Silver is a popular investment asset. When everything else fails, silver could be one of the best investment alternatives, just like gold. Read on to find out how to invest in silver and other considerations before making a decision.
There are several ways to invest in silver:
- Shares of silver-producing companies
- Silver funds, including ETFs
- Physical silver bars, coins, or bullion
As we can see, there are different investment possibilities depending on our risk profile. This makes silver a product suitable for both conservative and risk-embracing investors. Below, we will introduce you to the different ways to invest in silver.
What is silver?
Silver is the best heat and electricity conductor among all metals. In nature, it is found in ores (such as argentite), but it’s most commonly a by-product of mining for lead-zinc, copper, gold and copper-nickel ores.
Silver is a very ductile and malleable metal, just a bit harder than gold. It has the highest electrical conductivity among all metals, even higher than that of copper which, however, has greater diffusion due to the lower cost.
Is it worth investing in silver?
“Born with a silver spoon in one’s mouth” is a phrase that indicates a person rich from birth. Many stories and tales include this important precious metal, discovered more than 5,000 years ago.
Investing in silver is advantageous for several reasons. It has many use cases that drive its demand up: it’s used to make components for electric vehicles, batteries, and many more eco-friendly products, including solar panels.
Silver is an important element in the healthcare industry, too. Nowadays, it’s a key component when it comes to sustainability and efficiency.
Hence, its applications that drive demand make it advantageous for investors.
In the past year, silver prices fluctuated from a high of $26 per ounce to below $18.
The reasons for the increases are to some extent related to the factors that drove gold prices up. Policies of central banks, the value of the dollar, the yield of the US ten-year bond, geopolitics, and international context all play a key role when discussing the past and future performance of silver.
Experts anticipate a strong year for silver demand. This is due to industrial fabrication and the high demand for silver bars and coins. However, some voices are more conservative and expect selling pressure for silver in H2 2023.
How to invest in silver?
There are multiple ways to consider if you want to invest in silver. Let’s find out more about the most popular ones.
Invest in silver stocks
Many people prefer to gain exposure directly by investing in silver stocks. In other words, you pick companies that deal with silver, such as:
- Mining companies
- Royalty and streaming companies
Investing in silver mining companies
Investing in silver extraction means participating in the operation and management of a mine with silver reserves. In this case, it is worth noting that there are very few mining companies whose only activity is silver, although it is possible to look for other types of companies, such as gold miners, who also extract silver.
Of all the silver on the market, only 30% of the supply comes from silver mining companies, which means it is difficult to find such companies. Also, you should know that the risk is high, since silver extraction is an uncertain and capital-intensive activity, although high returns are possible.
Investing in silver via royalty and streaming companies
The alternative to mining companies are royalty companies, that is, those that finance the extraction of silver from mines in exchange for a percentage of the profits.
Although in these cases the profitability is lower, since they do not capture the majority of the profits from silver extraction, the risk is also lower, since before financing a mine, the royalty company studies the feasibility of the project.
Examples of silver stocks
Here are some of the main silver stocks you may want to consider:
Pan American Silver Corp. (NASDAQ: PAAS)
Founded in 1979 and based in Vancouver, it is one of the largest silver producers in the world, extracting about 700 tons of silver, 4 tons of gold, 1.5 tons of zinc, 21,000 tons of lead and 13,000 tons of copper each year.
MAG Silver Corp. (NYSE: MAG)
Founded in 2003 and based in Vancouver, Canada, MAG is an explorer and developer of silver, gold, lead, and zinc.
The company was founded on August 15, 2007, and is based in Mexico. Fresnillo PLC is a company engaged in the production of gold and silver.
Newmont Corporation is an American gold and silver mining company based in Greenwood Village, Colorado.
Invest in silver ETFs
Exchange-traded funds (ETFs) seek to replicate the performance of silver-related assets, such as stocks or even physical silver.
As mentioned at the beginning, silver tends to perform well in times of high inflation, which increases the likelihood that silver ETFs will perform well as an investment when the consumer price index rises.
