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4 Experts Weigh In
After a somewhat listless past couple of years, the precious metals market, including silver has surged back this year. Because of geopolitical uncertainties like the US-China trade war, widespread social unrest, and the massive economic disruption brought on by the ongoing pandemic, investors are turning to safe havens like gold and silver.
By some accounts, the silver demand forecast is set for a +11% rise in 2021. This is a major growth signal for the white metal, which is poised for significant growth if supply can't keep pace with demand. In 2020 alone, the silver spot price skyrocketed +27% from about $16 to $20.50. As global demand for silver increases in the current macroeconomic environment, silver has never looked better as a stabilizing investment.
As you'll see below, both Wall Street and Main Street are bullish on silver. But their reasons vary. With today's geopolitical and macroeconomic backdrop, the only guarantee is that investors are going to seek stabilizing forces in their portfolios. As momentum continues to mount behind the white metal, 2021 seems like a great time to seek exposure in precious metals.
Want to get started investing in physical silver? Not so fast. First, you need to do your homework. In this article, four experts discuss things you should know about the silver spot price and will offer some tips for buying silver that you need to know before getting started.
Silver Spot Price: A Beacon of Stability in Uncertain Times
At the time of writing, the silver spot price per ounce is $26.10. Six months ago, the silver spot price was hovering around the $25.70 mark. Aside from a short-lived silver short squeeze in February 2021, which drove the price to 8-year highs ($29.59), silver has stood stable. Its price movements from September 2020 to the following February represents a +1.5% price fluctuation in half a year—a what a tumultuous year it was! The S&P 500 broke record highs in 2020, as did the price of Bitcoin and other cryptocurrencies. Suffice it to say, silver proved to be a reliable bulwark against volatility for most of 2020, and as more countries scramble to print money amid the coronavirus pandemic, investors will likely continue to seek stability in sound, finite commodities such as silver.
After the 2020 U.S. presidential elections, one of the most consequential and highly anticipated events for global market watchers, the DXY Index rose to the mid-90s. This is a very positive development for the U.S. dollar, which is poised to gain in relative value. Typically, a strong dollar signifies relative weakness for precious metals, but we've seen anything but that. Since the election, silver prices have risen in value around the $24-$25 mark to the current silver spot price around $26. Therefore, the upward momentum we're seeing with silver might be more resilient than in years prior.
This is all great news for silver. As the stock market continues to volley erratically and cryptocurrency prices go haywire, precious metals are looking like the only stable assets. But don't expect silver prices to stay put forever. A recent survey of the top analysts in the precious metals market found that bullish sentiments is held near-universally for the white metal. If you take the median of all the analysts' price estimates for silver in 2021, you get an average of over $31, which amounts to over +25% gains on the year. You'd be lucky to score returns like that in the crypto market, let alone on precious metals. Clearly, we're seeing a unique opportunity in the metals market.
With that said, let's take a look at what some of the leading experts on silver have to say about the asset. These interviewees are some of the most respected in the precious metals field and are subject matter experts with years of experience in the field, so you might want to read carefully about what they have to say about silver and silver price trends.
Silver Is Massively Undervalued Right Now
“Modern geologists know that the ratio of silver to gold found on earth is around 17 to 1. Ancient historians know that ancient Romans could buy an ounce of gold for 12 silver ounces, or 12:1 ratio; fairly close to what modern science now says is the relative scarcity. In the 1700s in USA and in Europe in the 1800s, the ratio was fixed by government law at around 15:1.
For most of the 20th century, gold prices hovered around 47 times the silver price, which could indicate too much obsession with gold, or a lack of interest in silver, which was used for many industrial processes such as photography and medical.
Due to more recent concerns over currency devaluation, trade wars, US-debt accumulation and possible hyperinflation of the $US, gold prices have increased rapidly in the past two decades, leaving silver far behind.
At current prices, gold is seeing ratios of 80:1 or even 90:1, far out of alignment with its 5000-year historical precedents.
If we consider that 20th century free markets were not insane with a 47:1 ratio, then this leaves only two conclusions: either, a) the gold price could halve from its current pricing (unlikely), or b) the current silver price could soon double (more likely).
If the ancient Romans, ancient Egyptians, and modern geologists are correct, ‘silver could soon be over $100/ounce.’
In 2021, investors seem to be leading the market away from inflationary paper currency towards ‘true value'. Whether the new scarce commodity will be gold, silver or bitcoin remains to be seen.
It is my view that silver is massively undervalued right now, relative to its scarcity, and also relative to centuries and millennia of its historical pricing.
