The Market Report: What is silver’s appeal as an investment? How is it different from gold?
Gold usually steals the headlines, but silver plays a critical role in any diversified portfolio of precious metals. In this episode of the Market Report, we take a look at silver’s value as an investment. How does it compare to gold, and how are the two metals different? Why might you want to have both in your portfolio? And where might silver prices head in the future? If you want to maintain a diversified portfolio, you’ll want to hear what Vince Miller and Phillip Patrick have to say.
Mark Alyn: This is the Market Report with Vince Miller from the Birch Gold Group. Also joining us today, Phillip Patrick from the Birch Gold Group. Hi everyone, I’m Mark Alyn. Gentlemen, welcome to the Market Report.
Phillip Patrick: Hi Mark.
Vince Miller: Hi Mark.
Mark Alyn: We’re going to talk about silver. We’ve been talking about gold the last few weeks, but silver is an interesting material. I discovered a couple of things, that the periodic name is Ag. I discovered that it was found about 7,000 years ago and that today it’s used in a variety of industries and is a very much-needed commodity. Vince, tell me about silver.
Vince Miller: Yeah you’re right. Silver has a two-fold purpose. First of all it’s an investment metal that is sought after. It’s considered a global reserve asset just like gold is. Some people have referred to silver as the “poor man’s gold”, I strongly disagree. It is cheaper but that doesn’t mean it’s less valuable. In China, the demand for physical silver for industrial purposes has never been higher. Silver is in almost everything that we use, from cell phones to medical equipment, and I think the demand for it is continuing as we continue to innovate and grow.
Mark Alyn: What about the ratio between gold and silver? I mean gold, right now, is around $1,300 an ounce as we speak and silver is around $19 an ounce.
Phillip Patrick: Correct, Mark. Very interesting time to be looking at silver. As you mentioned, historically, the trading ratio has been about 16-to-1 with gold. And what that means is if you go back throughout history, gold has averaged out to be 16 times the price of silver. Today, it’s closer to 60-to-1. Silver is cheaper today, relative to gold, than at almost any other point in history. So certainly a good time to be looking at silver.
Mark Alyn: Is silver also a hedge against inflation? Our last episode, we talked about inflation, can silver be used in the same way?
Vince Miller: Yeah, you know, silver, historically, has always followed gold except for when gold took the big jump and silver kind of didn’t track as much and most of the experts believe that, obviously, if silver was to catch up to historical levels it would just go through the roof. The thing that most people don’t actually understand is just that the supply and demand fundamentals right now in silver are extraordinary. Literally there’s been an ongoing supply deficit for the last 10 or 11 years. China has been ordering and buying more silver, almost 300% more silver this year than last year, which is unprecedented. Which just means they’re using it for industrial purposes. And the fact is that there’s just not enough of it. I recently read a mining report that said that in 25 years, if they don’t find some silver substitutes or more silver, we could actually be out of silver. So we could be depleted of silver right now.
Mark Alyn: And that, of course, would raise the value of silver dramatically.
Vince Miller: Absolutely. The one thing that most people don’t actually realize is that 70%-80% of silver is actually brought to market and mined as a byproduct of other mines such as copper mines, zinc mines, gold mines, coal mines and so forth. So there’s literally very few silver mines in the world right now.
Mark Alyn: So somebody who wants to preserve wealth, to preserve their buying power, as they do with gold, as you at the Birch Gold Group teach and educate people to do, can you do the same thing with buying silver?
Phillip Patrick: The answer is absolutely yes. Silver is very, very attractive in the current climate. To recap on what we’ve discussed: We’ve got cheap prices, we’ve got rising industrial demand and we’ve got a supply that’s currently shrinking. Long term, that bodes very well for the silver market. Its use in the electronics industry has doubled in the last decade. It’s being used now more and more in the medical field: It has medicinal properties, it’s used imagery, it’s used in burn cream. So, very, very interesting time to be looking at silver and certainly we feel as part of a diverse portfolio, it makes a lot of sense.
