Amazing silver

Whilst this chart is a few years out of date it clearly indicates in the very long run how undervalued silver is in absolute terms and relative to gold. Click on the chart for a larger view.
The historical high for silver was set 531 years ago in 1477, topping at (using the purchasing power of 1998 dollars) a princely $806 an ounce. By comparison, the price of silver less than $15 an ounce today, and was only about $5 an ounce in 1998, after having bottomed at under $4 an ounce in 1992.Now, fast-forward to today as our 2008 dollars, which have fallen 50% in purchasing power since 1998, means that the all-time high price of silver, set in 1477, now stands at $1,012 an ounce, measured in the buying power of 2008 dollars! Over a thousand dollars an ounce! For silver! In case you haven't noticed, we're unmistakably coming off the lows of a 530-year bear market in silver and, theoretically, entering a long bull market, which ought to be exciting to people who have a lot riding on silver gaining so much in price, or even just keep up with this kind of thing, like, for instance, Israel Friedman, writing at InvestmentRarities.com, who notes that there are 5 billion ounces of gold sitting around someplace in the world, but that there are only 2.5 billion ounces of silver, even though 5 times as much silver is mined every year than gold. Therefore, silver is being consumed at prodigious rates, which is why Mr. Friedman says, "Silver is needed to maintain and improve future standards of living. Gold is needed for luxury and emotional reasons. Silver is for the optimist, gold for the pessimist."In that optimistic vein, Mr. Friedman says, "I honestly believe that silver must eventually sell for five to ten times what the price of gold may be". Let’s hope he is right!

However, before you jump in and buy silver you need to be aware of some important positive and negative considerations;

On the positive side,

• Silver in bullion form is a very safe investment – it is no one elses liability
• In your possession it is totally removed from the financial system & government
• On almost any inflation adjusted measure silver’s true value is well in excess of $100 per oz but it may take years for the market to recognise this
• Silver is money at all times under all circumstances – paper money has and will come and go, silver has stood as money in all cultures for hundreds if not thousands of years
• Silver is a great inflation hedge – its buying power has stood the test of time. Silver still buys the same litres of oil as it did in 1950 or same bushels of wheat it did in 1600.
• Silver is a great catastrophe hedge – war, famine, disease, financial meltdown . Unlike financial assets silver excels in these environments.
• Silver ownership by the masses is at the lowest point of history
• It took 1000 ounces of silver to buy a house in Sydney in 1980, today it takes over 35,000
• Silver is dramatically undervalued versus gold – 500 years of ratio 15-1 (sometimes even parity) today it is 60-1
• Unlike gold most of the silver mined in history no longer exists
• Silver mining supply is diminishing rapidly due to rising mining costs and the fact that silver is most often a by product of other metals such as lead, zinc or copper
• Silver has the most patents pending of any metal due to its unique medicinal, antibacterial and conductive properties
• Silver is the most conductive of all metals its use in nano technology is rising dramatically
• Silver is set to compete with platinum for use in catalytic converters for diesel engines
• Demand for physical silver is increasing rapidly at industrial and investment level
• Worldwide shortages of physical investment coins and bars is an early sign smart money is mobilising into silver
• Most wealthy families in history have used gold and silver as a store of wealth

Alternatively some of the downside,

• Silver and Gold are political metals inciting war and deception throughout history
• Silver and gold are the governments and banking systems worst enemy because they hold governments to account on printing money, controlling interest rates, are difficult to tax and generate little commission because they are hoarded not traded.
• Silver is a volatile metal – price can fluctuate 30% in one trading day
• Paper silver (futures, ETF’s options, derivatives, shares etc) often trades at a significant discount to real market prices for physical.
-It is possible, some say even likely, we could see a default on paper silver and gold contracts, so be warned there are risks of owning bullion in this form.
• Silver (&gold) are manipulated in price by central banks and governments
• Manipulation to restrict the price is actually a good thing because it creates value for those willing to buy on discount hold for the longer term
• Gold has been confiscated and deemed illegal to own by governments including US (1930 – 1971)
• Paper silver would be impacted by government price controls or ownership restrictions, but physical gold and silver would likely thrive in underground market (as happened in depression & WW2)
• Never give (sell) your bullion back to the government under any circumstances – bury and say its lost.
• The low per ounce price of silver makes it extremely hard own in large quantity due to storage and transportation challenges.

Day to day rules,

• Don’t watch the daily price – this is a minimum 4 year investment I would recommend no selling until at least Mar 2012, but prefer 2018.
• In my view we could see major problems in the financial system within 6 months, under these circumstances it is almost certain paper gold & silver will go down as leverage is unwound and people strive for cash. However, in this situation the physical market will thrive with the paper market catching up shortly after as bankers realise the only safe haven will be gold & silver. Great buying opportunity.
• Dont panic!!! Silver will never be worth nothing like paper money will be. At a minimum it will maintain your current purchasing power.
• If you can average down, buy more as the price declines
• Price is not important, its all about how many ounces you own!!!
• Remember in 1980 dollars 800oz of silver would buy the median house in almost any city in the world.
• Be patient................