In fact, many consider ETFs a better option for investing in silver due to the low fees, compared to the costs and risks associated with holding the metal physically.
|WisdomTree Physical Silver||PHAG||JE00B1VS3333|
|Xtrackers Physical Silver ETC (EUR)||XAD6||DE000A1E0HS6|
|Xtrackers Physical Silver EUR Hedged ETC||XAD2||DE000A1EK0J7|
Where to buy silver ETFs
DEGIRO is an online trading platform based in the Netherlands that provides brokerage services for trading a wide range of financial instruments, including stocks, bonds, ETFs, options, futures, and other products. Founded in 2008, DEGIRO has become popular for its competitive fees and user-friendly trading interface.
One of the distinguishing features of DEGIRO is its low-cost pricing structure, with very competitive trading fees compared to other traditional brokers. In the case of ETFs, it also offers a core selection of over 200 ETFs that can be traded without trading fees. The broker also provides access to a wide range of international markets, allowing investors to trade securities in numerous countries around the world.
Check out our in-depth DEGIRO review for more information.
Invest in silver mutual funds
Mutual funds are another alternative for those who wish to invest in silver. The main difference between these and ETFs is the fact that ETFs are traded on the stock exchange, while mutual funds can only be bought or sold at the end of the trading day.
Mutual funds tend to be highly diversified, which means it is very difficult to find one that only invests in silver, as they usually mix silver with other products.
Invest in silver via derivatives
Investing in silver via derivatives is an interesting option because it offers traders great flexibility.
On the one hand, you can use derivative contracts for hedging purposes, an excellent way to manage risk and at the same time speculate on price movements.
To learn more:
- Futures trading
- CFD trading
- Options trading
- Best brokers to trade CFDs
- Best brokers for options
- Best brokers for beginners
- Best forex brokers
- Best futures brokers
CFD trading with EasyMarkets
EasyMarkets is an online broker specialising in forex and CFD trading. It was founded in 2001, with the premise of “revolutionising” trading. With EasyMarkets, you can trade CFDs on commodities and metals, as well as stock indices, and stocks.
You can open a real or demo account (to try strategies with virtual money) and you can connect to different platforms: EasyMarkets proprietary platform, TradingView, MT4, and MT5.
One of the distinguishing features of EasyMarkets is its promise of “no surprises”, offering traders the certainty of a highly transparent cost structure. This allows investors to manage their trading costs in a more predictable way.
EasyMarkets also offers a range of advanced trading tools, including guaranteed orders, guaranteed stop losses, and more.
In addition, EasyMarkets offers a unique feature called “dealCancellation”, which allows traders to cancel a trade if the market moves against them within a certain period of time, offering some protection against losses.
Invest in physical silver: bars or coins
As previously mentioned, one of the options to invest in silver is to buy it directly, that is, to buy physical silver bars or coins.
However, this option has become less popular over time, as it is no longer as profitable as it once was. The reason is mainly due to the increase in the costs of storing physical silver, but also to the increase in transaction costs.
Invest in silver coins
Indirect investment methods, such as ETFs, stocks, index funds, etc., have become more popular. But despite this, there are still investors who choose to buy physical silver, for two reasons.
Many believe that physical silver is safer, as it is a tangible asset, compared to investing in the stock market, for example, which relies on intermediaries that can fail.
There are still countries where options to invest in silver indirectly are limited, while the physical option offers more possibilities. It is also the most well-known method, which inspires confidence in investors.
Investing in silver bars
If you are interested in buying silver in physical form for security reasons, you can do so in several ways.
- Silver Specialty Companies: The most common is to turn to this type of company, which will offer you the metal in the form of certified silver bars or silver coins. This product has an authenticity and purity certificate that gives security to your investment, but remember that you will have to store it yourself.
- Purchase and Storage Service: On the other hand, there are platforms like Bitpanda that offer a physical silver purchase service and take care of the storage. The disadvantage is that you will not see your bars or coins, but they will provide you with a document that guarantees that you are the owner.
- Buy jewellery or silver coins: In addition to this, there is the possibility of buying jewellery or silver coins directly, which can be stored more easily, although when you want to sell them, it can be more difficult to find a buyer.
Why invest in silver?
Here are some of the main reasons why many decide to invest in silver.
Silver as a safe haven
Safe havens, of which you have probably heard, are investments that allow us to preserve our capital, that is, even if they do generate high returns, they are ideal for protecting against inflation eroding wealth.
The reason why they behave in this way is that they are products with a limited supply, which makes it difficult for the supply to exceed the demand and depreciate. This is exactly what happens with metals like gold and silver.
