The Limitations of Silver Mining Stocks

[silver coins]

Although you’d never know it based on silver prices, silver mining stocks fell behind years ago and have struggled to catch up.

Silver is a crucial component in the manufacture of so many things we depend upon in modern society, and as such, will be only minimally affected by a global economic slowdown.

With a growing industrial demand and the reality that the silver mining industry is not able to meet it, it seems obvious that silver prices are poised to go up…and yet no one in the mainstream wants to believe it!

The History of Silver Mining

Silver has been mined for over 25,000 years. Widespread soon after the Roman conquest of the first century AD, mining of silver was a driving force in the settlement of western North America. The first major silver ore deposits in the United States were discovered at the Comstock Lode in Virginia City, Nevada, in 1859.

[silver mining]

The United States produced 1,200 metric tons of silver in 2007, 35% of the silver it used. The remaining 65% was imported from Mexico, Canada, Peru, and Chile.

Silver Mining Stocks

I believe strongly that silver mining stocks are not a good bet for most silver investors.

[silver mining]

All newly-produced silver is already spoken for by industrial demand. Therefore, the only real silver available for new investors is the sale and resale of silver by existing silver investors.

Yes, it is true that mining stocks can potentially move up much higher, faster, and at greater percentages relative to the spot price of silver. But they can go the other way as well. And unless you have money that you can gamble with an afford to lose you must to consider the downside.

In addition to trying to meet an incredible demand, world silver miners are facing a rough road ahead. Entangled in the roots of financial mess, environmental impacts, and manipulated prices, many mining operations have already been or soon will be nationalized. This will be devastating for people who own stock.

Interested in owning silver mining stocks for short-term gain? Try Jason Hommel.

But remember, futures, options and ETFs and mining stocks are much easier to buy and sell than real silver.

Since the big gains come with long-term positions, the fact that physical silver forces you, more than any other form of silver, to hold is a very good thing and why coins are essential.

The Reality

[silver mining]

Gone are the days when there was universal talk of inexhaustible inventories of silver. The depletion of thousands of years of accumulated silver inventory has resulted in rarity and scarcity of above-ground silver available for small investors. We've had a consumption deficit lasting more than half a century.

We are in the midst of the perfect storm. With growing industrial demand, increased investment demand, a shortage of retail silver, and a serious financial crisis, the retail market for silver has tightened like never before.

The continued debasement of the dollar in a crumbling world financial situation is slowly turning the herd toward silver at a time when there has never been so little for investment! My focus is on silver coin investing because it is the safest form of silver that you can own.

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