Posted on 27 August 2011.
Silver is a precious metal that is not only sought for its industrial and commercial uses, but also for its intrinsic value as a rare metal that for thousands of years has been cherished for its beauty and used as a currency. Silver is a commodity that can be bought and sold via various silver commodity contracts at commodities exchanges. A commodity is a fungible item; meaning it can be replaced or exchanged by another identical product of similar quality that is produced anywhere.
Silver bullion differs from silver as a commodity because silver bullion is measured by weight and quantity, rather than by price. Silver bullion is 99.9% pure physical silver that can consist of silver bars, coins (also known as rounds), ingots, or plates.
Silver bullion coins are not the same as rare silver collector coins. This is because silver bullion coins have no additional value attached to them beyond the silver that they contain in weight. Whereas, rare silver collector coins could sell for much more than the silver that they contain in weight since collector coins are valued for many subjective parameters, such as the year they were coined, their rarity, etc. An investor looking to invest in silver bullion should not confuse their investment in silver bullion coins with rare silver collector coins, as these are two different markets that are affected by different market valuation forces.
To buy silver bullion allows investors to participate directly in the silver markets and to profit from growing world demand for silver by investing in physical silver bullion. The major benefit of buying physical silver bullion, verses investing in silver via a Silver ETF that derives its value from silver commodity futures and options, is that the potential for price decay is removed when an investment is made in physical silver bullion. Price decay occurs when further out month’s futures and options contracts are more expensive than the current month, and an ETF must buy the more expensive further out month’s contracts, thus causing the ETF to lose value. This means that the money invested in silver bullion will have more potential to grow over time, since it will not be encumbered by price decay.
Buying silver bullion is not difficult. The difficult part of buying silver bullion is ensuring you are buying it from a trusted source. There are dozens of companies that sell silver bullion over the Internet. However, an investor looking to buy silver bullion over the Internet would be wise to make sure the company they are considering buying silver bullion through is legitimate. For those who would rather see the silver bullion coins in person before buying, a local coin shop should have silver bullion coins available for examination. An investor should expect to pay a slight premium for buying silver bullion coins from a local coin shop. Another option for to buy silver bullion coins is the United States Mint, which sells the one troy ounce United States government issued American Eagle Silver Bullion Coin directly to the public.
As governments around the world look for ways to solve their crushing debt burdens by diluting their currencies, buying silver bullion to hold physical silver is worth considering, as part of a diversified investment strategy.
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