Historically, both have always behaved as safe havens in periods of inflation. This is due to their properties, of which the five most important are the following: scarcity, durability, divisibility, homogeneity and difficulty of counterfeiting.
Silver is not only a precious metal but also a raw material. Silver is a precious metal necessary for the production of:
- Water filters
- Medical equipment (because it is antibacterial) and many other products
In fact, many do not know that more than half of its demand comes from the industrial sector.
In addition, silver use cases in the renewable photovoltaic sector stand out, with demand skyrocketing from 5.6% to over 12%.
Silver is a tangible asset that backs investments. For instance, some funds that invest in silver hold the asset physically. Also, the supply remains somewhat steady compared, for instance, to fiat currencies, whose increasing supply leads to depreciation.
Most of the major investment assets are highly correlated with each other and linked to the macroeconomic landscape and its performance, which means they tend to move in the same direction.
In other words, most assets such as stocks, real estate, or commodities tend to move up and down depending on economic conditions and investor sentiment.
The fluctuation of the silver price, on the other hand, can be somewhat decoupled from the economy. For example, if industrial demand decreases due to a financial crisis, demand for silver as a store of value could increase and vice versa.
Silver is cheaper than gold
Silver is a more affordable alternative to gold to diversify your investment and protect it against inflation and recession. This alone could be a great incentive, especially if you start out on a small budget.
Risks of investing in silver
Although all these advantages may seem attractive, we must never forget that any investment carries risks and silver, of course, is no exception.
The main risk is that the price of silver may fall, as the economic factors that influence it are constantly changing. For example, the global demand for silver could decrease, which will lead to a fall in its price as well.
On the other hand, if inflation were to rise quickly, investors would start buying safe-haven assets like silver, increasing its price. Alternatively, if the economy goes well, investors may liquidate their silver holdings and opt for high-growth, riskier assets, such as stocks, leading to a fall in silver prices.
However, all these risks can be countered with a simple strategy: diversification. If our portfolio is well diversified, losses from silver can be offset by increases in other investment products.
Investing in gold vs silver
Although there is no correct or wrong choice when it comes to investing in gold or silver, here are some aspects you may want to consider:
- First of all, silver is cheaper than gold, due to its greater availability.
- At the same time, like gold, silver also serves as a store of value.
- It must also be taken into account that silver is much more volatile than gold and this can be an element not to be overlooked.
- Silver plays a key role in many industries.
- Silver, from the pandemic lows to the post-quarantine highs, has recorded a rally of over 100%, while gold has remained around 30%. Since then, however, silver has more or less remained stable.
In short, investing in silver is worth considering. There are many benefits to keep in mind, such as diversification and demand, which is poised to increase its price.
The Gold/Silver ratio paints a clearer picture of the relationship between the two precious metals. The ratio indicates the relative strength of the two metals. It represents, in simple words, how many ounces of silver are needed to buy an ounce of gold. When the ratio increases, it means that the yellow metal becomes more expensive compared to silver.
Investing in silver: pros and cons
- Positive correlation with gold
- Safe haven
- Cheaper than gold
- Provides protection in times of uncertainty
- Industrial demand
- Very volatile
Alternatives to investing in silver
- Investing in commodities
- Investing in metals
- Investing in oil
- Investing in precious metals
- Investing in water
Summary: investing in silver
Investing in silver offers a pathway to both stability and growth in a dynamic market. This precious metal, with its versatile industrial applications and growing importance in the renewable energy sector, presents an array of opportunities for investors seeking to diversify their portfolios.
Why should I consider investing in silver?
Investing in silver offers a unique blend of attributes. Beyond being a precious metal with intrinsic value, silver also holds significance in various industries, including electronics and renewable energy. Its potential to act as a hedge against inflation and economic uncertainty further enhances its appeal as an investment option.
How can I invest in silver?
There are several ways to invest in silver. You can purchase physical silver in the form of coins, bars, or bullion. Alternatively, you can invest in silver-focused exchange-traded funds (ETFs) or engage in silver futures trading. Each method has its own benefits and considerations.
What factors influence the price of silver?
Silver prices are influenced by a range of factors. Supply and demand dynamics, economic conditions, geopolitical events, and shifts in industrial usage all play a role. Additionally, movements in the broader financial markets and the value of the U.S. dollar can impact silver prices.