Is silver a commodity
Silver price today jumps on firm global trend. Brokers cut client positions on silver futures. All rights reserved. For reprint rights: Times Syndication Service.
Investing in Silver: Four Ways to Invest and Why
Gold and silver have been recognized as valuable metals, and have been coveted for a long time. Even today, precious metals have their place in a savvy investor's portfolio. But which precious metal is best for investment purposes? And why are they so volatile? There are many ways to buy into precious metals like gold, silver, and platinum, and a host of good reasons why you should give in to the treasure hunt.
So if you're just getting started out in precious metals, read on to learn more about how they work and how you can invest in them. We'll start with the grand-daddy of them all: gold. Gold is unique for its durability it doesn't rust or corrode , malleability, and its ability to conduct both heat and electricity.
It has some industrial applications in dentistry and electronics, but we know it principally as a base for jewelry and as a form of currency. The value of gold is determined by the market 24 hours a day, seven days a week.
Gold trades predominantly as a function of sentiment—its price is less affected by the laws of supply and demand. This is because the new mine supply is vastly outweighed by the sheer size of above-ground, hoarded gold.
To put it simply, when hoarders feel like selling, the price drops. When they want to buy, a new supply is quickly absorbed and the gold prices are driven higher. Unlike gold, the price of silver swings between its perceived role as a store of value and its role as an industrial metal.
For this reason, price fluctuations in the silver market are more volatile than gold. That equation has always fluctuated with new innovations, including:. It's unclear whether, or to what extent, these developments will affect overall non-investment demand for silver. One fact remains: Silver's price is affected by its applications and is not just used in fashion or as a store of value.
Like gold and silver, platinum is traded around the clock on global commodities markets. It tends to fetch a higher price than gold during routine periods of market and political stability simply because it's much rarer. Far less of the metal is actually pulled from the ground annually.
Investors should consider that all of these factors serve to make platinum the most volatile of the precious metals. Lesser known than the above 3 is Palladium, which has more industrial uses.
It can also be used in dentistry, medicine, chemical applications, jewelry, and groundwater treatment. The majority of the world's supply of this rare metal, which has the atomic number 46 on the periodic table of elements, comes from mines located in the United States, Russia, South Africa, and Canada.
Jewelers first incorporated palladium into jewelry in This is the first recorded instance of palladium used in coinage. Metalworkers can create thin sheets of palladium down to one-two hundred fifty thousandth of an inch. Pure palladium is malleable, but it becomes stronger and harder once someone works with the metal at room temperature.
This shiny metal is Precious metals offer unique inflationary protection—they have intrinsic value , they carry no credit risk, and they cannot be inflated. That means you can't print more of them. From an investment theory standpoint, precious metals also provide low or negative correlation to other asset classes like stocks and bonds. This means even a small percentage of precious metals in a portfolio will reduce both volatility and risk.
Every investment comes with its own set of risks. Although they may come with a certain degree of security, there is always some risk that comes with investing in precious metals. Prices for metals can drop during times of economic certainty, putting a damper for people who like to invest heavily in the precious metals market. Selling may be a challenge during times of economic volatility, as prices tend to shoot up. Finding a buyer for physical metals may be difficult.
Another risk to precious metals prices includes the issue of supply. When demand shoots up, the existing supply may begin to deplete. And that means producers will have to bring more of each metal into the market. If there is a short supply of mineable metals, that could put pressure on prices. Precious metals provide a useful and effective means of diversifying a portfolio. The trick to achieving success with them is to know your goals and risk profile before jumping in.
The volatility of precious metals can be harnessed to accumulate wealth. Left unchecked, it can also lead to ruin. World Gold Council. Federal Trade Commission. Federal Reserve Bank of St. TD Ameritrade. Geological Survey. Accessed Mar. Top ETFs. Metals Trading. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Filling Up Your Treasure Chest. Will Precious Metals Shine?
Precious Metals Risks. The Bottom Line. Key Takeaways Precious metals can be a good portfolio diversifier and hedge against inflation - but gold, perhaps the most well-known such metal, is not the only one out there for investors.
Silver, platinum, and palladium are all commodities that can be added to your precious metals portfolio, and each have their own unique risks and opportunities. In addition to owning physical metal, investors can gain access through the derivatives market, metal ETFs and mutual funds, and mining company stocks.
