The historical price of Silver has stayed pretty much in the same range for a year now, being in the $14.50 – $15.50 range. Yesterday (April 12, 2016) Silver finally broke through the $16.00 ceiling breaking what’s known as a resistance level. This is basically a price that a stock, commodity (like oil, gold or silver) or index is finding it difficult to break through. For Silver, that resistance level was a spot price of $16.00 per Troy Ounce.
Silver has been performing very well over just the last few days, being up by 5.37% which means it’s outperforming almost every other asset class:
Will The Price of Silver Go Up?
So What Does This Mean?
Well, it could signal that this is a genuine, long-term increase in the price of silver. If that is the case, then silver is entering the bull market that so many analysts have predicted would happen this year.
Or it could just be a short-lived spike in price. Silver briefly broke the $16.00 barrier in mid March too before falling back to a low of just under $15.00 earlier this month.
There’s never an optimum time to buy volatile assets because you never know if the price will rise or fall from the price you buy at. I’m taking the analysts’ advice to buy some silver now before the price does start rising sharply (I ordered some silver bullion coins last night).
The danger in waiting to see where the price will go from here is that if a lot of people rush into buying silver, the supply will dry up pretty quickly. That, in turn, pushes up prices and pushes out delivery dates so you may have to wait weeks or months rather than days for your order to arrive.
The Silver Premium
One thing you need to be aware of if you buy silver is that there’s a much higher premium on it than there is for gold. The premium is the percentage above the spot price that dealers charge to customers. Gold has a premium of around 7% (unless you buy from BitGold which has a 1% premium), whereas silver typically has a premium of about 20%.
So while the spot price of silver today is $16.06 per Troy Ounce, a 1 oz silver bullion coin will cost about $19.08 (an 18% premium). SD Bullion have the lowest silver premiums I’m aware of – theirs is about 11.5%.
If you check the historical price of silver and look at a 5 year chart you’ll see that silver peaked at about $46.50 per ounce in 2011 and it’s price had fallen since then to lows of $14.00 – $15.50 in mid-2015, where they’ve remained until yesterday. That means silver is at least one third of its potential value.
The Gold/Silver ratio historically has been 15:1 (15 ounces of silver bought 1 ounce of gold). Today, that ratio stands at 78:1. Many analysts expect that ratio to correct itself at some point and return to a 15:1 ratio, or near that value. If that does happen, silver would be about priced at about $80 per ounce. It’s all speculation of course, but you can see that there’s a potential to make a windfall by buying some silver.