Ignoring Silver Bad For Your (Financial) Health

For the first time in over twenty years, silver is trading above $10.00 per ounce. As a numismatist, and someone who regularly follows the precious metal markets, this is an amazing feat. For years, silver was almost the throw away precious metal - trading at a lackluster $4.50-5.00 per ounce. But now we're seeing levels not seen since the days of the Hunt brothers who tried to corner the silver market (when silver prices hit the stratospheric levels of $40.00 per ounce).

As a regular attendee of the local coin club meetings, I've watched over the past year as people are starting to snap up silver coins to melt. A year or two ago, no one would have even considered purchasing 40% silver Kennedy half dollars. The work needed to melt and pull out the silver just wasn't worth it. But now, with silver trading at decades high levels, people are starting to notice. One local dealer who I speak to on a regular basis is willing to buy any silver he can get - even at current high levels. And "junk silver," or coins that are in bad shape and really only worth their melt value, are extremely sought after, mostly because they're easy to melt.

So what's driving the market? The US dollar is weak, inflation is tugging on the economy and is causing a significant move in the gold markets. And there's the impending start of a silver ETF (exchange traded fund) which should also drive up costs. But what's also driving the huge increase in silver prices is - there's not enough of the stuff to go around. Since 1991, the above ground silver supply has declined from about 1.4 billion ounces to an estimated 600 million ounces - according to the Texas Hedge Report. Additionally, there's a lot of silver that only exists on paper. If banks or other investors started calling in this paper, there wouldn't be enough physical silver around to meet that demand.

It will be interesting to see how this increase in silver affects other consumer goods prices - for example, Kodak still uses a lot of silver in film manufacturing. And, while it does remediate a lot of silver out of their furnaces, or from old film, they still have a high demand for silver. My recommendation? Buy a few 10 ounce bars and put them away... I don't think you'll be sorry.

Back To Top