Tuesday, October 9, 2012

More People Ask 'How Do You Buy Silver?'

It was more than ten years ago when I bought my first gold and silver bullion.

Back then, there were no U.S.-based ETFs available that invested only in the metals and, as was the case back in the 1970s during the last precious metals bull market, if you wanted to own gold and silver in the early-2000s, you either had to call up a coin shop or settle for mining stocks rather than the metal.

In fact, I recall one time in early 2004 when I decided to buy some junk silver (pre-1965 coins, 90 percent silver) and, between the time that I placed my order until the time that I had to mail a check, the silver price had dropped from about $7 an ounce to below $6 an ounce.

Apparently, the coin shop felt so sorry for me about my unfortunate timing that they waived the shipping charge which, for anyone who has lifted bags full of silver coins with a face value of $1,000 can tell you, is not cheap (they weigh over 50 pounds).

Obviously, more than just the price of silver has changed since then.

I still have those bags of coins and, while I've traded in some 100 ounce silver bars over the years for silver ETF shares, I'll probably hang on to those coins for many, many years.

You never know when they might come in handy.

Anyway, these memories were spurred by this little question and answer article at Money Magazine and a short stroll down memory lane seemed appropriate before delving into the deeper meaning behind one Pinikin D. writing in to ask the nation's most popular personal finance magazine how to purchase silver.

Now, I've long considered Money Magazine to be one of the best contrary indicators around for gold and silver - whenever they heartily recommend the stuff, that's when I'll start thinking about selling.

Like most of the rest of the mainstream financial media, gold and silver are, for the most part, still frowned upon by Money Mag and, though I haven't been a subscriber for many years, I haven't seen anything in their online commentary that would suggest they've deviated from their long-time advice of, basically, "If you feel you have to own precious metals, don't make it more than 5 percent of your portfolio and favor the stocks over the bullion".

This has been terrible advice for more than a decade. However, I was curious to see if anything had changed.

So, Pinikin D. asked, "How do I purchase silver in physical form or stock?

And, to my surprise, there was a rather succinct and well thought out response provided by Marc Mewshaw that covered all the possibilities without discouraging such an investment or warning about the dangers of too high an asset allocation.

First, two silver ETFs were suggested -the wildly popular iShares Silver Trust (SLV) and ETFS Silver Trust (SIVR) and then it was noted that American Silver Eagles and Canadian Maple Leafs can be purchased at coin shops.

This was followed by some thoughts from precious metals expert Rich Checkan of Asset Strategies International about coin premiums and ETF management fees along with some advice about what sort of silver bars to buy (though I have no idea what was meant by "avoid buying bars with lower-than-advertised purity").

It was all very matter-of-fact ... and that's what got me thinking.

Has Money Magazine come on board with the whole idea that investors should have more than a token asset allocation to precious metals now that the gold and silver bull market is moving further into its second decade?

If so, that could be significant, strictly from a numbers standpoint since, after all, many of their 2 million subscribers take their advice.

Broad participation by U.S. investors has been a key missing ingredient in this bull market and, though India and China have both done a pretty good job at sustaining physical demand even as prices have soared in recent years, we are not likely to enter the really "bubbly" phase of the bull market until U.S. investors begin to make a major commitment to precious metals.

More than just a token "five percent, if you must."

Back in the late-1970s and into the early-1980s, gold and silver were a core holding of investors around the world, the former accounting for upwards of 10 percent of all investment assets at one time. However, in the decades that followed, a long-running bull market in stocks made precious metals almost obsolete.

Few people wanted the stuff and this was clear to see as prices plunged and both metals endured a 20-year funk.

But, all that changed at the turn of the century and, over the last ten years, stock prices have been flat or lower while gold and silver prices have soared.

Moreover, with central banks around the world printing money with abandon in the last few years and nary a sign of them easing back, it's no wonder people are writing into Money Magazine asking how to buy physical silver.

While it's surely a mistake to read too much into this one magazine article, it offers hope that, after $10 trillion or so in global money printing, U.S. investors are finally looking to diversify out of paper assets into something more tangible and an acceleration of this trend could bode well for the final manic stage of the precious metals bull market coming sooner rather than later.

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