Apr 2024

Why You Should Consider Silver Investment

By StoneX Bullion

With its historical significance, various industrial uses, and potential as a hedge against inflation, silver is an attractive asset for any investor to hold. If you’re thinking about investing in silver, or not sure if it’s a worthwhile investment, this article is for you. We’ll look at reasons why silver is such a valuable investment, and how you can start investing in silver today.

Why should I buy silver?

So, what makes buying silver a good investment? Below, we explore some key reasons why you should buy silver - and why now is the right time to do so.

Silver is a historical store of value

Like gold, silver is an asset with intrinsic value that has been held in high esteem for centuries. Over the last 20 years, the price of silver has more than quadrupled, going from $6.66 in 2004 to its current price of $29.09 per troy ounce in 2024. Its endurance over time makes silver a prized asset that delivers great value for investors.

Being an asset with intrinsic value also means that silver doesn’t come with the counterparty risk found in other investments like shares, stocks, or bonds. Its value is independent from other assets and, unlike paper currency, not anchored in blind faith.

Silver acts as a hedge against inflation

Silver is often viewed as an effective hedge against inflation. Like gold, silver has a negative correlation with other assets. When inflation erodes the value of fiat currencies, bonds, stocks, or property, hard assets like silver tend to retain their purchasing power. Historical data supports this, with silver prices often experiencing upward momentum during periods of high inflation.

For example, during the inflationary period of the late 1970s and early 1980s, the silver price skyrocketed to reach an all-time high of nearly $50 per ounce in 1980. Silver’s ability to retain its value during inflation helps investors preserve their purchasing power and provides a sense of security during uncertain economic climates.

Silver is a scarce asset in high demand

Silver’s high demand and scarcity adds to its appeal as an investment asset. While silver isn’t as rare as some other precious metals, like gold, its limited supply relative to its demand makes it an attractive investment option.

Unlike paper currencies that can be printed at will, silver’s production is finite and subject to geological and logistical constraints. Any disruption in the supply chain can exert upward pressure on silver prices, and vice versa. For example, after silver’s price crashed in 2011, mining production was reduced as mining companies looked to cut costs to retain their profits. This reduction in mining production essentially stabilized silver’s supply and added to its scarcity. On top of that, silver is also rarely recycled - unlike gold. This means that most silver used in medical devices or electronic equipment is never recycled, adding to its finite nature.

Despite its scarcity and flattened supply, global demand for silver continues to grow in various sectors like solar energy, electronics, and healthcare. Beyond its industrial uses, demand for silver is also increasing from investors, with most government mints seeing record levels of silver sales in recent years. When you invest in silver today, you’ll essentially be buying early into a potentially lucrative market.

Silver can offer larger gains than gold

Silver’s relatively small market means that its price is more likely to be influenced by cash moving in and out of the industry. In other words, silver is more volatile than gold. In bear markets, it’ll lose value more than gold but in bullish markets, its price will increase much more and faster than gold.

Here’s an example of silver offering larger gains than gold, pulled from the two biggest precious metals bull markets in modern time:

1970-1980: Silver’s price jumped by 3,800% compared to gold’s 2,500% increase.
2008-2011: Silver’s price increased by 448% compared to gold’s 166% increase.

With this historical performance in mind, it can be argued that investors can earn bigger returns by investing the same amount of money in silver than in gold.

See: Gold vs Silver: Which is a Better Investment Right Now?

Silver is currently undervalued compared to gold

The gold/silver ratio is the oldest continuously tracked exchange rate in history and can offer guidance as to which precious metal is best to buy at any given time. When high, the gold/silver ratio indicates that silver is undervalued and gold is overvalued. When low, it’s likely that gold is undervalued and silver is overvalued. Basically, you want to buy silver when the ratio is high and sell when the ratio is low.

At the time of writing in April 2024, the gold/silver ratio stands at 83. In the 20th century, the gold/silver ratio averaged at 47 and since 1968 the average has been 56. With these figures in mind, the ratio is currently high - indicating an ideal time to buy silver.

At the peak of 2011’s bull market, the gold/silver ratio dropped to nearly 30. The last bull market before that, in 1980, the gold/silver ratio was as low as 14. This just shows how much can be gained by buying silver at a time when it's undervalued.

Silver is relatively affordable

Compared to other precious metals, silver offers a more affordable entry point into the world of precious metals investing. While gold’s price sits at around $2,400.57 per troy ounce today, silver’s price is only $28.53 per troy ounce. At this rate, you could buy around 85 ounces of silver for the price of one ounce of gold. This makes silver much more accessible for investors, and buying small quantities over time provides the added benefit of dollar cost averaging.

When silver prices are roughly 1/65th of gold prices, and silver offers the same benefits against inflation, and is a hard asset with intrinsic value just like gold - well, that makes it quite the attractive investment.

Silver’s industrial uses are increasing

Many sectors, such as technology and medicine, rely on the use of silver for its antimicrobial properties, high malleability, corrosion-resistance, thermal and electrical conductivity. Silver is used to manufacture medical equipment, mobile phones, solar panels, flat-screen TVs, and more.

