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Types of Precious Metals - Investing in Silver Bullion

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Silver is a white, soft and lustrous metal that can occur naturally as free, or native, silver. Silver also occurs naturally as an alloy with other metals, or as a chemical compound with other metals. Silver is unique among all elements -- it has the highest thermal and electrical conductivity of any element, ensuring that silver has important industrial applications. Silver is element 47 and has the chemical symbol Ag, from the Latin “argentum”.

History of Silver

Along with gold, silver has long been valued as a precious metal. Since the dawn of human civilization silver has been used as a coinage metal, in jewelry, tableware, and ornaments and as a store of value. Electrum, an alloy of silver and gold, was used in ancient Lydia as coinage from 700 B.C. Once silver was able to be refined in its pure form, many nations used silver as the basis of their monetary systems. Only in the 1800s, when huge new deposits of silver were found, did many nations switch to a gold-standard, fearing a sharp decline in silver prices.

Silver coins were generally phased out in the 1960s and 1970s and replaced by pure fiat currencies. Because of the high value of silver, however, it is still used as a means of exchange by private individuals. Silver is, of course, still extensively used in jewelry, artwork, and in utensils.

Uses of Silver Today

The chemical properties of silver make it an important industrial commodity, with widespread use in dentistry, photography, optics, as a catalyst, and especially in electronics, due to the unmatched electrical conductivity of silver. Silver is still very rare and has not been forgotten as a precious metal. Investors buy physical silver in large quantities, especially when the silver price dips. Buying silver is a way for investors to spread out their financial risk and to protect against inflation and other economic troubles. Silver bullion is produced for investment in the form of silver bars, silver coins, and silver rounds.

Future of Silver Prices and Investing in Silver

Silver is rare and is no longer mined directly. The main sources of silver production are byproducts in the refining process of lead, zinc, and copper, with Mexico the current leading producer of silver in the world. The spot silver price per ounce is used in determining the commodity price of silver, which is subject to market forces, as well as speculation and futures contracts. Industrial uses of silver account for a huge share of the annual silver consumption, with investing in silver accounting for an increasingly large share. Realizing the scarcity and increasing demand of silver, investors have been buying silver bullion in ever-increasing quantities. More about silver prices, answers to questions about gold price fluctuations, and an interactive silver prices chart can be found on the CBMint Silver Prices Page.

Gold - Silver Ratio

The gold/silver ratio, abbreviated GSR, is a useful tool for forecasting the direction that gold prices and silver prices may take in the future. In the last 100 years the GSR has fluctuated between 15 and 100 -- meaning that the price of gold fluctuated between being 15 times the price of silver to 100 times the silver price. Analyzing this relationship can give buyers who invest in precious metals important clues as to what the future market may hold for gold and silver prices. Historically, a low gold/silver ratio has coincided with the end of a long bull market in precious metals. Conversely, a high silver/gold ratio has coincided with the conclusion of a bear market for metals and the beginning of a long bullish run for precious metals. See the chart below for a visual representation of the gold and silver ratio for the last 100 years (courtesy of Macrotrends.net and the US Federal Reserve):

Gold - Silver Ratio Graph

As you can see, the gold/silver ratio has dipped near 15 several times in the last century, each instance followed by a surge in the gold and silver markets. If historical precedents hold true, the bull market for gold and silver than began in 2001 is still in effect. With regression to the mean certain to happen at some point, the current position of the GSR indicates that silver would outperform gold by approximately 400% during that time span. This shows us that although investing in precious metals of any type would still show promising returns, silver is likely the better investment on a per-dollar basis.