Tuesday, 23 April 2013

Silver Bullion is Going to Be Worth a Fortune, But Beware of Paper Silver

Silver value today is not consistent with its underlying fundamentals of supply and demand. The high demand and strictly limited above-ground and below-ground supplies are going to ignite an explosion in silver prices in the near future. This article explains one of the six primary reasons prices are about to undergo a tremendous increase.
Assume for the moment you are a major investor in silver... At the current spot price (approximately $19 per ounce), how much would $10,000 worth of silver weigh?... Recognizing precious metals are quoted in Troy ounces and there are 14.583 Troy ounces in a normal (i.e., Avoirdupois) pound, the answer is 36.09 pounds [($10,000/$19)/14.583].
So, how much would $100,000 worth of silver weigh?... That's right, 100 times as much, or 360.9 pounds. And of course, it follows that $1Million invested in silver bullion would weigh 3,609 pounds; that's just over 1.75 tons!
Obviously, 1.75 tons of anything (or even just 361 pounds) would be a bit tough to store in a safe at home. So, what do you do instead?
Historically, two options are available. The first is to pay fees for secure storage, and the second option is to buy "paper silver" instead. By far, the better, more reliable choice is to pay storage fees as unattractive as that may be.
The reason is... in many (perhaps most) cases, the real silver backing up "paper silver" does not really exist!
Paper silver includes such "investments" as pool accounts, bank silver certificates, and leveraged accounts. The problem with paper silver, assuming it is legitimate and not fraudulent, is you are betting on the future creditworthiness of the issuer of the paper.
This is kind of like having a pension with a company that goes bankrupt or re-negotiates (a.k.a., "Re-negs") the terms after or just before you retire. If the company goes out of business (or otherwise can't deliver the goods), you are left holding nothing but paper and broken promises.
According to expert, Theodore Butler, the current volume of paper silver is on the order of a billion ounces (currently worth about $19Billion), and this volume is completely separate from futures contracts and leased silver.
Since in many cases there is little or no real metal actually backing up silver paper, the issuers are essentially holding a "short" position on silver. As prices begin to rise (which has already begun incidentally), the issuers may panic and try to buy silver to cover the paper; this would increase demand on the silver market and caused dramatic increases in silver prices.
If you are going to buy silver, which you absolutely should, buy the real thing, not paper. If you buy silver bullion without taking delivery, be sure you get serial numbers for silver bars, and be especially wary of unusually low or non-existent storage fees. If someone is storing real silver bullion, they are storing a lot of bullion. And as you can see by the introductory paragraphs of this article, if they are storing a lot of silver bullion, it's not going to be cheap.
Protect your financial future, buy silver bullion now... real silver bullion.
Written by Dr. Bryan Stoker
Click here to read the other 5 reasons silver prices are going to soar:
Silver Prices Report
Discover the best way to Earn Free Silver Coins.

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