Dear Mr. Rawles,
I read on The Claire Files that you think silver will be going to $40 an ounce. My spouse and I can’t agree when we should sell our 8,000 ounces of silver. I think we should hang on to it all until it gets to $20 and ounce then sell. But my spouse thinks we should start selling now. What do you think? By the way, we purchased most of it at $5 an ounce in the form of 100 ounce bars. We also have about a bag and a half of “junk” silver dimes.- F.L.
JWR Replies: First, you need to distinguish between a core holding (for barter), and what you bought for investment purposes. My advice is to sell your family core holding–perhaps 800 to 1,500 ounces–only as a last resort. As for the rest, be dispassionate about selling it. Don’t try to time the top of the market. Since spot silver is currently at around $9.80/oz., (and it was recently $10.18) so it is has essentially doubled since you bought it. At present, you could sell half of it and recoup your original investment, and still be sitting on 4,000 ounces at essentially no cost. (BTW, don’t forget to consider both taxes and the “opportunity cost” of missing out on the interest that you would have otherwise earned in a dollar-denominated investment during he same years that you held the silver.)
There is an old saying on Wall Street: “Bulls make money, and bears make money, but pigs get slaughtered.” If you wait until silver hits some magic/arbitrary number, you might miss the peak, and hence get slaughtered when the metals go back into a bear market cycle. That is what happened to a lot of folks, back around 1981. When silver ran up past $35 an ounce, they decided to hold on “a little while longer.” Oink oink. Big mistake. They should have gradually averaged their way out, during the second half of the the run-up.
Based on my assumption that you have 80 bars (100 ounce bars) that had a purchase cost of $500 each, here is my specific advice on when to sell:
Core holding: (All of your circulated “junk” coin bags.) Hold and don’t sell unless you are in desperate need.
Silver exceeds $10 per ounce: Sell 8 bars.($8,000)
Silver exceeds $12 per ounce: Sell another 8 bars. ($9,600)
Silver exceeds $15 per ounce: Sell another 8 bars. ($12,000)
Silver exceeds $20 per ounce (4x cost): Sell another 8 bars. ($16,000.) This gets you past your “break even” point on your original investment. Everything past this will be gravy.
Silver exceeds $25 per ounce: Sell another 16 bars. ($40,000)
Silver exceeds $30 per ounce: Sell another 16 bars. ($48,000)
Silver exceeds $40 per ounce (8x cost): Sell your last 16 bars.($64,000)
Even if silver crashes after passing $20 per ounce, you will still have recouped your original investment and have 48 bars (4,800 ounces) of silver remaining. But if silver runs up past $40 per ounce, you will have $197,600 in cash. Not bad for a $40,000 investment!.