On January 28, 2011, the spot price for silver closed at $26.68 per troy ounce. That was almost $4 lower than it opened on January 4, the first trading day of the year. Since then, silver has climbed steadily to close at $40.22 on April 8. A rise that has seen the price of silver gain a bit more than 50-percent in value.
Some are wondering if the price of silver could hit the $48.70 it did in 1980 when the Hunt Brothers, Nelson and Herbert, tried to corner the silver market. Although the comparisons are interesting, it would only be a numeric record. Accounting for inflation, the actual value would be $130.80 in terms of 2011 dollar. For a true record, silver has a long way to go!
Since the economic downturn, there have been significant investment in gold pushing prices higher with it reaching a record of $1,469.50 per troy ounce as of Friday’s close. However, silver has remained relatively flat until this year. The one explanation that makes sense is that silver remains a good investment because it is undervalued as compared to gold—called the spread or ratio of silver to gold.
Historically, prior to the deregulation of markets, governments have fixed the spread around 15-to-1, meaning that the price would be set to where 15 ounces of silver would buy one ounce of gold. This changed during following deregulation of the markets. One analyst found that gold was over 100 times more expensive than silver but the price ratio never went below 41.51.
At the beginning of the year, a few analysts commented that silver was prime to rise because of the gold-to-silver ratio was very wide. Some suggested that the ratio should be closer to 25-to-1 even though it has never been lower than 41-to-1. However, as of Friday’s close, the ratio is now 36.29!
Some analysts believe that as the dollar falls in value, the prices of both gold and silver will rise. Projections see gold rising to anywhere from $1,500 to $1,600 per ounce. But because this price is high for some investors, silver looks like a better value and is expected to hit the $50 mark before the end of the year. Given its trend and the nature of the markets, it could reach $50 by the summer.
If you are not an investor but a collector of United States coins from prior to 1965, the value of your collection has been going up. Do you have American Gold Eagles? You might have noticed that some of your coins have more than doubled their original price, even for the one-tenth ounce. Remember when the first Gold Buffalo sold for $650? Now add a $200 premium to the gold spot price to find the current value.
Are you collecting dimes? Just the silver value of the dime is $2.96. Those Kennedy Half-Dollars that your father or grandfather saved from 1964 have $14.80 worth of silver. And those common date Peace Dollars (1922-23) that sold for $20-25 a year ago is now worth $31.65 in silver.
By the way, those 1965-1970 Kennedy Halves that are 40-percent silver contains $6.05 worth of silver.
The analysts who determine and publish the values of coins have been very busy!
I am not suggesting that anyone buy gold or silver as an investment—speak to your investment advisor before doing anything. I am looking at the situation from a collector’s point of view. The rise of prices makes my collection worth more when considering the bullion value and the numismatic premium. Maybe now is a good time to consider selling some of my collection—the parts I am less emotionally attached to—and start over again when metals prices drop. In any case, we certainly live in interesting times!