How to best invest in silver is a thought on many investors’ minds.
However, what goes up must come down, and the silver market is prone to deep dives. This has much to do with the silver’s dual role as both a precious and industrial metal.
The most direct avenue to investing in physical silver is by purchasing bullion products such as silver bars, silver coins and silver rounds. Physical silver can be bought via mints and bullion exchanges for immediate delivery.
As a tangible asset, silver bullion has inherent and real value, although as with other commodities it is also vulnerable to market fluctuations. Like gold, silver has been used as legal tender for centuries.
For those investors interested in holding silver bars, a dedicated storage vault in a secure storage facility is a necessity. However, it’s important to understand that there are associated costs with secure storage. Another expense associated with investing in physical silver is the premium charged on top of the silver spot price to cover minting costs.
Silver futures are traded on a number of global exchanges, such as CME Group’s COMEX exchange, the Dubai Gold & Commodities Exchange (DGCX), and the Tokyo Commodity Exchange (TOCOM).
The silver futures market allows participants to enter into futures contracts for the delivery of the white metal in the future at an agreed-upon price. In such contracts, two positions can be taken: a long position to accept delivery of the metal or a short position to provide delivery of the metal.
However, the volatility inherent in the silver sector can be amplified in the futures marketplace. This makes it a realm for more experienced investors with a higher tolerance for risk.
Investors can purchase shares in silver mining stocks on many of the world’s premiere stock exchanges. Buying a share essentially means buying a stake in the company, with financial returns or losses tied to its performance.
Canada’s Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) feature the most mining stocks of any of the world’s stock exchanges. The New York Stock Exchange (NYSE) and the Australian Stock Exchange (ASX) are also excellent platforms for mining investment.
It’s worth noting that investing in a junior stock can be risky. Since these companies can fail due to the risks associated with exploration and development, investors stand a greater chance of taking on a loss when getting exposure to silver this way.
Watch the interview above for Hansen’s thoughts on how to conduct due diligence for gold and silver stocks.
If investors don’t want to take the risk of investing in individual stocks, they can also opt to invest in silver through an exchange-traded fund (ETF), which trades on an exchange like a regular stock.
As a precious metal, silver can offer wealth protection in times of turmoil. When political and economic uncertainty are rife, legal tender generally takes a backseat to assets like gold and silver.
Recent concerns include the threat of a looming recession, social unrest, Russia’s entrenched war in Ukraine and the destabilization in the Middle East centered around the Israel-Hamas war. Investors will be closely watching these trends and any other geopolitical events that bring higher levels of uncertainty.
Like gold, the silver price often increases when geopolitical issues are at play. Yet, silver has the potential to offer higher returns than gold — the gold/silver ratio, which has moved between 1:75 and 1:95 since June 2022, is a metric that compares the metals’ prices at a given moment. Often, when gold moves up, silver will play catch up, and it stands to see a much bigger percentage gain when its price goes up.
With the highest electrical conductivity of all the metals, silver’s industrial side also offers opportunities for generating wealth. The major drivers of industrial demand for silver comes from sectors important to energy transition, specifically the production of photovoltaics and electric vehicles.
This is an updated version of an article first published by the Investing News Network in 2019.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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