Why Silver Is a Smart Investment: 5 Key Reasons

Silver at a Crossroads: Why Demand Is Rising

Precious metals have been the refuge to which capital flocks in troubled times since the dawn of civilization. In large part, this is because they represent a form of wealth that is independent from the monetary or financial system.

And for sure, Gold has clearly played this role in the past few years since the explosion of international tensions following the start of the war in Ukraine.

Tariffs and international trade with the US slowing down also contributed.

The cheaper relative of gold, silver, is also outperforming, reaching in nominal terms (not inflation-adjusted) its all-time highs from the 1980s.

As a result, gold and silver have surged since 2022, with one of the fastest multi-year advances of the modern era.

Source: GoldPrice

However, concerns about inflation, geopolitics, and monetary disorder are only part of the story about investing in silver.

Supply constraints, industrial demand, relation to gold prices, and accessibility all play a role as well.

So while not as talked about or valuable as gold, silver might have as much or maybe even more upside potential than the yellow metal.

5 Reasons to Invest in Silver

1. Store of Value & Inflation Hedge

For most of human history, silver has been considered a “monetary metal”, due to its rarity and high value, and has been more often used for coinage than gold. Like the yellow metal, silver especially holds well its value when currencies are being devalued, resulting in high inflation periods.

So, like gold and bitcoin, silver cannot just be “printed” into existence, making it a hard asset investors can trust a lot more to hold its value.

In that context, silver prices should not just be compared to previous historical nominal price spikes, or even adjusted for these previous highs for inflation.

Instead, it should be compared to the money supply, the amount of fiat currency present in the system. And whether we look at the money supply data called M1 (roughly, the cash supply) or M2 (cash + highly liquid assets), both show that since 2020, the money supply growth has been a major trigger for the current bull market in precious metals.

Source: Federal Reserve Bank of St Louis

Some of the newly printed money also finds its way into the stock market, especially the most popular segments of it, like the tech sector and popular stocks like Tesla (TSLA -3.24%) or Nvidia (NVDA -3.28%). The high prices of other asset classes, like real estate, reflect partially the past years’ money printing as well.

Another confirmation of excessive money supply is persistent inflation, despite moderate economic growth.

Source: US Inflation Calculator

As the money invested in cash, stocks, bonds, and real estate might rotate partially to precious metals, both gold and silver prices can benefit.

2. Industrial Demand (Electronics, Solar, Medicine)

If historically the main uses of silver were jewelry and currency, this is no longer true in the modern era.

Silver has, of all elements in the periodic table, the highest thermal and electrical conductivity. This makes it very useful, and sometimes absolutely required, for electrical and electronic applications.

Green Energy

Today, the major driver for the growth in silver demand for industrial uses is the production of photovoltaic panels.

While alternatives like copper exist, they are less efficient and will only be deployed if silver becomes too expensive.

Silver powder is turned into a paste, which is then loaded onto a silicon wafer.

When light strikes the silicon, electrons are set free and the silver – the world’s best conductor – carries the electricity.

Another growing electrical application is EV batteries, where silver is very useful, but also represents just a fraction of the total cost, making its substitution unlikely, even at very high prices per ounce of silver.

Battery electric vehicles use between ~25-50 grams of silver per electric vehicle.

Electrical & Electronics

Silver is also used in fuel car components (airbag deployment systems, automatic braking, infrared radars, LIDAR, etc.), for corrosion-proof soldering, and is found in countless electrical systems as well (switches, transformers, relays, capacitors, etc.).

Source: Visual Capitalist

Medical

Lastly, another application of silver stems from its disinfectant properties, as silver ions can kill bacteria, viruses, and other microbes.

So it is used in wound dressings, coatings, and medical devices to keep wounds clean and avoid the formation of deadly biofilms in hospitals.

3. Supply Constraints

Because of its dual use as both a monetary and industrial metal, the supply of silver is radically different from the supply of gold.

Most of the gold that has been mined over history is still around in the form of gold bars, coins, jewelry, and other artifacts.

In contrast, most of the silver ever produced is now lost, consumed by industrial processes, and very rarely recycled.

As the industrial demand from the trend of electrification is not going away any time soon, it makes silver potentially an even harder asset than gold, with a built-in consumption of the available resource over time. In that context, even Bitcoin, with its immutable fixed supply once all Bitcoins are mined, might not compare favorably.

An additional short-term limit on silver supply is that silver is often produced as a by-product of mining for gold, copper, zinc, lead, or other metals. So, the silver supply cannot easily respond quickly to price changes.

If industrial or monetary demand surges while mines’ output is capped, shortages can push prices higher.

