Affordability is Silver Bullions Secret Weapon - And it's Achilles' heel

As this article is written in mid February 2011. Silver, Golds poorer less glamourous sibling has once again broken through the $30 per ounce level despite of all the anti precious metals news that main stream financial media pedal daily.

But with all the noise about Gold/Silver ratio, Silver fundamentals, Chinese imports, Chinese inflation, Western deficits, sovereign defaults and the like, perhaps the most single most positive aspect for silver has been lost - its price. At current price levels, Silver bullion provides buyers with an easy way to buy a precious metal, at an affordable price.

Though Silver has enjoyed even better percentage returns than gold over the past couple of years, at $30+ per ounce, it remains comparatively affordable to the average retail investor when compared to Gold which is currently around $1,360 per troy ounce. Alternative platinum group metals (PGMs), in the form of Platinum, currently around at $1830 per ounce, or Palladium around $824 per ounce, don't provide much of a cheaper alternative.

Recently a friend of the author of this article started to invest a little each month into physical gold and silver bullion coins. He started his foray into precious metals, by locating a reasonably priced fractional troy ounce Krugerrand, using a bullion price comparison site. However, having paid his money, he was somewhat dismayed at the size of the coin when it arrived. After he aquired a 1 troy ounce silver bar, he was significantly more impressed. Now correct or not, this attitude is likely to be a common one. For most of modern times, precious metal investing beyond jewellery or a gold watch, has been the preserve of a small minority. As this changes, and more and more new Silver investors take physical possession of their precious metal, psychologically silver will always appear to provide the precious metal newcomer much more "bang" for their buck.

So while Silvers comparative cheapness in comparison to Gold, Platinum and even Palladiums lofty prices may well help the poorer, ugly sister Silver, this could also be it weakness. This is because the real problem for most physical silver investors investing even modest amounts, is likely to be one of storage, if they choose to hold the precious metal themselves. Because assuming that you can overcome the currently tight supply situation to buy Silver at a reasonable premium, one of the largest practical problems with owning Silver is its bulk.

An investment of $100,000 in physical silver bullion represents over 3300 troy ounces (over 100 kilos). The same $100,000 investment in physical gold bullion represents just over 73 troy ounces of bullion (just 2 and a bit kilos). In Silver bar form, which stores more compactly than say American Silver Eagle bullion coins do, finding secure accommodation for that metal is not exactly as easy as throwing it in a home safe.

Even a more modest investment of $10k is representing over 10 kilos which risks straining the cashiers back when they retrieve your deposit box at the bank. With $100k in gold bullion tipping the scales at under 3 Kilos, storage is nowhere near such an issue. Further more, a more modest investment of $10,000 in gold represents a just a handful of 1 ounce coins. And for those investors concerned about wealth density and where to keep it. This could be Golds clincher.

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