NASA astronauts used to drink water purified by ionized silver instead of chlorine and ceramic filters coated with colloidal silver are making drinking water accessible in developing countries. Silver’s high thermal and electrical conductivity also makes it an essential component in solar panels, helping convert the sun’s rays into photovoltaic energy. In April 2022, the Silver Institute estimated that photovoltaics in solar panels account for nearly a quarter of the world’s silver industrial demand. Silver is also used in the manufacturing of battery electric vehicles.

With these industries actively growing, and expected to continue growing, silver demand will only increase and drive up its price - making it a smart investment due to its scarcity and finite nature.

How to invest in silver

Now you know what makes silver such an appealing investment, let’s look at the different ways you can invest in silver, including silver coins, silver bars, silver jewelry or objects, and silver ETFs.

Silver coins

Investing in silver coins offers many benefits, including:

Tangible ownership: When you buy silver coins, you’re owning the actual metal itself. This offers a sense of security and control over your investment. Unlike silver ETFs (see below), you can actually access and hold the coin with no counterparty risk.
Numismatic value: Silver coins carry numismatic value which allows them to appreciate beyond the value of the metal itself. This is based on factors like rarity, historical significance, or collectible value.
Various denominations: Silver coins come in various denominations that allow investors entry into the silver market at various price points. For example, you can buy a 1/10 oz Britannia Charles III Silver Coin or a 1/4 oz Noah's Ark Silver Coin if you want to start small. Or if you’d like a larger investment, bigger coins are available such as the 1 kg Silver Koala Coin or 1 Kilo Britannia Charles III.
Highly liquid: Silver coins are highly liquid and easily tradeable, with established markets worldwide. Because they come in smaller denominations, it can be easy to sell smaller amounts when needed, even during periods of market volatility.
More fun: We’ll throw it out there - investing in silver coins can be more fun than investing in bars or ETFs. You can choose from various popular coins and designs, including the Silver Maple Leaf, Silver Krugerrand, and Silver Vienna Philharmonic. You’ll not only be able to build a valuable investment portfolio but also enjoy the process of collecting different coins and appreciating their beauty and craftsmanship.

Continue reading: What are the Best Silver Coins to Buy?

Silver bars

There are many advantages to investing in silver bars:

Tangible ownership: Like coins, silver bars are another way for investors to enjoy tangible ownership of the metal. This means you physically own the silver and can hold and access it without relying on a third party.
Lower premium: Silver bars can be more cost-effective when purchasing large amounts of silver due to their lower premium over the spot price. This means investors can maximize their purchasing power and achieve economies of scale in their investments.
High purity: Silver bars tend to be made from the highest purity silver, usually ranging between 999 and 9999 pure silver. This means you’ll get to enjoy the full intrinsic value of the metal without any alloys.
Easy to store & transport: Because they are compact and stackable, silver bars can also be easier to store and transport, particularly when investing in large amounts.
Transparent pricing: Finally, buying silver bars can be more simple and straightforward as pricing is based on the current spot price of silver without taking into account any additional numismatic value.

Silver jewelry, cutlery, or objects

Buying silver jewelry, cutlery, or objects also offers various benefits to investing in silver. These include:

Tangible ownership: Like silver coins and bars, buying silver decorative objects offers tangible ownership of the metal combined with the added bonus of aesthetics in the form of wearable accessories, household items, or decorative pieces.
Added sentimental value & beauty: Silver jewelry can be a sentimental way to enjoy wearing your silver investments and then pass them down through generations. Silver cutlery and decorative objects serve as ornamental pieces that can enhance the look of your living spaces while also preserving the value of the silver content.
Extra value: In some cases, silver items will carry added value beyond their metal content, such as historical or cultural significance or artistic design, increasing their collectible and investment value.

That said, the premium over the spot price of silver is higher for jewelry and decorative objects compared to buying silver bullion bars and coins. If you’d like your silver investments to be admired on a day-to-day basis, and don’t mind paying extra for the craftsmanship, then investing in silver jewelry, cutlery, or decorative objects may be a good option.

Silver exchange-traded funds (ETFs)

Investing in silver exchange-traded funds (ETFs) is another way to invest in silver. Benefits of ETFs include:

Instant diversification: ETFs allow investors to hold a basket of silver-related assets, like physical bullion, silver futures contracts, or shares of silver mining companies. This can help spread risk across multiple assets within the silver sector.
No hassle: This is a benefit to some and a drawback to many. With ETFs, you don’t have to worry about holding the physical metal itself. This means you don’t need to consider things like storage, insurance, and security associated with owning physical silver. That said, you don’t get to enjoy the tangible benefit of owning the physical metal and knowing it is entirely yours with no counterparty risk.
Flexibility & liquidity: Since ETFs trade on major stock exchanges, investors can buy and sell shares throughout the trading day at market prices, making silver ETFs highly flexible and liquid.

Start investing in silver today

Don’t need more convincing? You’re in the right place. At StoneX Bullion we stock a wide range of investment-grade silver bars, coins, and silver grain from the most prestigious and well-known mints in the world. Whether you’re looking to invest in the tangible nature of bars or the numismatic value of coins, you can be sure to make the most of your money with StoneX Bullion.