Modern Silver Bullion Coins

‘Poor man’s gold’ as a long term store of value and safe-haven

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Silver’s history as money goes back 5000 years, according to New York University professor of finance and economics, William Silber*. “In fact, if you go back to biblical Egypt,” he says, “it was silver that was used in transactions. There wasn’t enough gold to be used by most people, so silver for thousands of years was the main medium of exchange. Only in the 19th century did we switch over to the gold standard. Britain led the world in that. But silver had been the main currency of the world for thousands of years.”

In the time of imperial Rome, the citizenry used gold to hedge the debasement of silver money.  Today, the citizenry use silver to hedge the debasement of paper money.  Its role as a crisis hedge goes beyond just inflation, though, to address the disinflationary risks common to the modern economy – a credit crisis or stock and bond market meltdown. As such, the popularity of contemporary silver bullion coins, like the American Eagle, the Canadian Maple Leaf, the Austrian Philharmonic, Australian Kangaroo and the recently introduced Silver Krugerrand, has risen dramatically over the years and particularly since the economic crisis of 2008.

In 2006, silver traded in the $11 to $13 range and the United States Mint produced 10 million  American Silver Eagles. In 2011 at the height of the crisis, silver had climbed to $46 per ounce and the mint had produced 40 million American Silver Eagles to meet soaring investor demand.  Though the crisis calmed after 2011, investor nervousness remained and volumes never returned to the pre-crisis levels. Silver today is routinely accumulated for monetary purposes and much of the discussion at this website about gold’s qualities as a long-term store of value and safe haven apply to silver as well.  In the process, it has regained its reputation as ‘poor man’s gold.’

“The chances of silver returning as backing to the currency is relatively small,” says professor Silber. “It’s not zero; it’s relatively small. I say it’s relatively small because the central banks of the world have been doing a pretty good job of controlling inflation. But there’s always a chance that we have a problem. We had a big problem 10 years ago in 2008. We had the Great Recession, which brought us to the brink of financial collapse, and silver quadrupled in value between 2008 and 2011. Gold doubled in value. Silver is much more volatile, and that volatility serves you well if you have some silver as portfolio insurance. A small amount in your portfolio. Five percent of your net worth could be in silver and some gold in order to prepare for the possibility of a financial disaster.”

That volatility is an important factor on both the upsides and the downsides. A correct call could help you net more profit than if you had purchased gold alone. A bad call could cost you dearly. At this point in time, though, silver enjoys the benefit of a deeply skewed gold-silver ratio. At present, it takes 85 ounces of silver to buy an ounce of gold, the highest ratio since the early 1990s. By way of perspective, in 2010 (two years after the Lehman Brothers collapse), it reached a ratio of 30 to one. Such a variance hints at silver’s performance potential vis a vis gold for those with a speculative bent and an understanding of precious metals’ role as a crisis hedge. That said, we do not advocate silver at the exclusion of gold, but more as an adjunct through which the investor conceivably can get more bang for his or her buck if history repeats and silver outperforms gold.

Gold-Silver Ratio
Chart by TradingView

Silver’s major drawback is in its storage and transportation. It is a bulky, heavy investment. Even at current prices, moving $100,000 worth of the metal is an effort, and its owners often complain about the difficulty of preparing large amounts of silver for shipment when they wish to sell. This limits its usage among those who like to have their metal stored nearby. More and more, though, investors with larger sums to invest are utilizing storage programs with well-known depositories to circumvent the shipping and storage problems.

USAGOLD offers silver storage accounts  – a program many of our clientele put to good use. This gives the investor the opportunity to speculate on the price and move in and out of ownership positions with a phone call. The metal is kept in an allocated account in the customer’s name. Account owners pay fees that cover insurance and storage, but those costs are relatively minor. In addition, most depository programs offer the option of taking delivery if the owner so desires. Because of the same problem with assaying and potential tampering or counterfeiting encountered in gold bars, we usually recommend that the purchase of one-ounce bullion coins, usually silver American Eagles or Canadian Maple Leafs.  A large percentage of our orders for silver come from investors with IRAs and other retirement plans – a circumstance where the metal is stored (rather than delivered) anyway.

Last, we would be remiss if we did not mention that because the demand for silver bullion coins is global in scope, shortages can develop quickly in times of stress and drive premiums significantly higher.  Such a premium increase can be of great benefit to those who already own silver bullion coins, but a great detriment to those in the market as buyers. The best course of action is to purchase ahead of a crisis instead of in the middle of it. Take to heart the old saying that the best time to buy precious metals is when things are quiet.

The “Modern Silver Bullion Coins and Bars ” section of our Online Order Desk offers a gateway to reviewing and ordering these items. We augment our current selections with periodic ‘Special Offers‘ of specially-priced items. These offers usually sell out quickly so time is of the essence if something sparks an interest. Please note that Online Order Desk registrants and regular clientele receive notifications of ‘Special Offers‘ by e-mail. If you are not a client but would like to receive offer notifications, the best course of action is to sign up for access to the Online Order Desk. By doing so you will be included automatically on our mailing list and also, as an added benefit, receive access to our members only Premium Bulletin Board at no cost or obligation.

* Please see White Hot: How Silver Forged the World’s Economy/William Silber, Professor of Finance and Economics, New York University

 [Please see our Full Risk Disclosure here.]

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Disclaimer – Opinions expressed on the website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.