Investing in Silver – Everything you Need to Know
Securities.io is committed to rigorous editorial standards. We may receive compensation when you click on links to products we review. Please view our affiliate disclosure. Trading involves risk which may result in the loss of capital.
Table Of Contents
Why Invest in Silver?
With the global economy in an unpredictable spot, it is no surprise that trading in precious metals has soared. Gold is on the cusp of all-time highs as traders flock to a more traditional safe haven as is common in times of economic uncertainty.
Not only gold though is seeing an uptick in demand. Silver trading, often seen as the second most popular precious metal to trade, has jumped to its own multi-year highs. Trading at near $28, silver has advanced almost 30% this year alone. With that in mind then, you may be wondering how to get in on the action? We have you covered with a full lowdown on how to get started trading silver, alongside everything you need to know about the world famous precious metal.
What Influences Silver Prices?
Unlike gold which remains largely unaffected by the usual movements of supply and demand, silver prices can fluctuate based on a number of factors. In this sense silver plays something of a dual role. Yes, it has similar characteristics in terms of being seen as a store of value, and a safe-haven investment to a certain extent, though its value can also be heavily influenced by the demand in the sectors which it used.
Currency Strength: Similar to the relationship you will see between major currency (USD), and gold, silver also has an inverse relationship with the Dollar. This means that when the Dollar is weak, silver prices tend to be higher. The opposite is also true that in times of a strong US Dollar, the price of silver tends to go down.
Fiscal policy: Here we can use fiscal policy as a catch all, not only for inflation and interest rates, but also for government policy on the purchase of silver bullion. All three things can do a lot to move the price of silver. It is a great hedge against rising inflation, while lower interest rates also tend to drive people to invest in silver and other commodities.
Practical Demand: The other side to silver is that it is very widely used in industry. This is particularly true in electrical appliances, medical devices, and circuitry. The demand within these sectors is also a key driver in the market prices if the precious metal.
How to Invest in Silver
Now that you know what drives the market, let’s look at a few of the easiest ways that you can get involved and make an investment in silver. Once you have set up on online broker trading account, the process of investing should be really easy.
Silver Bullion: This is certainly the most direct way that you can get involved in the silver market. The purchase of silver bullion, or actual silver bars and coins, is relatively easy and there are a number of trusted outlets from which you can purchase. You should remember though that this is the most illiquid way to invest in silver, and each purchase of physical silver will have a slight premium added as well as the storage costs you may incur.
We recommend these companies:
- Bitpanda (USA Prohibited)
- Gold Broker
- Bullion Vault
Silver Stocks: Investing in stocks related to silver is another great way to get involved in the market. This could mean invest in companies who mine silver, or anyone involved along the production process. These stock price in these companies is typically closely correlated with the price of silver. This investment could stretch as far as companies in the sectors mentioned above which use a lot of silver in their products. These companies will also be impacted by the prices of silver, and of course investing in the stock market has great liquidity if you wish to sell or trade.
ETFs & Mutual Funds: The price of silver can fluctuate as can the price of individual stocks. To that end, diversification is always a good idea. ETFs and mutual funds can provide the ideal alternative to invest in silver through a number of different stocks. This is precisely what you are doing by investing in an ETF or mutual fund. These are essentially baskets of stocks which are offered, and can be weighted toward any particular sector. In this case, you would be investing in a fund weighted in favor of silver.
While there are other ways to start investing in silver, these are some of the most common, and in the most part accessible methods through your broker.
Benefits of Silver Investments
There are several benefits to be derived from an investment in silver, particularly at the correct time. With the current economic situation pushing more and more people in to silver, it would seem that now could be the time to make that move.
Diversification of your portfolio is always a big plus. This is exactly what an investment in gold, silver, or other precious metals can offer. These can also work as a great hedge against changing conditions now or into the future.
Another positive point for silver is that, if you are interested in an investment in precious metals, silver offers one of the most accessible gateways in terms of price. At under $30 per ounce in the current market, it remains very affordable even if you have a little less capital to invest with.
With sliver, you also have the dual uses referred to above. It can be both a store of value and also an in-demand industrial resource. This in itself also adds to the appeal if you are considering a move for silver.
Overall, while it is true that silver is seen as a more volatile precious metal to invest in than gold, it is a very well-balanced choice. You have several benefits on your side, particularly if you choose to invest in silver at the present time, and you also have a commodity that you know can retain value over time.
Add to that the fact that it is easier than ever before to make an investment in silver and other commodities, and you are on the right path.
Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.