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Is Silver Buying an Investment or Speculation?

Silver barsThere are plenty of great reasons to buy silver, many of which we discuss here. But can silver buying truly be considered an investment? Investors tend to differ on this question, but really it may just be a matter of semantics. Here’s how people on both sides of the issue usually break down their opinions.

 

 

The “Silver Is an Investment” Camp

Silver prices are much higher than they were a decade ago. If you look at historical values of silver throughout history, you’ll be glad that Grandpappy left you his silver stash from years gone by. While it’s impossible to tell how silver values are going to play in the future, something tells me that nobody who buys silver will be sorry to have it as the years and decades click by. Silver prices tend to surpass inflation levels, so wealth contained in silver tends to lose no value. Plus, it’s a material that’s easily traded. For those who are knowledgeable about the silver trade, there can be a lot of money made buying and selling silver.

The “Silver Is Not an Investment” Camp

Now there are plenty of people who don’t consider silver to be an investment. They would, instead, insist that it’s a speculation. There is good evidence to suggest that this may be the case, but it’s still a grey area. Investors like Warren Buffett insist that silver is a speculation because it cannot be improved. You just have to put your coins in a safe place and hope the price goes up before you want to sell.

What Do I Think?

I can see both sides to this story, and I think the reality is a little bit of both. Sure, silver can’t be improved, and people who buy it are reliant upon hope just as much as history when thinking about future value. But the same could be said for the buying of stocks. Unless an investor sits on the board as a major stakeholder of a company, he or she has nothing to do with the daily operations of this company, and simply has to hope that the value will rise. Of course, stocks are packaged such to minimize risk and maximize earning potential over time, but at no point does the element of “hope” leave investments. Risk is inherent to investment, so to the average investor, buying a bar or silver and buying a stock may not have much real difference.

If you want to learn more about the fine points of different investment forms, CMC Markets investment education is a great resource. Their focus on short-term investments in the day trading arena will help usher people in from easy-to-understand investments (like buying gold and the like) into slightly more complex day trading options (FX trading and currency exchange) and beyond. For the sake of diversification, a lot of investment forms are good to learn. For those who love buying silver, these kinds of investment will be a natural progression, one that will help you from relying on a single investment form for future security.

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The Top Three Most Valuable Coins

flowing-hair-dollarCollecting coins is a fun past time which people of all ages can enjoy. Valuable, old and rare coins are often passed down through the family and treasured not only for their sentimentality but also their value, which is something to take into account when managing your money and planning for the financial future. The latest news in the coin collecting world is the release of the 2013 Royal Baby coin. Any children who were born on the same day as the new prince will receive a free silver penny. The coin, made by the Royal Mint, will be presented in a blue or a pink pouch and is engraved with ‘2013’ to commemorate the third heir to the throne’s birth date.

If you often spend your free time visiting museums to admire the coins on display or researching the history of coins online, then now is your chance to learn more about rare and precious coins.

Here are three of the world’s most valuable coins.

Flowing Hair Dollar

The Flowing Hair Dollar was the very first dollar to be issued by the US Federal Government The coin – which sold for $7.85m – was minted in 1794 and 1795. Its size and weight are very similar to a Spanish dollar which at the time was very popular in trade throughout the Americas.

Edward III

There are only three of these medieval and very rare coins left in the world. The Edward III coin was in circulation in 1343 and was sold for a staggering $6.8m.

edward-III-dollar

1804 Silver Dollar

The 1804 Silver Dollar is also one of the world’s most valuable coins. Worth $4.14m, this dollar is divided into three different classes. Out of the 15 specimens still remaining eight are categorised as Class I because they were minted in 1834. These Class I coins have been traced back to the King of Siam and the Sultan of Muscat. One of the remaining coins is ranked as Class II and the other six were minted somewhere between 1858 and 1860 making them a Class III.

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The American Eagle (2013)

About the American Eagle

American Silver Eagle

One of the most recognized and sought after coins by international collectors is the American Silver Eagle. With its iconic eagle on the back face, and walking liberty on the front, the coin is easily distinguished among the coins of other nations. American Eagles come in gold, platinum, and silver issues.

They are known for their purity, refinement and detail, and as an international bullion standard. The 2013 Silver American Eagle is a 99.9% pure silver, 1 troy oz. proof coin, with a denomination of $1 USD – though they are actually worth the price of a silver troy ounce. The Silver Eagle is 1.58 inches in diameter, with a thickness of .117 inches, and weight of 31.1 grams. American Eagles in the silver category do not have a mintage limit, and are usually produced until demand is met.

Here is the description of the American Eagle design, from the US Mint website:

The obverse design features Adolph A. Weinman’s walking Liberty striding confidently toward the sunrise, draped in the strength of the Stars and Stripes, carrying branches of laurel and oak in her arms to symbolize both civil and military glory.

The reverse design, by former United States Mint Sculptor-Engraver John Mercanti, features a striking heraldic eagle with shield, olive branch in the right talon and arrows in the left.

It is the reverse design by John Mercanti, the iconic American eagle that most investors recognize on this coin – hence, the American Eagle the nickname was coined. This eagle design was adopted by the mint in 1986. The front design of the walking liberty was introduced to the coin in 1916, and has remained in place since.

GB2_zoom_front Case for the American Eagle

(All images courtesy of the US Mint website)

The Effect of the Financial Crisis on Availability

One of the reasons investors purchase bullion coins, as well as gold and silver bullion, is as a hedge against economic uncertainty. That became apparent during the 2008 to 2010 Financial Crisis, when demand for American Silver Eagles exceeded supply:

As a result of the global recession, the demand from investors for bullion coins as a hedge against inflation and economic downturn surged. This increased demand began to affect the availability of American Silver Eagle bullion coins in February 2008 when sales to authorized dealers were suspended temporarily. In March 2008, sales increased nine-fold from the month before (from 200,000 to 1,855,000). In April 2008, the United States Mint began an allocation program, effectively rationing Silver Eagle bullion coins to authorized dealers on a weekly basis due to “unprecedented demand. (Wikipedia, American Silver Eagle, http://en.wikipedia.org/wiki/American_Silver_Eagle).

The American Silver Eagle is not only a standard for any serious coin collector, but also a hedge against economic uncertainty and times of crisis. Canadian coin collectors, can also get the American Silver Eagle through The Fabulous 15 (2013) series, we featured last week.

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