Silver is staging a comeback.
Bargain-priced American Eagle silver coins and other silver investments have been gaining sales momentum in 1991. Furthermore, a recent modest rebound in price just might indicate a silver rally is coming somewhere down the line.
The jump in sales of the one-ounce silver dollar Eagle coins began as the market began a slow descent toward a 17-year low of $3.50 an ounce in February. Prices looked good to investors and speculators. After showing some encouraging improvement, the price most recently has hovered around the $4-an-ounce level.
"More than 5.3 million ounces of silver Eagles were sold from December through March, making this the best-selling silver coin ever," observes Donna Pope, director of the U.S. Mint.
As with the Eagle gold coin, some sales gains were tied to the increased patriotism of the gulf war period. However, most buyers were doing more than simply flag-waving. They know that silver coins, inexpensive to begin with, can readily be bought at banks and coin shops. In addition, there are improving market fundamentals at work.
"It's a good time to buy silver coins because there really isn't much downside risk at current price levels," says Alan Posnick, senior vice president of New York's MTB Banking, who expects a trading range between $3.75 and $4.50 an ounce through year-end. "Silver will outperform gold and platinum in terms of total return on investment for the next several years."
The silver Eagle remains the most popular way to buy silver, and it's possible to buy that coin for $1.25 to $1.50 over the silver spot price. Next in popularity, but usually at higher premiums, are the silver Maple Leaf coin from Canada and the silver Libertat coin from Mexico.
"Longer term, silver has a lot of emotional appeal, and the general public won't get very interested in it until it gets over $5 or $6 an ounce," says Walter Perschke, president of Numisco Rare Coins Inc. in Chicago. He says he thinks investors could buy silver at $3.80 an ounce in the next six months and, "at those prices, I'd definitely be a buyer."
Investors can most economically buy silver in small bars of one-ounce, 10-ounce and 100-ounce sizes, Perschke believes.
"With a moderate economic recovery, we'll see silver prices in the $4.50-to-$4.75-an-ounce range, but, with a stronger recovery, the price will go much higher," predicts Bette Raptopoulos, senior metals analyst with Prudential Securities. "I would be a 'scale-down' buyer of silver at current price levels and whenever it might slip lower."
The $50-an-ounce price range of the early 1980s was far from the norm, brought about by a high rate of inflation. Its price then fell quickly to the $17-an-ounce range, remaining there before beginning its gradual descent to that remarkable $3.50-an-ounce low set in February.
In Raptopoulos' opinion, coins and bars remain the best ways to buy. The stocks of silver-mining companies and also the futures markets are two riskier ways of purchasing silver that could conceivably provide a big return for a small investment. But she warns that there is considerable volatility in those rather speculative choices.
Silver, like any other precious metal, can boost your spirits or break your heart. But its lower price tag makes any pain somewhat easier to bear.