Some analysts argue we are heading toward a structural supply deficit due to rising green-energy demand, making the supply deficit that started in 2023 permanent.

Source: Mining.com

Global silver inventories are certainly depleting, with almost 400 million ounces going missing since 2021, leaving inventories below the 1,200 million ounce mark.

Source: Sprott

(You can read more about silver history, supply sources, and how to invest in silver in our guide “Investing In Silver: Diving Deeper into Demand, Deficits, and Risks”)

4. Relative Value vs. Gold

For a long time, silver’s value was somewhat comparable to that of gold, with the gold-to-silver price ratio (how many ounces of silver equal one ounce of gold) averaging around 15–20.

This ratio varied depending on the region of the world and the respective abundance of each ore in that area.

Since the end of the direct monetary role of gold and silver in the global monetary system, the silver-to-gold ratio has fluctuated, with silver becoming less precious than gold over time.

Source: Aberdeen Investments

In large part, this was due to central banks still holding strong gold reserves (only a partial demonetization) but holding no silver reserves (total demonetization).

Today, this trend seems to be reverting, with, for example, the Central Bank of Russia having restarted building silver inventory since 2024.

Saudi Arabia has also started to invest in silver, through its Central Bank purchasing iShares Silver Trust (SLV -6.33%), which holds physical silver, and Global X Silver Miners ETF (SIL -4.42%), focusing on companies that mine silver.

China might also be stockpiling silver, for example, by directly acquiring unrefined silver from miners in secretive direct deals, but as for its long-suspected policy on gold accumulation, China is staying more discreet about it than other nations.

5. Accessibility & Leverage

Often dubbed the “gold of the poor”, silver has been seen all over history as a precious metal more accessible to buy for the lower and middle classes, to whom gold might be too pricey.

Gold is for the mistress; silver for the maid–

Copper for the craftsman cunning at his trade!

Rudyard Kipling

So while many people might struggle to buy even 1/10^th of an ounce of gold, a dozen silver coins is more accessible.

Historically, periods of monetary disorder also saw silver more used as an alternative currency for barter, with gold becoming too precious to fulfill this role.

Silver is also inherently a more volatile market, due to its smaller size. So any large capital influx in the sector creates stronger price fluctuations than in the gold market.

This volatility and “built-in” leverage can make silver more attractive to speculators, potentially leading to higher potential returns during bull runs in precious metals. But investors should be aware that this also means bigger losses during bear markets.

How to Invest In Silver?

Investors can gain exposure to silver through three primary methods. Each option has unique advantages and drawbacks, as shown in the table below.

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Silver Bullion

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. Investment-grade bullion typically refers to silver that’s 99.9% pure.

Collectibles and rare coins typically command a higher premium than “commoditized” forms of silver bullion, such as the Vienna Philharmonic, the American Silver Eagle, or the Canadian Maple Leaf.

Source: Bullion Vault

We recommend these companies for bullion purchases:

1. Bitpanda(USA Prohibited)
2. Gold Broker
3. Bullion Vault

Silver ETCs

Some exchange-traded commodities (ETCs) are financial instruments created to invest in silver metal and track the price of silver, without having to bother with direct custody and storage of the metal, in exchange for a low fee.

Among the largest ones are:

• iShares Silver Trust (SLV -6.33%)(total Expense Ratio of 0.50%).
• iShares Physical Silver ETC(SSLN), for European investors (total Expense Ratio of 0.20%).
• abrdn Physical Silver Shares ETF (SIVR -6.29%) (total Expense Ratio of 0.30%)

Silver Miners

Investors can buy individual mining stocks, but must understand that the smaller the mine is, or a mine not yet in production, the riskier it is.

Larger silver companies, especially with a diversified asset base across many countries, might be safer. For example, we covered the second-largest silver miner in the world, Pan American Silver (PAAS -3.48%) in our company spotlight series.

ETFs that hold many silver miners at once can be a good way to diversify a portfolio, with, for example:

• Global X Silver Miners (SIL -4.42%)
• Amplify Junior Silver Miners (SILJ -4.01%)
• iShares MSCI Global Silver Miners (SLVP -3.28%)

Royalty companies like Wheaton Precious Metals (WPM -5.47%) or Franco Nevada (FNV -3.68%) mostly deal with gold royalties, but also usually have some revenues from silver royalties as well.

Royalty companies that are focused on silver specifically are Silver Crown Royalties (SLCRF), with royalty streams from properties all located in the Americas (mostly South America), or Vizsla Royalties (VROYF), whose main royalty stream comes from Mexico.