4 Reasons Why Silver Should be in Your Portfolio

It's the best electrical conductor of any metal, and may soon replace the lithium-ion in batteries used in future Apple (NYSE: AAPL) iPhones and laptops.

It's highly reflective, making it a perfect choice for the increasingly popular photovoltaic solar panels.

It's strong enough to withstand thousands of pounds of pressure and continuous abuse, making it the metal of choice for ball bearings on jet engines.

Its antibacterial properties prevent infection and speed healing. It's even used to purify one of the few limited resources that we would literally die without -- water.

This metal is already a strong investment.

Oh yeah -- and it's one of only two metals the U.S. considers legal tender.

As you've probably realized by now, the super metal we've been talking about is actually silver, and there's no reason it shouldn't be part of your investment portfolio.

The case for silver-lining your portfolio
1. Because silver is used in more products and services around the world than gold, its value will be prolonged and preserved for decades -- even during crises or financial collapse.

2. Silver is a great complementary asset to gold. For example, if gold prices rise to new record highs (as it has been), the expensive yellow metal will become less attractive to industrial users, jewelry buyers and central banks. In this event, many suppliers of these products will substitute gold with the much less expensive but still shiny and durable metal, silver.

This "substitution effect" would cause prices of gold to fall. In this instance, your total returns would suffer if your portfolio happened to be only invested in gold. However, if your portfolio happened to also be invested in silver (which would rise in price due to the substitution effect), the negative returns of the gold could be offset.

3. Affordability. The metal is much less expensive per ounce than gold, so an investor can purchase more "units" to increase their exposure to precious metals without breaking the bank.

4. There are lots of different ways to invest in this metal, making it super convenient.

Investing in silver ETFs and mutual funds
Want to invest in silver, but don't want to hassle of actually storing it? Exchange-traded funds (ETFs) and mutual funds make owning silver as easy as buying shares of Microsoft (Nasdaq: MSFT).

The iShares Silver Trust Fund (NYSE: SLV) and the ETFS Physical Silver Shares (NYSE: SIVR) both track and reflect the price of actual silver (minus management fees).

If you want to further diversify your silver strategy, you can even invest in the silver mining companies themselves through the GlobalX Silver Miners ETF (NYSE: SIL).

Advantages: Lower premium (fund expenses only) on your investment and easy to add to an IRA or other brokered investment account. You don't have to store physical silver bricks or coins.

Disadvantages: ETFs and funds cannot be redeemed for actual silver, only cash, which generally holds little value in a market collapse or hyperinflationary environment.

Investing in silver bars, rounds and coins
Though ETFs and funds are easy to add to a portfolio, they are not the best option if you're looking to protect your wealth from the possible threats of a falling dollar, hyperinflation, failing government, or a market collapse.

When you purchase physical forms of silver bullion (in the form of bars, rounds and coins), you not only profit from silver's rising prices, but protect yourself from these threats.

The majority of .999 fine silver bars come in 100-oz size, with the most popular brand names being Engelhard and Johnson Matthey. Other fine silver bars that come in a heavy, 68 pound, 1,000-oz size are usually delivered commercially and are labeled by COMEX or LBMA (entities that hold large amounts of gold and silver). Their cost to produce is lower than most coins and rounds but they can be difficult to store.

Silver rounds look like coins at first glance, but they are produced by non-federal mints and can be customized with various designs or faces. Silver rounds carry a lower premium price for production than silver coins for the amount of silver content they possess, but they are not considered legal tender as most silver coins are.

Silver coins have been federally minted by many countries, but the American Silver Eagle is the only official silver coin minted in the United States. Other forms of silver coin are the 99.99% pure Canadian Silver Maple Leaf and "junk-silver" coins. "Junk-silver" coins are those widely-collected U.S. coins minted before 1964 that contain 90% silver content.

Official silver coins (especially collectable editions) generally charge a slightly higher premium than other physical forms of silver. However, American Silver Eagles and Silver Maple Leafs are the only silver coins with legal tender status, and carry an official guarantee of weight and purity by their federal mints (You can verify a dealer's ASE coins here for authenticity). An investor looking to buy one ounce of silver at a time may also find coins easier on the monthly budget than buying a single silver bar that may cost several hundred dollars.

