utilized for investing purposes. These items, which will range from silver bars, silver rounds and basic silver coins such as silver dollars, will not be stamped like name brand bullion.
For this reason, it can prove difficult for first-time investors to determine how legitimate the source of a generic bullion might be, especially if you are buying from an online dealer. You want to be certain that you are buying true silver bullion. While this type of bullion might not be stamped like name brand products, there are some particular stamps you can look for to determine whether it is reliable. These include such stamps as “.999 fine silver” or “one troy ounce,” as these are both commonly used phrases consisting of terminology from the bullion market.
Furthermore, if you purchase a “one troy ounce” piece of silver bullion, you can measure the item at home to determine whether it is pure or counterfeit. By using a small scale, you can weigh the item which should weigh out to 31.1 grams (the equivalent of one troy ounce). If you find that this isn’t the case, you should contact the seller immediately to discuss the issue.
RESEARCH WHO IS SELLING THE BULLION
Unfortunately, we can’t trust every seller that is a part of the market. There will always be companies selling precious metals that will either be selling them at a higher price per troy ounce or selling counterfeit bullion items. In some cases, this can be difficult to catch with the naked eye, as they are expertly produced to replicate pure bullion items on the surface.
If you are unsure of the reputation of a seller, consider taking the time to research the company before buying from them. Read reviews from various investing outlets to determine whether or not they are a company you can trust; consider contacting them with questions to ascertain their legitimacy when producing and testing their products; and seek out articles written by expert investors within the field to discern which organizations can be most trusted.
IS THIS INVESTMENT BEST FOR YOU?
Consider why you are even thinking about investing in silver bullion in the first place. What, in your opinion, has piqued your interest to begin investing?
Perhaps you want an alternative to add to your portfolio. Maybe you want a precious metal that can be used for monetary safekeeping in the event that the USD gets hit by substantial inflation or simply collapses in the near future. Maybe you’re looking for a low-risk investment that can be easily monitored and traded that isn’t tied to the stock market.
Whatever your reasoning, these are things you should ask yourself prior to making an investment so you know the exact reasons you are going to make a purchase, as well as why it interested you in the first place.
UNDERSTANDING YOUR INVESTMENT AND PORTFOLIO
When first starting out with silver bullion, you want to have a plan in place that will allow for smart, tactile investing. Because the price of silver can sometimes be volatile, what we would call a liquid asset, you don’t want to invest a great deal of your portfolio into this asset alone. Furthermore, you shouldn’t invest solely into silver bullion thinking it will make you quick cash—allowing for periods of high-rate turnovers from buying to selling your asset, or what would be called “day trading.”
Your best bet is to think of your long-term goals—i.e., how you see this investment benefiting you for the future. The interest gained on silver bullion might not be high while you hold it, but it is a great asset that you won’t have to valuate into income taxes. The benefits you gain from holding on to your silver bullion will come directly from when you sell your asset.
ESTABLISHING FAITH IN YOUR PURCHASE
When first getting involved with silver bullion, you want to find a dealer whom you can trust. With so many sellers out there, it can be difficult to find someone reliable, especially dependent upon the item you are looking to buy. Whether you’re looking for silver bullion or silver coins, you want to be sure to take the time to find a legitimate dealer whom you can either build a rapport with or has been trusted by many other people.
If you’re in the market for silver bullion, you want to find dealers who are reliable, selling very fine silver rounds and bars. If they are online sellers, they are likely to offer significant amounts of information about the silver market, and will be available to answer your questions whenever needed. Similarly, it is likely they will offer buy-back guarantees in the event that you decide to sell your investment.
For numismatic pieces, these notable sellers will offer you premium values on collector coins, most of which will be valuated likely above the melt value of the coin you’re eyeing. They will often explain their pricing schemes, dependent upon the condition, rarity and population of the coin, and will similarly be available to discuss the subject with you.
If you are ever unsure about a business that is selling silver bullion or coins, consider investigating them through the Federal Trade Commission’s Better Business Bureau, which will outline how secure and reliable the organization is for a consumer. Otherwise, consider comparing prices between companies to determine which would work best for you, ensuring you don’t pay too much for your investment but receive an investment that is pure and notable.
With this information in your arsenal, consider taking a closer look at just what it is you want when investing in silver bullion. If you have any questions or are in need of some guidance, feel free to reach out to Provident Metals. We’re here to guarantee you get the most out of your investment.
Interested in investing in silver bullion but not sure where to start? Provident Metals wants to ensure that you have all of the information you need to begin investing in the silver market and make educated investments that will benefit your portfolio.