A ratio of 80:1 is tenuous, and for those who think this could be the new normal, please reflect back on PE ratios of stocks during the late 1990s. The long-running average stock PER had been around 20 for centuries, and when tech stocks took PER's up to 300, it was not long before it all crashed back down from hysterical levels to historical levels.
History may not repeat, but it does echo. Wise older men read history and learn lessons for the future. Millennial 25-year-old Wall Street traders think they know better. We will wait to see if the long-running 15:1 ratio holds true, and meanwhile, we stack silver in faith. In history we trust.”
Dr. Jeremy Britton, CFO, BostonCoin
Four Tips on Buying Silver
“Know your dealer! Cold calling boiler room type operations might offer a limited amount of silver at a low price, but they will try to talk you into ‘a better option with projected higher returns.’
Do they offer buy-sell spreads? Any legitimate dealer will not hesitate to give a current buy-sell spread on their silver bullion products.
Know that premiums under and over the spot price can vary depending on market activity as well as supply and demand.
The consumer should be aware that certain items might be reportable when they sell if total weight allowances are reached.”
Richard Weaver, President, Professional Numismatists Guild Accredited Precious Metals Dealer Program
Silver’s Significant Outperformance Is A Clear Sign That Monetary Concerns Are Also Sparking Demand
It’s obvious that the US-China trade dispute is a big driver for gold right now. But I think silver’s significant outperformance is a clear sign that monetary concerns are also sparking demand, and that the rally will be a long-term, secular move as a result.
A good rule of thumb is that if gold is rising and silver is underperforming, then gold’s rise is based on geopolitical, or safe haven, issues. If gold is rising and silver is outperforming, however, it’s a signal that longer term, monetary factors are fueling the move.”
Brien Lundin, Editor, Gold Newsletter
It's A Volatile Measure That In Busy Times Can Change In Seconds
“The spot price of any precious metal (i.e., not only silver) is the price of the metal/ commodity in question ready for transaction at right this minute – with delivery assurance. To reiterate, It's not unique to silver. Oil, gold, platinum, etc., all travel through the market on spot price (SP) momentum. Traders in silver, including the banks, financial institutions, dealers, and retail investors rely on the spot price as the real-time trading value of silver (or the metal they're focused on.) The SP, for traders, is current, reliable, and realistic. Considering that Silver trades 24/7/365 (or thereabouts) across the world on all major exchanges, everyone involved (literally in their millions) is eyeing the SP.
Also note, it's a volatile measure that in busy times can change in seconds, but at least many times daily. The one exchange that's central to the silver SP is the COMEX. It applies the near term futures contract price, where the latter refers to the value of one troy ounce of silver (quoted in USD). Traders working in other currencies have to convert based on the USD quoted price. It's a fool's errand to assume or try to calculate how someone is manipulating the SP. It's a task that requires dissecting myriad futures contracts across all continents – a nigh impossible undertaking.
My advice is to accept the SP as the guiding light in the silver markets and go on from there. Going on is where the concern should lie. If you enter the silver markets, get used to the system of buying and selling silver through registered dealers. You are probably picking up where this is leading to, so let me cut to the chase. but when you sell to a dealer, as a silver seller, you won't get an offer for higher than the silver SP, and probably a small discount on it. When buying, you are likely to confront a premium on SP. The question is, how big a discount on SP (when selling) and how high a premium on SP (when buying)? Another way of putting it is, how much gross profit are you willing to leave behind for the dealer? Your ability to depress SP premiums and discounts when interacting with dealers is one vital measure of your trading acumen. Astute trading yields future profits as the SP changes down the line. Accepting large discounts and premiums (depending on which side of the trade you are on) may kill future returns or reduce the upside.”
Gordon Polovin, finance expert, serves on the advisory board for Wealthy Living Today
With increasing global economic uncertainties, investors are now more enthusiastic about precious metals, including silver. Take into consideration what the experts in this article have discussed, and always do your due diligence before making investment decisions. This is as true of silver as it is of any other investment asset, all of which pose some degree of risk to your portfolio. However, diversifying with the expert-recommended 5-10% of your portfolio's value in precious metals can help insulate your wealth against certain types of risk.
For a silver spot price chart with the most up-to-date data, check out our silver spot price graph. This way, you can get the most accurate information possible on asset price if you decide to get in on the silver market. For the best silver prices for investment-grade bullion, check out our list of IRA-approved silver bullion that you can add to your self-directed 401(k) or IRA.