One of the most frequently raised points of concern for new silver investors is the question, where do I sell my silver. I have answer this question in an earlier blog here: https://www.silver-sphere.co.za/can-sell-silver-time-off-load/. However, there is a different implied dimension to this question that is often probed, namely, should I sell all my silver when the price spikes significantly higher?
While such a subjective question is difficult to answer (given that each silver investor has a specific strategy in mind, not to mention having bought silver at various pricing entry points), I would like to take the next few paragraphs to provide my own personal strategy as to why I will not sell all of my silver, irrespective of how much the price spikes. Here’s why.
I think of my total personal precious metals position in three thirds. Each of these three thirds addresses a certain need and contains a different selling/holding rationale.
The 1st third is for speculating. Should the silver spot price spike violently towards the previous high of $50 per ounce in a relatively short time, I would only off-load one third of my total silver position. After all, the idea from the outset was to purchase silver when the price of an ounce of silver is undervalued, and sell it when it is overvalued. While it is difficult to define what ‘undervalued’ or ‘overvalued’ means in terms of the Rand value of an ounce of silver, the idea is to make a profit. If there is money to be made, then why not offload one’s entire silver position if the price climbs so dramatically? This is where the other two thirds come into play.
The 2nd and 3rd thirds of my silver investment position serves very different purposes.
The 2nd third is intended to provide a certain type of an ‘outside of the banking and monetary system’ insurance policy against the stupidity and irresponsible actions of governments and central banks on fiscal policies. Ever increasing debt, money printing, surreptitious taxing, pension fund mismanagement, possible hyperinflation or economic depression, currency devaluation, and corruption are just a few of the actions/scenarios that owners of physical silver can hedge against (at least to some degree). Silver represents wealth that you can hold and touch, that is outside of the government-controlled banking and economic system. This type of honest wealth in the form of a commodity with 3000 years of monitory history and utility will certainly provide peace of mind. (Truthfully, the peace of mind is directly relative to the percentage one contributes to precious metals relative to one’s entire investment portfolio.) Thus, no matter how high the price spikes, it seems imprudent to offload such an important hedge and insurance policy for the sake of a few pieces of colorful paper.
The final third of my silver investment portfolio serves another important purpose, namely, preserving the purchasing power of my hard-earned money (correction; currency). Should I put R400.00 and an ounce of silver under my mattress today, five years later, the value of my silver (representing the other R400.00 only in the form of silver) will be preserved, while the R400.00 in the form of currency notes will be worth considerable less (due to inflation mainly).
Here is another example that makes the point well. I bought my first two-bedroom town-house in July 2004 for R245,000.00 (a bargain, but more or less market related). In terms of the silver price, my town-house cost me about 7000 ounces of silver (Rand/Dollar exchange rate in July 2004 was R6.20 and the silver price was approximately $5.60/oz). Now, fast-forward to the present (2016). My town-house was evaluated conservatively at R750,000.00. From a fiat currency perspective, that is a growth of about 200%. I should be smiling. However, in terms of silver ounces, the shocking realisation is that R750,000.00 (the current value of my town-house) is worth just under 3000 ounces of silver—calculated at the current Rand/Dollar exchange rate and the current silver spot price. In other words, although I have tripled my ‘money’ (from R245,000.00 to R750,000.00), it terms of the silver value of my property, I lost over two thirds of its value. My point is this: had I bought silver instead of buying property or putting my money under a mattress, I would have preserved the purchasing power of my hard-earned money.
So, returning to the original question; why would I not sell all of my silver even if the price popped significantly higher? The answer is, because only a third of my physical silver is used to speculate and trade for profit. The other two thirds serve two greater purposes. That is, as an insurance policy against the recklessness of those in charge of making global financial decisions, and secondly, it preserves the purchasing power of my money/labour.
