Silver and gold are two of the most common precious metals that people invest in. Gold is the traditional store of value, with banks and governments worldwide using it as a safe haven reserve of value. In comparison, silver provides an alternative to gold that is only slightly more volatile.
In addition, the silver market tends to move with its industrial and commercial uses more than the gold market does. This is because silver is often used to make electrical equipment, solar panels, and some medical supplies, among other things.
Also, because silver is a smaller market than gold, individual forces can move the market more than gold. This volatility means silver has more opportunity for short and medium-term plays than gold.
Investing in physical silver
First, before you go out and purchase physical silver, look at the price of silver on the London Silver Fix. This price is updated twice daily and can be considered a reliable indicator of the current market price of silver.
Second, find some reputable dealers to buy from. Their silver prices will be higher than the price of silver because of their mark-up, so keep that in mind. It is much better to go with a slightly expensive reputable dealer than a cheaper dealer with no reputation due to the potential to be scammed.
You can invest in physical silver by purchasing either bullions or bars. Bullions have a higher cost due to the cost of stamping the designs onto them, whereas bars are simply poured into a mold and can be considered relatively close to the price of pure silver.
Investing in silver online
You can also buy silver online through an ETF (Exchange-Traded Fund) or by purchasing silver mining stocks.
A silver ETF is a fund traded on the stock market that stores silver for its investors. Purchasing into an ETF means buying shares of a fund that will hold silver for you, keeping it stored and secured for an annual fee tied into the price. So while you won’t directly own the silver, the ETF price will rise and fall in direct correlation with the price of silver. The biggest ETF of this kind is the iShares Silver Trust (SLV), with nearly $15 billion of silver assets under management.
Another option is to purchase silver mining stocks. These are more volatile than the price of silver itself, as different mining companies can achieve more or less success with their operations for various reasons, including efficiency, management, and luck with finding silver.
However, compared to other precious metals, it can be difficult to invest directly into silver mining, as about 70% of silver production comes from base metal mining operations.
On average, silver mining stocks will have greater annual returns than a silver ETF, but they come at the risk of greater volatility.
Should I buy silver or gold?
Silver and gold are both highly correlated with one another. That means that when gold goes up, silver tends to do the same, and vice versa. Unfortunately, this means that having both in your portfolio doesn’t make a large difference to your overall risk.
However, there are some shorter-term plays that affect only silver. Therefore, one of the biggest reasons to invest in silver over gold is if you have a good reason to believe in the short-term gain of silver, whether that be from technical analysis or other means you see through things like supply shortages or demand spikes.
A second reason to invest in silver over gold is that it is less expensive per ounce. You can more easily purchase a large quantity of bullion or bars to distribute however you choose. This might be helpful if you were only hoping to invest in a small amount of precious metal or if you were looking to gift it, for example.
Finally, because silver is used in industry, there may be a medium or even longer-term play in silver that looks to its future uses in unknown technologies. The use of silver in solar panels and electric vehicles points to this potential, as perhaps more of it will be needed as more of these technologies are made.