Several factors account for an increased desire to hoard the shiny yellow metal:. An entire lifetime's worth of savings can be made portable and stored until it needs to be traded for foodstuffs, shelter or safe passage to a less dangerous destination. Silver's once predominant role in the photography industry—silver-based photographic film—which has been eclipsed by the advent of the digital camera.
The rise of a vast middle class in the emerging market economies of the East, which created an explosive demand for electrical appliances, medical products, and other industrial items that require silver inputs.
From bearings to electrical connections, silver's properties made it a desired commodity. Silver's use in batteries, superconductor applications, and microcircuit markets. There are also other factors that determine platinum's price:. Like silver, platinum is considered an industrial metal. The greatest demand for platinum comes from automotive catalysts, which are used to reduce the harmfulness of emissions.
After this, jewelry accounts for the majority of demand. Petroleum and chemical refining catalysts and the computer industry use up the rest. Because of the auto industry's heavy reliance on the metal, platinum prices are determined in large part by auto sales and production numbers.
But in , American and Japanese car makers started turning to recycled auto catalysts or using more of platinum's reliable—and usually less expensive—sister group metal, palladium.
Let's take a look at the options available to those who want to invest in precious metals. Commodity ETFs : Exchange-traded funds exist for all three precious metals. ETFs are a convenient and liquid means of purchasing and selling gold, silver or platinum. Investing in ETFs, though, doesn't give you access to the physical commodity, so you don't have a claim on the metal in the fund.
You will not get the actual delivery of a gold bar or silver coin. Common stocks and mutual funds : Shares of precious metals miners are leveraged to price movements in the precious metals.
Unless you're aware of how mining stocks are valued, it may be wiser to stick to funds with managers with solid performance records. Futures and options : The futures and options markets offer liquidity and leverage to investors who want to make big bets on metals.
The greatest potential profits and losses can be had with derivative products. Bullion : Coins and bars are strictly for those who have a place to put them like a safety deposit box or safe.
Certainly, for those who are expecting the worst, bullion is the only option, but for investors with a time horizon, bullion is illiquid and downright bothersome to hold. That said, if you're looking for insurance in a real disaster, certificates are just paper.
Don't expect anyone to take them in exchange for anything of value. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
In , they agreed to a civil settlement with the Commodity Futures Trading Commission, paying out fines, and agreeing to a ban from trading commodities. The most important trading venues for silver are the New York Mercantile Exchange (COMEX), the Tokyo Commodity Exchange, the Chicago Board of Trade.
Gold isn't the only game in town, even though you'd never know it by watching late night TV. Investing in silver means putting your money into the production, trading or outright ownership of silver metal. For most investors this means buying quantities of bullion in coin or bar form and holding onto it. While silver is technically a commodity like any other, precious metals are somewhat different as an asset class. Unlike crude oil, corn or lumber, the value of silver isn't limited to its consumption uses.
Gold and silver have been recognized as valuable metals, and have been coveted for a long time.
Silver may be used as an investment like other precious metals. It has been regarded as a form of money and store of value for more than 4, years, although it lost its role as legal tender in developed countries when the use of the silver standard came to a final end in Some countries mint bullion and collector coins, however, such as the American Silver Eagle with nominal face values.
Silver as an investment
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Silver Futures End of Day Settlement Price
The element silver, in the periodic table symbolized with Ag for the Latin argentum and atomic number 47, is one of the more precious metals used by mankind. It is a soft, white transitional metal and has highest electrical and thermal conductivity of any metal. The metal silver is usually found as an alloy with gold and other metals, in minerals such as argentite and chlorargyte and in its pure form as native silver. The majority of silver produced originates from the refining of zinc , lead , copper or gold, where it is collected as a byproduct. The metal is slightly harder than gold, but still very malleable. Despite its excellent electrical conductivity, copper is usually used in electrical applications, because of its lower cost. Only gold has been considered a more precious metal throughout history. From archeological evidence found around the Aegean Sea and Asia Minor, silver was being separated from lead as early as BC.
Silver frequently occurs during the extraction of base metals. In its pure form the white precious metal is even rarer than gold.
After gold , silver is the most invested precious metal commodity. For centuries, silver has been used as currency, for jewelry, and as a long term investment option.
