Investing in silver bullion
Folks who invest in silver often say that doing so lets them hedge against the risk that their other investments might depreciate — and against the risk of catastrophic events. Much of the appeal of commodities like silver stems from the fact that they give investors something to latch on to. Those who want to invest in silver have a few options. You can buy the physical commodity and figure out a way to store silver bullion securely. You can also invest in a silver-backed Exchange Traded Fund ETF that trades on the market and offers a higher degree of liquidity.
Investing in Silver
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.
Unlock the 4 Secrets to A Wealthy Life. What are the pros and cons of investing in silver bullion? Read on to learn why now may be the time for investors to enter the market.
Market News. Invest in Gold, Silver, More. Your IRA Portfolio.
Why Zacks? Learn to Be a Better Investor.
The silver market has been volatile over the past 20 years, with a huge bull market that ran throughout most of the s and early s giving way to a big pullback in recent years. Now, however, some see silver as an investment that could take advantage of industrial demand, especially if new supply gets constrained by lower prices. Yet many don't know how to buy silver or why investing in silver can be lucrative.
A Beginner's Guide to Precious Metals
In uncertain financial times, people have historically turned to gold and silver as a hedge against inflation and investment losses. But silver attracts heavy investor demand for a number of other reasons. Silver has the same attributes as other precious metals but possesses unique strengths and weaknesses. This can motivate a different type of investor behavior. New money is cash or securities from a non-Chase or non-J.
Member Sign In
So why invest in silver? The reasons are manifold. Silver is a precious metal, and like gold, it has an intrinsic value. Silver is widely perceived to be both a commodity and a form of money, and it has been used as a medium of exchange for thousands of years due to its inherent value. Money in the U. Constitution is defined in terms of silver. Article I, Section 10 of the U. The Coinage Act of specifically defined the U. Silver also has number of unique characteristics, such as malleability, thermal and electric conductivity, and a resistance to corrosion, which allow it to be used in many important industrial, telecommunications, medical and energy technologies.
Silver may be used as an investment like other precious metals.
The silver investment market offers a variety of silver bullion products. This overview provides brief discussions of the advantages and disadvantages of buying the most popular silver bullion and silver coin investments. For detailed discussions of specific silver bullion products and silver coins, follow the links.
How to Invest in Silver the Right Way
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.
Silver as an investment
Physical silver is a tangible asset with no counter-party risk or default risk. Silver has an intrinsic value due to its metallic characteristics making it suitable for industrial, medical and ornamental use and due to its finite supply. There are also compelling fundamental reasons to buy silver. Chart: years history of the silver price. Silver is also the best conductor of electricity. The silver price is therefore often more volatile than the gold price. The global silver market has been in a deficit position since Of the estimated 1. These two markets dominate price discovery for silver. However, both of these markets are based on vast paper trading with little physical silver supporting the gigantic trading volumes.
