First Person: The Chinese Like Silver ... I Like it Too

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An article from Marketwatch recently noted that, "Silver's drawing more and more attention as an investment these days, especially from China."

This was no big revelation to me, since I was aware that China was accumulating vast amounts of physical gold, so it was no surprise they are doing the same with silver.

Personally, I've liked silver since I was a kid and my uncle gave me my first ounce in the form of an American Eagle silver coin. Therefore, I'm not influenced in my decisions regarding silver by whether or not the Chinese like it as well; however, as an owner of silver, I like it in the fact that one of the largest and fastest growing economies of the world likes silver. Any investor with some sense would likely take note of such information. But even without China's interest in silver, I'd still like it as an investment for a multitude of reasons.

Popularity and Price

At silver's current price of right around $31/ounce, it is widely available to the average investor.

According to the Marketwatch article:

"China's retail investment demand for silver is forecast to grow "robustly over the short to medium term, as a wider population base gains access to silver bars and coins," according to a Silver Institute report issued last month compiled by Thomson Reuters GFMS.

In 2010, the first full year after Chinese government restrictions on investment in physical bars were lifted in July 2009, net demand for silver bars and coins totaled 9.8 million ounces and by 2011, reached 17 million ounces, accounting for 8% of global net purchases of silver bars and coins, the report said.

At the same time, "growth in paper trading of silver could turn out to be even more dramatic" than retail investment demand, "as a renewed silver rally and its low acquisition cost compared to gold should provide a strong boost to investor interest," the Silver Institute report said. See the report on the Chinese silver market."

I'm aware of the popularity of silver here in the US as well. Just the other day I stopped in at our local coin shop to have a look around. The owner mentioned that he'd had several customers in before me buying bags of pre-1963 silver quarters and half dollars. It didn't surprise me since silver had just dropped by over a dollar an ounce earlier in the week and the US Mint had recently temporarily halted sales of American Eagle silver coins due to high demand.

Investment Options

There are several options for investing in silver. From stocks like Silver Wheaton, and ETFs, to silver in its pure form by way of antiques, home furnishings (candlesticks, silverware, jewelry, and similar items), coins, and even bars, there are all sorts of ways to become an owner of silver.

I already own some small quantities of silver through household items and coins because I like having the physical asset; however, I've recently be considering moving into the ETF realm when it comes to the silver market in an attempt to get into investing that's geared more toward the short-term rather than long-term holdings. I think that being diversified among both physical and paper silver is a good hedge against a number of situations -- political, natural, and economic -- that could affect the trading and price of silver.

Uses

There are all sorts of uses for silver. From financial and industrial to medical and technological, the list of industries, products and applications that involve using silver runs into the hundreds, if not thousands.

This can be a great thing for silver investors since the need for silver -- even during economic downturns -- can remain high for a variety of reasons. When economic instability hits, while industrial consumption might fall, investors could flood to silver as a hedge against inflation or devalued currencies. And during stable periods, industrial demand might be higher due to consumer demand among products. Personally, I like investments that have positive aspects no matter what the economy condition.

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Disclaimer:

The author is not a licensed financial or investment professional. He owns physical silver but is not currently invested in silver stocks or ETFs. This article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

Sources:

Saefong, Myra P. Marketwatch. "If China likes silver, maybe we should too". January 25, 2013. http://www.marketwatch.com/story/if-china-likes-silver-maybe-we-should-too-2013-01-25. January 30, 2013.

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