Buying physical silver is just as easy as shopping online. Kitco and the First Federal Coin Corp. are two great places to start.

Advantages: Physical silver may be put in a tax-deferred "Precious Metals IRA" or Self-Directed IRA so long as it's at least .999 fine silver (like the official American Silver Eagle coin). Physical silver will also become more valuable as a potential medium of exchange as governments print more paper money and devalue their currencies.

Disadvantages: Physical silver in bar form can be difficult to store due to its heavy weight and volume. Silver rounds may not be used as legal tender and it can be difficult to verify their purity. If you're looking to invest in physical silver, your best bet are federally minted silver coins.

Action to Take --> Choose silver tracking ETFs and mutual funds with low expense ratios to easily add diversification to your investment portfolio. But if you're an investor looking to preserve wealth and gain from silver's future growth, choose bars, rounds or official coins.

Source: http://www.streetauthority.com/exchange-traded-funds-etfs/4-reasons-why-silver-should-be-your-portfolio-458439

Gold seen peaking at $1,900/oz in next 6 months - GFMS

(Reuters) - Gold could hit $1,900 an ounce in the next six months, driven by buyers seeking an investment safe from global economic problems, but a further rise to $2,000 looks unlikely, metals consultancy GFMS said on Thursday.

"Gold will be muddling through to peak at $1,900 (an ounce) as U.S. data points have been ambiguous, the action on the fiscal and monetary front is also ambiguous," said Paul Walker, global head of precious metals at GFMS, which has been acquired by Thomson Reuters.

Gold extended record highs above $1,825 an ounce on Thursday after poorly received U.S. jobs data hurt assets seen as higher risk, such as stocks, while boosting interest in nominal safe havens such as gold.

So far in August, the price has risen by more than 12 percent, putting it on track for its biggest monthly gain since November 2009.

"In the time frame, we really need exceptionally dramatic news to push gold above $2,000 and this is not our base case," said Walker. "This is highly unlikely."

Although gold remains off its inflation-adjusted peak above $2,000 struck in 1980, it is one of the top performing assets this year, up by over 28 percent versus a 15-percent loss in U.S. blue-chip stocks or a 7.7-percent decline in the price of copper .

He said there was a high probability of India's gold imports crossing 1,000 tonnes this year -- up four percent on 2010 -- as expectations were for prices to gain further.

The World Gold Council in a report on Thursday said Indian gold jewellery buying was up 17 percent in the second quarter and that signs of strength in the market remained.

Gold imports by MMTC, India's second biggest importer of the metal, have tumbled to 5 tonnes so far in August as buyers preferred a 'wait-and-watch' approach. Walker said consumers would wait for price stability before jumping in.

"People are getting accustomed to this kind of a benchmark (price) even though it is at incredibly elevated levels. Everybody who is involved in the value chain in the Indian gold market thinks prices will go up," said Walker, ahead of a conference in Kerala.

Silver prices could extend gains to $50 an ounce in the next months from around $40.60 an ounce now, he added.

"It will follow gold up ... It will move towards $50, but it is going to be a hell of a lot more volatile," said Walker.

Silver prices have more than trebled since 2008 to peak at $49.51 an ounce this year.

"Silver will benefit from the same factors as that of gold from rising investment drivers. Until the global macro situation gets clearer, prices will go higher," he said.

(Editing by Anthony Barker)

Source: http://in.reuters.com/article/2011/08/18/idINIndia-58854820110818

40 years on from gold standard, bugs crow - Reuter

(Reuters) - Gold, and only gold, will be our salvation when the value of companies, banks, countries and even money itself melts away. Gold, not shifting currencies, is the foundation of wealth and security. Gold is back, for good.

This is the song of the "gold bugs" - the fervent fans of the precious metal who have clung to its investment value for three generations and now glow in the reflected luster of a record price approaching $2,000 for just one ounce.

Monday will mark the 40th anniversary of the United States' abandonment of the gold standard. But gold bugs kept the faith -- even when prices stayed under $500 for nearly 25 years after their 1981 peak.

Their passion derided, dismissed as hopelessly out dated doomsayers, their love for the metal seemed irrational.

