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Should You Invest in Physical Silver?

Posted on 2012-11-05, By A-Best Staff
By Michelle Smith — Exclusive to Silver Investing News 

Should You Invest in Physical Silver?

Each category of investment products has its pros and cons. For those whose goals involve safety and protection, a recent roundtable hosted by Kerry Lutz, founder of the Financial Survival Network, presents a strong case for holding physical silver.

Investors seek protection in silver

Silver can be a volatile market. One reason is that many investors make decisions in response to news that drive concerns over currency and banking risks. When those worries heighten, some investors put their cash into the metal and then extract it again when their concerns diminish.

ETF Securities’ Global Commodity ETP Quarterly for Q3 2011 stated that despite its proportionately large industrial usage, silver is still viewed as a store of value asset by many investors.

That quarter saw $1.6 billion in net inflows to silver ETPs, with holdings totaling about $18 billion. These inflows were seen at a time when nearly every commodity except gold saw flat or negative outflows. The main driver behind demand was concern about financial turbulence. During that three month period there was the US budget ceiling stand off, anticipation of a US credit rating downgrade, and growing focus on economic turmoil in Europe.

These sorts of conditions, and uncertainty of their effects, are triggering an increasing interest in silver. Late last year, we reported that a growing number of our readers are among those who admire silver as a safe haven.

Making a case for physical silver

The Lutz roundtable raised an interesting question for safe haven investors: if a position in silver is motivated by a lack of faith in currency or the financial systems that distribute it, can non-physical investments be viewed as the best form of protection?

Lutz described guest Chris Duane as a major silver aficionado who put his metal where his mouth is by liquidating his assets pre-crash, putting the money into silver when prices were ridiculously low.

According to Duane, people need to view silver investments as a flight from currency instead of as the purchasing of metal.

Duane believes that our money system, and indeed our entire way of life, is built on unsustainable debt. He says the purpose of investing in silver is to take yourself out of the mathematically inevitable collapse that is going to happen.

Whether or not a collapse is indeed inevitable is an arena for debate we will not enter. However, unsustainable debt concerns are a driver for safe haven investment demand, and that demand has been accompanied by increasing interest in a variety of silver-related assets, such as equities and ETFs.

These products are often strongly marketed on the benefit of convenience. Investors can build positions, and when they no longer wish to maintain them, those positions can be liquidated, a process that can be completed with little effort.

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