Mark Alyn: And the active word there would be “diverse” portfolio.
Phillip Patrick: Absolutely.
Vince Miller: I talk to people that won’t buy gold, they’ll only buy silver, which is fine. I think you get more bang for your buck. I think you get more of it. I think people historically look at gold strictly as a protection hedge against inflation. A lot of people have considered silver to be not just for protection but also for profit. It tends to kind of go up as well when the dollar loses value it tends to kind of track upward as well. I think that the concern that we seem to have from a lot of people that we talk to is that if it, theoretically, goes to hell on a hand basket, they want to be able to buy and sell, they want to buy bread. You know, before 1965 in this country, American coinage had 90% silver, 10% copper. Obviously today it doesn’t. And so there’s nothing wrong with buying a bunch of silver and just having it on hand for an emergency fund, having a bunch of bags of silver, silver quarters, half-dollars, Peace Dollars, that sort of thing is not a bad way to diversify and to protect your family.
Mark Alyn: I can remember my parents going to Las Vegas and coming back with silver dollars for the kids, my grandparents too. Buying vintage coins like that, is that another way of purchasing silver?
Vince Miller: Absolutely, Mark, when we were kids I used to go into my father’s pocket and I used to steal these fifty-cent dollar pieces and I used to go to the Good Humor man and I used to buy an ice cream. Well, you know, those Walking Liberty half-silver dollars, today, that was the most expensive ice cream in history.
Mark Alyn: Of course, of course. I mean we didn’t think of them as investments at that time. Gold and silver, they go up at different rates. Is it a good idea to have some of each – we just talked about diversifying our portfolio – in your portfolio?
Phillip Patrick: Absolutely, we always believe in diversification and I think they have slightly different characteristics which makes them work very, very well together. Gold is predominantly your direct hedge. It’s a monetary metal in a way that silver isn’t. So if you’re looking for a direct hedge against inflation, direct hedge against currency devaluation, gold will provide you with that. Silver does tend to track gold, but it’s little bit more aggressive, I would say more focused on growth. So the two combined together work very, very well.
Mark Alyn: Makes a good rounding out of a portfolio. And a few weeks ago, I guess we were talking about hedging against inflation. What that means is that as inflation increases, the buying power of the dollar goes down.
Phillip Patrick: Correct. I think Vince’s example previously was a perfect example of that. You know, by sitting in currency for long periods of time, you lose buying power on the back of inflation.
Mark Alyn: At Birch Gold Group, what forms of silver can I buy?
Phillip Patrick: We have every option available here at Birch. I always tell clients, one type is not better than the other, it really depends on the individual and what they’re looking to achieve – we have all the options available from bars, to coins, to rarities and everything in between.
Mark Alyn: So where do you guys think silver is going to go?
Phillip Patrick: Well, I have to say Mark, nobody has a crystal ball so it’s impossible for us to dictate where prices are going to be in the future. But to recap on a couple of things that we’ve discussed here, we have silver prices way off where they should be from a historical trading ratio standpoint. So we can assume silver prices right now are very attractive. We have industrial demand for silver that is growing rapidly and we have a supply, long-term, that’s shrinking. In my mind, that bodes very, very well for the silver market, long-term.
Mark Alyn: Well that wraps up our program today. If you have any questions about silver, about gold, about platinum, about any precious metal, you should call the Birch Gold Group at (800) 355-2116. That’s (800) 355-2116. You can talk to one of our precious metal specialists, our gold specialists, they’ll answer any questions. And of course we would like to hear your response too and your questions and you can do that by emailing us at email@example.com, that’s firstname.lastname@example.org. And of course visit us at www.birchgold.com. I’m Mark Alyn, for Phillip and for Vince. This has been the Market Report, we’ll see you on our next program.china, Featured, gold, inflation, silver