The gold bug label itself goes back to master of the supernatural Edgar Allen Poe and his story of that name, a tale of golden beetle whose bite sends the hero to a chest of gold and jewels.

It reappeared as one of the first campaign buttons -- a brass bug sported by supporters of William McKinley in the bitter U.S. presidential election of 1896.

McKinley, the first presidential candidate to barnstorm across the nation, backed the gold standard against his Democratic opponent's proposal that it should be joined by silver in a fixed ratio. Loser William Bryan slipped into history but bimetallism lived on for a little in the think tanks of the day.

Fast forward and the financial crisis of 2008 has made gold the darling of investors from hedge funds to taxi drivers, and sparked a near-doubling of prices.

"Gold has been rising against all national currencies, and that's significant," James Turk, founder of bullion dealer Goldmoney, said.

"When there are problems with a national currency... people begin to worry about the value of their money, whether they're going to lose purchasing power because of inflation or other problems. As a consequence, they look for safe havens."

He was speaking as a true gold bug -- not in the dark days after Lehman Brothers' demise in 2008, nor in the depths of last year's euro zone debt crisis, nor after Standard & Poor's recent downgrade of the United States' top-notch credit rating.

Turk's view came in a BusinessWeek interview he gave in 2005, well in advance of the current financial crisis.

"My long-standing forecast, made in a Barron's interview in October 2003, is that $8,000 per ounce will be reached sometime between 2013-2015," he told Reuters this week.

"I've stayed with that forecast over the years and see no reason to change it."

The world's current financial woes are only going to get worse if current policies continue, he believes, meaning the rally in gold prices is unlikely to stop here.

"Politicians and central bankers are making decisions that debase national currencies, and the resulting bad monetary policies they are following are causing the gold price to rise," he said.

Gold's latest push to record highs has gone hand-in-hand with a plunge in Wall Street stocks to their lowest in nearly a year, while the dollar is languishing near multi-year lows.

Long-term gold bull David Beahm, vice president of marketing and economic research at New Orleans bullion dealer Blanchard and Co., says worries over the stability of the stock markets will be a key driver of higher gold prices.

"The best investment right now is gold," he said. "By diversifying one's portfolio with a negatively-correlated gold, investors can protect themselves from deep plunges in the equity market."

"There is no news in the market today or over the coming few months that is likely to stop the current gold bull market, as the fundamentals are firmly in place for gold to continue its rise," he says.

Traditional investment commentators have dismissed gold -- which, with no "intrinsic" value of its own, is only really as valuable as a buyer thinks it is -- as a classic bubble.

But those who have predicted its crash since it rose above $700 an ounce in 2006, on a simple "what goes up, must come down" analysis, have consistently been proved short-sighted.

Gold prices traded in a relatively narrow range from $250-420 an ounce for the whole of the 1990s. They have since more than quadrupled from that high, peaking at a record just below $1,800 an ounce earlier this week.

Their rise accelerated sharply from 2005 onwards, breaking through $1,000 an ounce in 2008 as the weaker dollar fueled demand for alternative stores of value.

Now gold bulls are predicting that prices, now around $1,750 an ounce, but still short of an inflation-adjusted high of nearly $2,500 in 1980, could climb even higher.

"I believe the price of gold will rise irregularly over the next several years, possibly reaching $1,850 an ounce by the end of this year, breaking above $2,000 in 2012, and possibly $3,000, $4,000, and even $5,000 in years to come," says Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic advisor to Rosland Capital.

"At the heart of this forecast is my observation (or belief) that the United States and, to a lesser but still significant extent, Europe have been living beyond our means for decades."

Back in 1896, losing presidential candidate Bryan's Cross of Gold speech turned the watching crowd into "a wild, raging irresistible mob," the New York Times reported.

Gold bugs, often accused of sensationalism, are finding their passion is becoming mainstream. "Raging" is probably no longer a suitable description of them. "Irresistible" is increasingly nearer the mark.

(Reporting by Jan Harvey, editing by William Hardy and Richard Mably)

Source: http://www.reuters.com/article/2011/08/11/us-gold-bugs-idUSTRE77A3CT20110811

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Last updated on 10 Aug 2011.