Even more than gold, silver can be quite volatile – up and down. I am no silver expert but I believe the case for investing in silver is getting stronger day by day.
While silver share prices have sharply pulled back with the silver ETF down 36% so far in 2013, the big picture of debt and debasement of paper money is increasing every day.
Here’s why, and how you can profit by this…
Silver’s scarcity is also enhanced by its many uses in industry and technology. In 2012, only 10% of production went to minting silver coins and medals. There are rumors that Apple’s recent production delays are due to shortages of metals such as silver.
And despite sagging silver prices, the U.S. Mint sold a record 40 million ounces of silver coins, silver ETF holdings are up 4%, and in the first half of 2013, India imported 130 million ounces of silver.
Coins seem to be the most effective (and fun) way to invest in silver. One inexpensive way is to purchase pre 1965 bags of dimes quarters and half dollars all of which have high silver content. This is a great Christmas present as long as your kids don’t break open the bags and start using the coins at the dollar store.
Silver mining stocks are also an option. But market silver prices are a bit below mining production costs. This is not a good place to be in right now. Miners are doing all they can to rein in costs and this will serve them well when prices inevitably rebound.
My favorite silver stock idea does not mine any silver at all.
Silver Wheaton (NYSE:SLW) follows a “royalty model” by investing upfront in mines in exchange for the silver byproduct.
Silver Wheaton basically buys interest in this by-product silver for around $4/oz. and then sells the silver at spot prices. This gives it better margins, lower risk and better diversification than owning and managing mines directly.
In other words, the company shares in the upside for the price of silver without construction problems, coming in way over budget, or those pesky environmental liabilities.
The company has silver interests in the top three of the top five silver deposits in the world and agreements in Canada, U.S., Mexico, Peru, Argentina, Portugal, Sweden and Greece.
And Silver Wheaton’s dividend policy is to pay out 20% of the previous quarter’s operating cash flow.
Silver Wheaton is down 44.9% so far in 2013, more than the silver ETF. This could be a great entry point and there is nothing wrong with starting a small position in SLW looking for a turnaround in silver prices next year. But for my Value Bounce service, I will wait for a clear uptrend before recommending SLW to my subscribers- timing is very important.
When silver prices turn, they will probably move explosively. Don’t get caught flatfooted. Prepare for the bounce.
Opportunity awaits,
Carl Delfeld.
