The Silver Lining

The Silver Lining


My investment history has been varied. After first ‘flirting’ with unit trusts and retirement annuities,  residential property hit my radar. I soon found myself owning and managing more than half a dozen residential properties.

Over and above my full-time academic career in theology, I was now a landlord chasing tenants for rent. Four years into the recession, and after a significant drop in the overall value of South African residential property, I felt as though I was merely treading water in a patched-up rowing boat, one personal financial storm away from drowning.

Looking to precious metals

In the early part of 2006, I began to awake to the upswing potential of the prices of precious metals, especially gold and silver.

Not only did the long-term economic fundamentals of these two precious metals look promising, but I would be receiving something tangible for my money.

With a large portion of my disposable income invested in predominantly silver, the growth was fantastic, even on non-numismatic bullion coins like Krugerrands and American Silver Eagles. To put it into perspective, had I invested all of my capital into silver in 2004, I would have received a return on my initial investment of over 500% today.

Entering the silver-sphere

After a couple of years of persistent research into the return potential of silver, I was hard-pressed to find another asset class that would preserve my wealth as efficiently against the eroding power of inflation. Three economic fundamentals that support the future price increase of silver are worthy of mention:

  1. Countries are increasing the printing of their money supply exponentially. For example, the Federal Reserve of the United States has added trillions of dollars to its money supply (‘Quantitative Easing’) over the past few years. Essentially, common sense would dictate to buy ‘assets’ that preserve wealth.
  2. There is an increase in silver demand from both industry (thousands of essential industrial, medical, military, and manufacturing uses) and investors (purchasing significantly high quantities of physical silver is extremely difficult, if not impossible).
  3. Historically, the average ratio between silver and gold is about 1:16. Currently, the silver/gold ratio is over 1:50. This is clearly lopsided and unsustainable, and an adjustment is inescapable in the medium to long term.

For new silver investors

Although I am not qualified to offer financial advice, I would like to say four things to those considering investing in silver:

  • Listen to the experts who have a proven track-record in the physical precious metals investment arena. Google the personal thoughts and guidance of legendary investors such as Jim Sinclair, David Morgan and Eric Sprott (to mention but a few).
  • Learn to evaluate your wealth from the perspective of how many silver and gold ounces you own, not how much paper money you may have in the bank. There may come a time when buying anything intrinsically valuable for paper money will be next to impossible.
  • ‘Stack the smack’. When prices dip as a result of possible manipulation by a silver cartel (a smack), see it as an opportunity to buy (stack) silver for less rands.
  • Keep an eye on the economic fundamentals that will drive silver significantly higher in the medium term. Unless these change, pay little attention to the paper price of silver. Just recognise that the paper dollar price of silver is not the real value of silver.

For more information visit Silver-Sphere.

Zoltan Erdey
Zoltan is an investor and owner of Silver - Sphere. He shares his insights into personal investment and choosing silver.