Understanding Silver as a Store of Wealth:-
Most people understand Gold as a store of wealth, but Silver too has a long history of being a store of wealth as the other main precious metal. There are other precious metals such as Platinum but its cost is so high that it is beyond the average investor.
Interesting history:- Aluminium use to be considered a valuable precious metal until new industrial processes made mass production possible thus driving the price of the metal down so far it is now considered a base metal.
Many people hold precious metals as a hedge against inflation. Despite the dollar buying less and less over time (just consider how much petrol cost you ten years ago compared today and you will understand how over time currency devalues), precious metals tend to hold their base value relative to currency. Of course there are periods when precious metals volatile (change in price), but such changes can make the savy investor money - buy low - sell high.
The price of Silver is determined by the spot price. The spot price is the price Silver is being sold on the worldwide open market - normally via a futures exchange - such the the NY spot price which is charted 24 hours a day (currently about $13.50 USD and on a 3 day up trend). The reality though is the average investor can't buy Silver at this spot price - this is because this price reflects contracts for Silver in quantities that you and I couldn't afford pay for.
Interesting fact:- In 1979 & 1980 the Billionaire Hunt Brothers tried to corner the Silver market driving Silver up to $50 USD an ounce but in the end it bankrupted them
Silver is stored in two main physical forms - bullion bars or ingots, and silver coins.
Bullion bars come in a variety of sizes from 10 oz bars, 20 oz bars, 1/2 kilo, kilo and even as big as 1000 oz bars. The general rule is the smaller the bar the higher the price you will be paying per ounce. For example today (20/7/09) at the Perth Mint a 10 oz Silver bar will cost you $189.70 AUD or $18.97 an ounce, whereas a 20 oz bullion bar will cost your $367.40 or $18.37 an ounce - thats a difference of 60 cents an ounce. There are a number of reasons for this premium. One is that it takes a simlar amount of labour to produce a bullion bar no matter its size - in fact the smaller ones can require more precise handling. Also smaller bars are more easily transportable (because the weigh less) and are more liquid (easier to sell). Hence the added premium. Most bullion buyers recognise this and hence are willing to pay the extra money for a smaller bar. A 1000 oz bar at the Perth mint today costs $15,310 or $15.31 AUD per ounce - near today's spot price - but a 1000 oz bar is HEAVY! and not easy to transport - you certainly wouldn't post it and the cost is prohibitive to most buyers.
Bullion bars can be brought at a number of places including mints and bullion traders. Most large cities have a bullion trader and most countries have their own mint. In Australia their are three main traders I know of - the Perth Mint; ABC (Australia Bullion Company) Sydney; and Ainslie Bullion Company, Brisbane; Each produces their own bullion bars with their stamps impressed into the bar.
I like and recommend the Perth Mint because it is owned by the Western Australian Government therefore has that added level of legitimacy, you can buy online and they will post it to you. Also they have a wide selection of bullion bars and their mark is widely recognised both nationally and internationally particularly the Silver Kookaburras and Koala coins.
Short detour:- Many people believe 95% of all Silver has been consumed by man. If true Silver will increasingly be in short supply meaning the price in future may skyrocket.
Coins are available in various weights from 1/2 ounces to even kilo coins but come with a very large premium over the value of the underlying precious metal. This is due to a number of factors. Firstly the Coins are produced to a very high standard therefore cost more to produce. Secondly coins are easily recognised by people as money, while many don't realise the true value of a bullion bar. Thirdly coins are harder to couterfeit. A bullion bar may have a center of lead - the only way to really check the content and quality of a Silver bullion bar is to have it assayed - scientifically examined for metal content and purity. In contrast most people won't questioned the Silver content of a coin because of the demands required to manufacture it in the first place.
