roland watson explains the concept of silver-backed bonds:

Silver investors over the last seven years have been on a rollercoaster ride as silver has bucked like a bronco to move between various price extremes with a rapidity not often seen in other asset classes.

They may be forgiven for wondering if it is worth the effort and not just move onto a less volatile investment like gold. After all, seeing silver move rapidly from $4 to $8 and $6 to $15 and then $11 to $21 is great for profits but if you snooze you lose big time as gains can be wiped out in weeks if not days.

Apart from complex hedging actions is there not a way for more mild mannered silver investors to limit their downside risk? Is there not a form of silver investment that protects them from volatility and sleepless nights? The answer is “Yes” or rather the answer was “Yes” a long time ago and perhaps now is the time for this old form of silver investment to make a comeback.

I am talking about silver indexed bonds and they haven’t been issued since 1985. You won’t read about in any silver investment book, newsletter or article unless it was written 25 years ago. Well, that is not quite right as my newsletter addresses them in its latest issue. But I feel this is something that should not be limited to a small number of readers. I think this type of investment is ripe for a relaunch and I think a volatility sick investor community is ready for it.

What is a silver indexed bond and how does it work? Quite simply, a silver indexed bond is like a normal bond that is bought for an initial sum (the principal or capital) and interest is paid on it until a maturity date. Where it differs from a normal bond is the option which allows the bearer to convert the bond into an agreed amount of silver or the cash equivalent if certain conditions prevail.

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