IS SILVER A GOOD INVESTMENT?

With many people choosing gold as their main metal to invest in, is Silver a good investment? One of the terms used to describe Silver is that it is ‘the poor man’s Gold.’ This isnt a fair representation of its intrinsic value to commerce, which we will get to later on, nor does it tell us the full story.

Of the four precious metals that are the most attractive to invest in, Silver is the lowest in value. At the time of writing this piece, silver had an ounce price of just over $17, compared to gold at over $1211, platinum at $995 and palladium at $759.  What we must remember though is that it is not the monetary value that makes us money, but the value of the metal to industry and commerce, along with the return on investment. So while silver has a monetary value considerably lower than the other metals mentioned above when it comes to investing, this certainly is not the case when you look at its worth to businesses.

The industrial use of silver is higher than platinum and palladium and certainly a lot greater than that of gold. Only around 12% of all gold is used in industry, whereas that figure is around 50% for silver.
The graph below, courtesy of Hard Assets Alliance, shows us that the industry use of silver has been rapidly growing since 1960.

In fact, Hard Assets Alliance state the following concerning the industrial demand for silver:

“The solar industry has grown dramatically worldwide—and it uses a lot of silver. According to BSW-Solar Association, photovoltaic capacity will quadruple by 2020. The US Solar Energy Industries Association says, “Eventually solar will become so large that there will be consequences everywhere.”

And the Silver Institute projects that industrial demand for silver will outpace global GDP growth. The need for silver is BIG!

(source here)

HOW TO WORK OUT IF SILVER IS A GOOD INVESTMENT

One of the best ways to work out the answer to our question’is silver a good investment?’  is to compare its price at the time to that of gold. All you need to do is look at the gold-silver ratio. To do that you look at how many ounces of silver would it take to buy one ounce of gold and you have your ratio. So for example, if gold were $1,000 an ounce and silver was $12 an ounce, the ratio would be 83. Now, this ratio is an excellent indicator to help you decide when is the right time to invest in silver. When the ratio is high, this is considered by experts as the best time to buy silver.

The ratio chart below (taken from macrotrends.net) shows that at the start of January 2018 the ratio was 77.34. Although not the highest it has been, it is still above the average for the past 40 years of 55. If the ratio is greater than 70, this tells you that silver is substantially undervalued in relation to gold.

WHAT ARE THE PROS & CONS OF SILVER INVESTMENT?

THE PROS TO SILVER INVESTMENT

Diversification

– Just like investing in gold, investing in silver should be seen as a way of diversifying your portfolio. As all wise investors know, diversification is the smart move when it comes to protecting your returns as best as possible.

ROI

– Because the price of silver moves up and down more regularly than gold, it is easier to make money off it quickly. Like any investment, if you do want to make a short-term gain, you will need to regularly check the price for the optimum time for you to sell.

Low Cost

– Because of the low cost of silver compared to other precious metals,  investing in it can be easier to do as you can buy an ounce with loose change compared to gold or platinum.

Demand

– Because the industrial demand for silver is increasing (as pointed out above), along with the fact mining output is expected to fall, the value of silver naturally is going to increase.

THE CONS TO SILVER INVESTMENT

Time

– If you are looking to invest in silver and you are doing so for a quick return, then you are going to have to factor in the time you will need to spend to keep an eye on the market.

Volitility

– Due to the popularity of silver investment right now, there is the danger that it becomes volatile to a mass drop in value if investors suddenly decide to pull out and invest elsewhere.

WHAT IS BEST TO INVEST IN – BULLION OR COINS?

Investing in silver bullion/bars and coins each have their benefits and downsides, and you need to consider these so that you make the right investment choice.

Investing in bars provides you with a lower premium than coins. The greater the bar size, the lower the premium will be, therefore if you are looking for a premium in your investment, bars are the better option.

Investing in coins enables you to achieve quick yet small financial returns as they are easier to sell than bullion. However, be aware that the premium on coins is higher than on bars. This means that the return on investment when selling coins won’t be as high as you may like.

WHAT ARE THE OPTIONS FOR INVESTING IN SILVER?

Like any investment, you need to consider before you do it, why you want to invest in silver. If your reason is simply to own collectibles, without looking for short-term gains, then that is quite straightforward. You will find that there are many coin providers available for you to choose from, on the internet.

If you are looking for investment purposes, are you seeking to invest in physical silver or add it to your retirement account and create a silver IRA?

If you look in the side bar, you will see we recommend some companies for precious metals investment. Buying from them cannot be more simply.