Here’s Why You Should Buy Silver
Silver has been one of the best investments during the 21st century, even though it has been a lousy investment over the past couple of years. Silver traded at just $5 per ounce at the beginning of the century and it traded as high as $48 per ounce in 2011 before correcting. Despite a 60 percent correction to less than $20 per ounce, silver has markedly outperformed bonds and American stocks despite the fact that many analysts missed this run-up. Many of these same analysts are still not bullish on the silver market.
While investors looking to diversify away from more traditional assets often turn to gold, they should also consider purchasing silver. In fact, more aggressive investors should favor silver in their portfolios. Here’s why.
First, silver cannot be mined profitably at the current price. True, if you read many silver mining companies’ reports, they are claiming that they can produce silver at $17 per ounce or $18 per ounce, but this is a razor-thin margin, and if anything goes wrong, these companies will not be profitable. Furthermore, there are other companies that simply aren’t profitable at the current silver price. The fact is that for silver miners to be comfortably profitable to the point that they are confident that their mines will be cash-flow positive, we need a minimum silver price of $25 per ounce to $30 per ounce.
Until we reach that point, there is going to be very little investment in silver mining, and this means that unless the price of silver rises from here, silver production is going to diminish. This in itself will force silver prices higher.