Investors looking to get the most out of precious metals should look no further than high-cost mining stocks. While mining operations are traditionally leveraged to the change in price of the underlying commodity, high-cost mining stocks enjoy even more leverage due to the inner finances of the company. I’ll explain below.

High Cost Mining Stocks
High cost mining stocks are stocks that represent a company that pays nearly the full cost of a commodity to bring it to surface. An example of a high cost mining company would be one that spends $15 for every $17 ounce of silver it brings to the surface and refines. Because of the accounting, high cost mining stocks offer huge potential to the upside and are a favorite among investors looking to rev up their returns.

The Hypothetical
Let’s assume that there is a mining company known as XYZ Mining. XYZ Mining operates several silver mines and trades at a price to earnings ratio of 10. Also, the company is a high cost operation, meaning it spends $15 to produce just one ounce of silver. Let’s also assume that the company produces 1000 ounces of silver per year.

So, when silver is $16, XYZ Mining earns $1000 per year. ($16 per ounce X 1000 ounces – $15 cost per ounce = $1000 profit)

However, should silver rise by just 6% to $17 per ounce, XYZ would earn $2000 per year. ($17 per ounce X 1000 ounces – $15 cost= $2000 profit)

As you can see, a small change in the price of silver (6%) generated a profit increase of 100%. If the company were to continue to trade at the same Price to Earnings ratio, it would double in price with just a 6% change in silver prices. Now do you see the value in high cost miners?

Demand for physical silver has soared due in part to strong industry and a desire for physical metals for investment portfolios.  But not all physical silver is created equally.  Investors need be careful to buy only physical metals that are worthy of investment, not collection.

Numismatic Metals

New investors in physical metals often make the mistake of purchasing numismatics, or those coins, bars, medallions, and ingots that are meant for collection rather than investment.  Generally, numismatics earn their value from their rarity, perceived value, or from their appeal as art.  Numismatic coins can often sell for multiples of the worth of the metals themselves, making them poor investments.

Investment Grade Silver

Choices in investment grade silver are plenty.  From junk bags of pre-1964 coinage to rounds and coins both foreign and domestic, there are a myriad of opportunities for the silver investor.  These silver products are better suited for investment because their value is derived directly from the amount of silver in the product.  For example, a 10oz bar will sell for 10x the current silver price whereas a rare American silver coin can sell for hundreds of times the value of its silver content.

Mind the Premium

Unlike exchange-traded funds or futures, physical metals do carry a premium over the current spot price.  This premium, usually 2-3%, helps cover the cost of transport, storage, and marketing of the metals itself where the futures exchanges don’t have as much overhead.  The premium isn’t all a lost cause since you’ll be able to recoup the premium upon sale of the silver, as all physical metals carry a premium over spot.  They have for the last century, and they will for the next.

The market was down, commodities were down, everything was down. So where do you put your money? Especially if you can’t put your money in precious metals, which are supposed to save you from inflation.

Well, we don’t think the world has gone crazy and decided to take their money out of everything. We think rather, the market is correcting itself. Investors are taking profits from both equities and commodities and we’re seeing a sell-off. But that doesn’t mean you shouldn’t look into buying these.

We think instead, you should think about buying into the market, especially something like SLV or GLD. Both of these ETFs look to provide you with buying opportunities in the coming weeks. Especially if we see another pull-back in the market. What around or get in now, either way, it looks like there might be some dollars to be had in the precious metals world.

Silver investing is what this blog is all about. Buy silver, invest in silver, get into silver! That’s what we say every day. But why do we say that?

Well, it’s not because we have to say that, we’re not analysts, we’re not paid by any of the big silver ETFs, we just like silver! One interesting point that we found in an article over at business 24 – 7 is about one fact.

The fact that silver is the only commoditiy that hasn’t jumped above it’s all time high during this commodity boom. Yes you read that right, every thing else has jumped above it’s all time high but silver. The precious metal silver is behind. And from what we’ve heard (only third hand so do your research) the silver supply is low and demand stays the same or is growing.

So why the low price?

We’re not sure. But it just adds to the reason why you should buy silver.

Silver has been a roller coaster ride lately with ups and downs and in betweens. No one can figure out this market. And if you can, you’re kidding yourself.

Buying silver, which historically, buying gold and silver has been done when the markets or dollar is down, is even a risky investment. Investors in precious metals have seen both of the major metals swing more than 15% in a months time. Going from 52 week highs to lows within a week.

However, the latest news from Wall Street, that Goldman Sachs beat estimates this quarter, comes as a boost to all commodities. Not because it’s finally good news from the investment banking world, or the banking world in general. But because the reports say that Goldman has had better than average returns in the commodities world or it’s investments.

