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The State of Silver: Metal's price has widespread impact
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JESSICA EBELHAR/LAS VEGAS REVIEW-JOURNAL
Stacks of silver are seen Friday at Sahara Coins in Las Vegas. Silver hit a 30-year high in September and closed at $22.71 an ounce on Tuesday. » Buy this photo
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Mark Scott reviews pieces of silver that a customer brought in Friday at Sahara Coins. JESSICA EBELHAR/LAS VEGAS REVIEW-JOURNAL » Buy this photo
LAS VEGAS REVIEW-JOURNAL
Updated: Oct. 6, 2010 | 8:39 a.m.
Ted Binion, the eccentric son of legendary casino owner Benny Binion, was right: Silver is a good store of wealth.
Binion hid several million dollars worth of silver coins in an underground vault in Pahrump. Rick Tabish and two others were arrested while trying to steal the treasure after Binion died in 1998. Tabish and Binion's girlfriend, Sandy Murphy, later were convicted of murder and found innocent in a second murder trial, but both were convicted in the silver theft.
At the time, the stock market was soaring into the stratosphere, and precious metal fans were considered dinosaurs left over from the precious metal bust of the early 1980s.
If Binion faced any criticism about the wisdom of hoarding silver, however, he would feel vindicated today. Silver hit a 30-year high earlier in September and traded for $22.71 an ounce on Tuesday -- more than 350 percent higher than the high price in 1998.
The price of silver is important to investors, Nevada's economy and state government, all of which benefit from the precious metal.
Nevada's mining industry, which extracts silver, gold and other minerals, employed 11,600 workers last year, according to "The Economic Overview of Nevada's Minerals Industry," prepared by John Dobra, director of the Natural Resource Industry Institute.
The average employee in metal mining in Nevada earned $82,000, compared to average wages of $43,000 for all industries in Nevada.
The mining industry contributed $204 million in state and local taxes in 2009, down from $224 million in the prior year. Most of the tax revenue came from gold mining, however.
Nevada miners recovered a total of 7.2 million in ounces of silver from the state in 2009, down from 8 million ounces the prior year, according to Dobra.
Silver often is found with other minerals. In fact, most silver is recovered as a byproduct of mining for another metal ore, such as gold, zinc and lead, Dobra said.
As a result, silver prices are more volatile than gold prices, he said. Silver is "not a big revenue item," Dobra said. "They just dump it into the market."
Couer D'Alene Mines Corp., however, has disclosed that it intends to reopen the Rochester Mine near Lovelock later this year, and the mine has primarily been focused on silver.
A couple of Irish prospectors who were looking for gold found the first big deposit of silver in Nevada. They discovered the Comstock Lode at Virginia City in 1859. Dobra said the discovery is the reason Nevada is called the Silver State, and he agrees with historians who say the discovery of the Comstock Lode led to Nevada becoming a state in 1864.
Miners ultimately pulled 900 million ounces of silver from Comstock Lode.
In the 1970s and 1980s, the Hunt brothers tried unsuccessfully to corner the market, driving prices to an all-time high of more than $40 an ounce, which Dobra said was a bubble.
Gold hit its all-time peak of $852 an ounce about the same time. Adjusted for inflation, Dobra figures the previous gold peak is equivalent to $2,300 an ounce in today's dollars. With inflation adjustments, silver that sold for $40 an ounce in 1980 would go for $106 an ounce today.
Some think that gold and silver will continue climbing in price as the value of the dollar declines.
So far this year, gold prices climbed about 19 percent -- but silver jumped 30 percent.
"Silver is about a 25 percent stronger play than gold," said Mark Scott, owner of Sahara Coins.
Scott is seeing a surge in silver buyers, but he recommends that investors hold both silver and gold, not to mention other kinds of investments. He also recommends diversifying the types of silver held: silver bullion bars and rounds, as well as junk silver coins, which were minted before 1964 and have high silver content but no value as collectibles. He also favors holding collectible coins made with various metals.
The PCGS 3000 Index shows that a group of collectible coins worth $1,000 in 1970 have appreciated in value to $67,248 on Monday. The Professional Coin Grading Service posts the index on its website.
While some rare coins trade for millions of dollars, a collector could plunk down $220 for an uncirculated 1883 or 1984 Morgan Silver dollar from the long-closed Carson City mint, Scott said.
There are several investment alternatives to ownership of the metal. An investor could buy shares in an exchange-traded fund which holds silver bullion and is traded on stock exchanges. One ETF is iShares Silver Trust (symbol: SLV).
An investor also could buy shares in a silver producer, such as Couer D'Alene (CDE) or Hecla Mining Co. (HL), both of Idaho.
Contact reporter John G. Edwards at jedwards @reviewjournal.com or 702-383-0420.
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Correction: on further review, the increase is 191%. I asked my kid to help me with the math.
If the price of silver increased from 7.80 to 22.71, the increase is 291%, not 350%. Ask your kid to help you with the math.