Silver has been on almost everyone’s mind. Since July, the U.S. Mint has been placing quotas on silver coins—like the American Silver Eagle. This increase in investor interest continues today and the influx is not just affecting the U.S. Mint. The Royal Canadian Mint and Australia’s Perth Mint have also had to take measures to account for growing silver demands.
All this led us to wonder: What’s driving silver demand in 2015?
Low Silver Prices
The price of silver has continued to fall since 2011. July 2015 saw a 5½-year low, August saw a 6-year low, and the only question now is just how far will silver drop. With these prices it’s easy to see silver as the go-to metal for investors. Because of its low cost and potential for appreciation, investors of all backgrounds are interested in staking their claim. Silver versatility—both in the market and in a precious metals portfolio—certainly plays a role in the growing demand for the gray metal.
Rate Hike Rumors
With the U.S. economy strengthening, the Federal Reserve has begun considering an increase in the federal funds rate. If a rate hike occurs, investors may turn their eyes from precious metals and begin to invest back in stocks. However, just last quarter the Federal Reserve made the decision to keep the rate as is. This was good news for the precious metals market, as people continued flooding the market to buy gold and silver.
Silver’s the Better Option
The third reason relates to the gold-to-silver ratio. With numbers in the 70s, silver is the favored metal right now. Investors may see the opportunity to build upon silver they already have in their precious metals portfolio. The hope being to later use their silver assets to acquire gold when the ratio settles back down to lower numbers.
Silver coins are a great way to get into the precious metals market. Provident Metals offers an expansive inventory of silver coins and quality services to help any precious metals investor get started. To learn more about silver investing, visit Provident Metal’s blog and knowledge center.
I have been considering giving my silver and gold to the bank changing it to currency in a savings account. I have almost a kilo of silver and maybe a half ounce of gold. And I know that isn’t very much but it would at least be drawing interest. I have a bunch of rare coins too I just started with the gold and silver about 3 months ago but when I walk in to a coin shop and they have a 2010 1oz American eagle and want $40 for it that makes me mad when they try and give me $15 the way I look at it I’ll just keep mine because it has nowhere to go but up. Gold too I will wait it out what happened to people that just wanted to make a profit because here in Tennessee they want to triple there money or they don’t want to buy. Just like my coins no i don’t have them certified but the red book on them well it says some are worth allot the 1984 double ear this guy has one on his website for $250 and mine was in better shape but he still said it was to much trouble so he would give me $10 no way 1906 Indian head he said fifty cents 1910,1920 wheals 5 cents and there in good shape 71 and 72 dbl die he wanted my collection bad I have a bunch of coins the book says are worth thousands but until I know how to get them certified well just like I told him I would throw them in the trash before he would get them. I know he has to get them certified and everything but he could at least offered me half. But I believe I will find somebody honest that will help me and I believe silver and gold will go up and I will be ready.
Partner, that Red book is misleading you. Do a little more reading, ask around. do not expect a dealer to educate you if you want “Red Book” prices-Nobody in collecting actually uses that thing. Beginners always get one, look-up the coins they have and think they really have something. About 90% of the prices are bogus in the Red book. The dealers use different reference and it is a news paper published by the coin industry. Ask a dealer next time, before you even mention the Red Book. As soon as you mention the Red Book, that dealer will not even try to deal with you because they know your idea of value is badly skewed. BUT if you get a chance ask about the coin sheet.
“If we can’t even liquidate by lowering our prices and beating mainstream and local competition, what makes you think your investment is rationale?”
As someone who has just got into precious metals, I find this comment interesting. Most of the buyers here are probably not dealers. So, there shouldn’t be a need to turn over your coins for cash unless one had some unplanned emergency. If you were forced to raise cash unplanned, you’d probably take loss on whatever you had to sell.
So, I’m just trying to build a collection and trying not to buy to much at any price point. As long as you’re diversified, there is no issue with investing in any type of asset. So regarding investment “rationale”, no investment is safe, so no investment can be rational. However, we have no choice but to invest because there is also no rationale in holding all dollars.
Great article and analysis of the trends that we have to compete with as dealers.
I will share a personal reaction to this market as a dealer who faces fierce competition both online and in the extremely saturated PM community in Orlando, FL.
We’ve been buying and selling metals for over 5 years at our shop which is located in a busy mall in Central Florida. Just a few months ago when Silver price was floating in the 14.00/oz to 15.00/oz range we noticed something highly unusual. It was impossible to physically buy anything within that range from the community or from other dealers. Premiums for generic rounds were $1.50 to $2.00 over spot (our cost). Premiums for Eagles were $3.00 to $4.00 over (our cost). We were selling product like hot cakes. In fact, I remember buying Eagles from another dealer at $4.50 over and still being able to sell them at $5.00 over for a profit. Then all of a sudden spot rose to $15 to $16 range (which we are currently in).
Now I’ve been able to acquire generic rounds for .25 CENTS to $.50 CENTS over spot. However, even when I advertise to sell them for .62 CENTS TO .87 CENTS over spot, NOTHING is selling. The same goes for Eagles: I can acquire ASEs for $1.50 to $2.00 over but when I advertise to sell them for $2.25 to $2.50 over, NOTHING is selling. I consider this the cursed range for silver as it is stagnant and there is little to no movement for physical inventory to turn into cash flow. I won’t even go into our Gold inventory as we effectively beat every online and local dealer in pricing and still cannot make any sales. In fact, wholesalers are not even answering our calls and what that means is physical inventory levels are at an all time high.
The bottomline is LIQUIDITY. Liquidity is the most important aspect of precious metal investing from the dealer level and the consumer level. You must be able to liquidate when you need the cash flow. It can be scary when no one is buying because they’re too afraid to stack more physical beyond their fears of market volatility. I’m not even advertising to buy right now and people are still coming to sell. Yes, I can make a profit, BUT, the amount of time it takes to profit vs. volatility must be taken into consideration. Therefore, I advise PM buyers to be especially cautious of the equation of profit vs. volatility. If we can’t even liquidate by lowering our prices and beating mainstream and local competition, what makes you think your investment is rationale?
Just some words of reality from a fellow dealer that follows the ups and downs every second.