Dollar Bears Love Silver Coins
By Jeff D. Opdyke, Editor of Profit Seeker
Dear Sovereign Investor,
All that glitters is not gold … sometimes it’s silver.
It’s clear that despite silver’s depressed prices, the metal continues to shine brightly among a large group of people who remain concerned about the state of the world’s financial system.
The U.S. Mint, the Royal Canadian Mint and Australia’s Perth Mint are all on course to set annual silver sales records this year. The reason: Demand for silver coins is surging because those who realize the fragility of the West’s debt-addled finances want some of their wealth parked in honest money.
I’m one of those buyers. And if you see the value of insurance, you should be one of those buyers, too.
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Here’s what I find compelling …
Silver prices so far this year are down nearly 35%. The metal — I call it a “precious industrial metal” because of its dual role as a currency and an industrial commodity — is back under $20 an ounce. Yet demand is surging.
In the world of assets, that’s odd. Think about the stock market, or the housing market, or just about any market you can think of. Typically, when prices are tumbling, investors are fleeing! They want nothing to do with catching a falling knife … and down 35% in a year is catching a falling knife.
Why is it, then, that investors so clearly disregard silver’s recent trajectory? Why are they loading up on an asset that’s under pressure? (And they are absolutely loading up; the three mints I mentioned above have sold more than 71 million ounces of silver so far this year, the highest on record.)
Those are trick questions … to see if you’ve been paying attention to your Sovereign Investor dispatches this year.
The answer goes to what I write about all the time when it comes to gold and silver — insurance.
The global financial crisis and its myriad knock-on effects didn’t teach us that house prices in America can go down. It taught us that the great minds — and I use that very loosely — running the world’s monetary and financial systems — bankers and central bankers — are generally: A) just as stupid as the rest of us when it comes to figuring out the inner workings of a global economy with way too many moving parts to track; or B) purposefully trying to destroy the value of Western currencies to better deal with the ultimately unmanageable levels of debt that governments have amassed … or — and this is my bet — C) some combination of the above.
This risk is that those great minds fail … or succeed. It really doesn’t matter, since either option is bad for us.
If they fail, they unleash a wave of debilitating inflation that raises the cost of borrowing for debt-ridden countries like, oh, say, America, and that will ultimately undermine the currency.
And if they succeed, it means monetary authorities have undermined the currency to such a degree that their respective countries’ massive debts have become more manageable.
Either way, the common denominator is “they undermined the currency.”
The buying frenzy in silver is a clear indication that many people recognize the currency risk we face today. That’s why they’re grabbing fistfuls of silver even as the price drops. They’re buying insurance against the very real possibility that governments or central bankers kill the cash in our pockets … and the cheaper that insurance is priced — the farther the price of silver goes down — the more they buy. Take a look at this chart …
As Silver Falls in Price … Buyers Buy More
See larger image
The chart plots monthly silver sales at Australia’s Perth Mint (in blue) against monthly average silver prices (in red). The lighter-shaded lines are the trend lines, which clearly illustrate my point: As silver prices are falling, hoards of buyers are rushing in to buy insurance on the cheap.
The Best Value in Silver Today …
As I noted at the outset, I’ve been a part of this trend of snapping up silver commemorative coins minted between 1892 and 1954. They’re incredibly cheap. You can buy high-quality coins — in grades of MS65, MS66 and even some in MS67 for less than $1,000 … and some are only a few hundred dollars.
To me, they are the best value in silver today. Many of these coins were minted in quantities of just a few thousand. And at the higher grades, only a handful of coins exist. Because they’re popular among collectors — and among telemarketers when the coin market is hot —they hold the potential to soar in value as silver-bullion prices rise.
There’s also a great opportunity in Morgan silver dollars, one of the perennially popular coins because of its design, its affordability and the fact that so many still retain their first-day luster because they were never circulated. And like modern silver coins, they, too, speak to the shortage of available silver coins that exists today.
Because of what I see happening in the silver market, I’m recommending you buy any silver commemoratives you can find in MS65 or higher. Or get in touch with my friend and rare-coin dealer, Van Simmons, and grab one of a very limited number of 20-coin Morgan dollar sets he has been able to piece together. (He’s at firstname.lastname@example.org or 1-800-759-7575.)
Until next time, stay Sovereign …
Jeff D. Opdyke
Editor, Profit Seeker