The Case For Investing In Silver (SLV, AGQ, PSLV, ZSL, GLD)
Diane Alter: Investing in silver has so far been one of the most popular moves of 2013.
Jan. 7, the first day of sales for the new 2013 American Silver Eagle bullion coins, saw a record number of coins sold, totaling 3,937,000. That fresh tally of 99.9% pure silver Eagles puts January 2013 as the fifth strongest month for the popular American Silver Eagles since its launch in 1986.
Early release and newly-dated bullion coins have always been hot items. But this year’s impressive sales numbers were particularly robust due to the fact that the U.S. Mint’s inventory of 2012-dated Silver Eagles sold out on Dec.19, leaving its network of Authorized Purchasers’ vaults empty for three weeks until the new Eagles debuted this year.
Demand for Silver Eagles has soared in recent years. The 2012 Eagles were set to log the second best annual total until the unforeseen sell out. Annual sales for last year reached 33,742,500 coins, good for the third-highest total.
Holding the top spot is 2011, with sales of 39,868,500. Second is 2010, with 34,662,500 coins sold.
Adding to the buying frenzy in the past couple months is silver’s spot price, which many deem a bargain.
From 2001 to 2010, silver prices gained a tepid $4.37 to $20.19. In late April 2011, silver surged, peaking at $49.76. Currently, the white metal is trading around $30.80 an ounce, but could climb to $50 an ounce in 2013.
Investing in Silver: Where the Money is Going
Besides buying coins, silver investors also are pouring money into exchange-traded funds (ETFs).
Net inflows to silver ETFs were up last month despite it being a losing month for prices. BNP Paribas called silver “the clear favorite in December.”
“Interest in silver was surprising in a context of a 12% fall in December,” Anne-Laure Tremblay, a BNP precious metals strategist, noted in the report to clients.
Net inflow totality was 311 metric tons in the final month of 2012, a rise of 1.6%. For the whole year, silver ETFs recorded an 8.5% rise in inflows to 1,482.2 metric tons.
Similarly, gold ETF inflows in 2012 climbed 12% from the same period a year ago, to 287.2 metric tons.
The rise was fueled by demand for gold and silver as cautious market participants bulked up gold and silver holdings “to hedge against currency debasement as the world’s major central banks made clear their intention to extend current asset purchase programs,” Nicholas Brooks, head of research and investments strategy at ETF Securities told MarketWatch.
iShares Silver Trust ETF (NYSEARCA:SLV) is up 2.3% so far this year, and ProShares Ultra Silver ETF (NYSEARCA:AGQ) has gained 4.13%.
The Case for Investing in Silver
According to a Bloomberg News survey of 49 analysts, traders and investors, the median estimate is for silver to gain as much as 31% in 2013 to $40.25 an ounce.
Money Morning’s Global Resource Specialist Peter Krauth is even more bullish. He sees silver – and gold – hitting new highs this year.
“For 2013 I think silver, like gold, will set a new all-time nominal price record, likely reaching as high as $54 an ounce,” said Krauth. “Now that gold has set and surpassed its own all-time highs, look for silver to be next. It now looks like $54 is the next price target in silver’s relentless and historic climb.”
Krauth cites the following reasons he is so optimistic on silver:
- The out-of-proportion gold/silver ratio which should move back down, “meaning silver will rise faster than gold.”
- Four more years of President Obama and Fed Chief Ben Bernanke leaving loose monetary policies in place.
- Higher investment demand as paper money loses value.
- Higher industrial demand as it’s used for solar panels, lighting, electronics and more.
For Krauth’s detailed outlook on investing in silver in 2013, check out this special investor analysis.
Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), ProShares Ultra Silver (NYSEARCA:AGQ), Sprott Physical Silver Trust ETF (NYSEARCA:PSLV), ProShares UltraShort Silver (NYSEARCA:ZSL).
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