To some this may seem obvious. Oil is up, way up, and buying things like gold and silver is just safe plays on a weak dollar and a strong commodities market. Traders don’t even have to buy just mining companies. They can get in by investing in silver ETFs like SLV.

But to others, just jumping on the bandwagon, it’s not that obvious and can still be a strong play in their investment portfolio, even in this run-up. As Blog Silver has said before, the demand is high and people are hesitant to dump their money into a volatile stock market. So they go looking for safer investments. Safer investments like gold and silver ETFs that can get large boosts from earnings reports that boast about commodities earnings.

Some may think that buying gold and silver right now is crazy. You may think that the markets are possibly on a turnaround and the dollar isn’t doing so bad. Buying precious metals at a high point would be crazy.

But what about the rest of commodities around the world? And better yet, the worlds use of those commodities.

It’s increasing, and increasing at a huge rate. China and India, named way too many times to count in this blog and similar financial blogs, are all about buying the commodities that China and India are buying and need to survive. Some of those commodities are gold and silver, which you may want to consider buying.

Buying silver now may not be the worst idea. Oil is on the rise, stocks are chaotic at best, and the dollar, although rebounding on news that the fed is done lowering rates, is still not as nearly as strong as it’s closest rivals. You need to consider the rest of the market, not just those historical indicators of the price of silver.

There are a ton more investors in the game now and with Silver ETFs gaining popularity along with all the other sector ETFs out there, you may want to think about getting into silver right now.

The iShares silver trust ETF, SLV is holding strong amid all this up and down buying and selling of silver and gold. The silver trust may be the best way to get into a silver market that some say is going to go even higher.

As oil continues to rise, gold and silver are tending to follow the trends set by the market. When there’s a sign that the economy could rebound and the dollar could be on the rise, the precious metals fall. But as the market shakes with rising oil prices, people are back buying silver and gold. A big way they buy these precious metals is to buy into the silver or gold ETFs (Gold, IAU).

These funds are easier to trade and cost an investor less in the long run than buying silver or buying gold directly in the form of bullion bars or coins. The two trusts are holding strong, fluctuating with the price of gold and silver as they should since they are backed by the precious metals.

If ever there was a low point to buy silver in this run-up, now would be the time. High $16 range right now.

Silver has dropped dramatically in the last few weeks due mostly to profit taking and people calming down about the economic conditions. But should people think that the worst is over and start pulling money out of precious metals and other commodities?

Well I don’t know about you but I don’t think the economy is ready for a huge return to glory. Housing is still slumping, the dollar is still weak, and the Feds are looking towards inflation and recession talk. That doesn’t sound like a huge turnaround to me.

On top of that, world economies continue to grow with China and India leading the pack. Silver, used in many applications, not just for fancy jewelry, will continue to be in demand while the worlds mining companies push to keep up with it.

That and silver ETFs still buy more and more silver making less supply on the open market for those countries to purchase.

Buying silver now is still, in our opinion a good bet. Be cautious of spikes and look into precious metals ETFs and mutual funds to increase your position.

The stock market is rebounding, the dollar is showing signs of strengthening, and banks may be doing a little better. A little. So should you be taking your money out of commodities like silver and gold?

The recent drop on silver prices may be a little premature but everyone new it was going to happen sooner or later. There wasn’t really a huge drop in production or spike in demand because of some discover about silver. It was a run up because the price of most commodities was increasing such as oil and especially gold.

So is this run-up done? Well that depends on a few things. Sure there will be price increases based on the economies emotion to financial news. But if you believe what many feel, that the huge growth in countries like China and India will keep demand on all the worlds resources, including silver, then investing in silver is still a smart bet for the long term.

Buying silver bullion isn’t your only option and may not even be the best one because of the tax implications of owning it. You may be better off buying ETF’s like iShares SLV Silver Trust ETF. You can trade it easily online and can hold it for the long term and take advantage of lower taxes should the price of silver keep increasing.

So that begs the question of Blog Silvers readers. Are you still investing in silver?

Silver and gold rose today as reports of a weakening dollar and worldwide inflation pushed investors into buying precious metals. Silver, which has been on an upward roller coaster since the beginning of the year, is creeping back up to highs seen last month as the worldwide markets continue to show high volatility.

Silver prices are topping $18 an ounce currently and gold is shooting past $940. The EU reported that it’s nations saw inflation of 3.6% in month of March making the 15-nation currrency rise to $1.5978 against the dollar. An all-time high!

The dollar also dropped against both the British pound and the Japanese yen. The European Central Bank, in charge of the Euro, unlike the US Fed, will work to curb inflation by not lowering interests rates below 4%.