Recent geopolitical tensions and apprehensions have seen a rise in bullion investments across the board. While gold has seen a sharp uptick in value and demand, the same has not been observed with regard to silver. However, despite prevalent trends investing in the white metal could be a good way to build up your wealth and hedge against market uncertainty.
Silver vs Gold
Though both are precious metals, silver has traditionally received the stepmotherly treatment from investors. One reason is that silver is usually seen as purely an industrial metal due to its myriad applications. As a consequence, investors have gravitated toward gold in times of economic turmoil, leading to a growing imbalance between the two metals on the commodity bourses.
This is despite the gold-silver ratio being favourable towards the white metal. At present this stands at close to 90, indicating a gross undervaluing of the metal. The biggest implication of such a skewed ratio means silver is cheaper than its yellow counterpart, meaning you can buy more of this metal compared to gold.
However, silver is fast catching up to gold when it comes to desirability, especially given its increasing use in new energy alternatives such as solar power. Its rampant use in industry and burgeoning applications in the technology sector make it an attractive investment option for those looking to diversify their wealth portfolios.
Short vs Long-Term
One of the biggest disadvantages of silver as an investment option is storage and resale. While it can be bought as coins, buying bars are usually cheaper. However, stacking large quantities of silver is impractical, resulting it in being overlooked as an investment option by all but the most serious of investors.
Looking at silver in the short-term might be counter-intuitive, as the metal’s volatility is seen as a factor against it.
However, the metal is on track to rise during the current year due to a number of factors, which have been listed below:
Lower production volumes: With the price of silver remaining low, production and mining are also set to be on the decline in an effort to boost prices. Buying into the metal in advance would help offset potentially higher costs at a later date, especially if you’re looking to invest in coins or smaller quantities.
Growing economic uncertainty: With markets in turmoil, investors traditionally move towards safe-haven assets like bullion as a hedge. Silver has seen an uptake in demand given the steep rise in gold prices since the start of 2019, indicating its rising favourability as a counter to the more expensive yellow metal.
Before choosing to invest in silver in any of its available forms, it is advisable to do some due diligence so you aren’t saddled with a small fortune in immovable bullion.
Physical form availability: Unlike gold, silver can only be bought in its original form, i.e., bars or coins. For investors looking to ride the populist silver wave through paper investments such as ETFs (Exchange traded Funds), a smaller volume of the physical metal would be a better alternative.
Trusted sources: Silver is sold by jewellers, banks and traded on the commodity exchange, providing you as an investor with a range of purchase options. While buying off the commodity exchange could be a bit cumbersome, it is advisable to buy bullion from licenced and verified sources and insist on purity testing. Most jewellers provide authentication certificates or sell hallmarked silver, though this may come at a premium (compared to scrap silver, which is melted from ornaments).
Buyback: Owing silver comes with the task of ensuring it has resale or buyback value. If you’re buying off the commodity exchange, you can always sell your coins or bars back on the market with relative ease. If you’re buying off jewellers though, it is prudent to ask if they will buy it back at a later date. Knowing the buyback percentage and profit margin is also important, since most will shave off 1-2% of the market rate.
With silver looking up as an investment, exploring your options at present is a good idea, after researching available opportunities and possible risks.