How To Invest in Silver: A Complete Guide

Home » How To Invest in Silver: A Complete Guide

Silver is a unique precious metal needed in many industrial applications. It is the best electrical and thermal conductor among all metals, and investors value silver because it has similar properties to gold. In this guide, we will tell you everything you need to know about investing in silver in 2024 and answer the question of how to invest in silver wisely.

Silver, sometimes called the “poor man’s gold,” has two main functions: it is a precious metal with a monetary role and an industrial metal with numerous and increasingly widespread applications. Today, this precious metal is culturally, socially, and financially important, and its demand and increasing value make it a smart investment. It is an easy investment method as it is much more accessible and affordable than gold.

Considering its industrial value, silver could also be described as “rich man’s copper” since silver is used much more often than gold as an industrial metal. This can help silver act as a hedge against inflation in a way not seen in the gold market, as rising prices are often accompanied by economic growth and increased demand for commodities that silver is used for. It can also help investors with greater portfolio diversification.


Why Invest in Silver?

The concept of investing in silver, gold, and other precious metals has been widespread since time immemorial and is considered a safe investment. There are several reasons for this:

1. Protection Against Inflation

Inflation has been growing intensively in recent years. Just look at the prices of food in stores. No matter how much you invest, you still risk getting hit by inflation spikes. For example, an asset that would provide a return of 3% would have no meaning if the inflation rate was 4%. The value of the investment still remains at -1%, so it is important to take preventive measures and ensure that the impact of inflation is as small as possible. Precious metals, however, historically have intrinsic value, and in the past, they always spiked when inflation peaked and the economy became unstable. In the long run, it is a well-known fact that precious metals protect against inflation.


2. Portfolio Diversification

As a smart investor, it is wise to decide never to put all your eggs in one basket. Therefore, it is best to have a good mix of investment options that provide small but safe returns. And here investments in precious metals bring long-term benefits. Buying precious metals always comes in handy when things get tough during an economic downturn.


3. Silver Is a Very Undervalued Asset

In the past, one ounce of gold could buy 15 ounces of silver, but today, one ounce of gold can buy 97.4 ounces of silver (data as of March 2023). If we consider the historical trend over thousands of years, today’s silver price should be $119 per ounce (gold price divided by fifteen). Silver is thus one of the rare commodities traded at a lower price than in 1980.


4. Silver Is Used in Many Industries

Mobile phones, digital cameras, computers, and iPhones all need silver. It has also played a key role in the automotive sector for decades due to two key properties: its unique thermal and electrical conductivity (highest among all metals) and high availability. Silver is the second most sought-after commodity right after oil, and there is no substitute for it. Therefore, this metal offers good investment opportunities.


5. Cheaper Than Gold

Gold is an excellent option that most precious metal investors choose because of its high return on investment. However, over the past few decades, the price of gold has skyrocketed, making it increasingly difficult to continue investing in gold. Instead, investing in silver is a more affordable option that anyone can invest in.


Silver vs Gold: What’s the Difference?

Silver is often considered the “second gold” as a hedge against inflation. However, the precious metals have two key differences: additional industrial uses of silver and their relative market size.

Silver is also one of the most common metals used in jewelry. It is also used in many industries, such as solar cells, electronics, and electric vehicles. In 2024, industrial silver production is expected to grow by more than 9%, according to the latest World Silver Survey.

In addition to playing a much larger role as an industrial metal than gold, there is another key difference between the metals that investors should consider: the gold market is huge. Meanwhile, the silver market is much smaller and more volatile. To be precise, silver is about 1.5 times more volatile than gold.


What to Pay Attention to When Investing in Silver?

  • Check Standard Market Prices: Silver prices are volatile and subject to market fluctuations. It is, therefore, essential to check the updated current market rate with the silver rate offered by your supplier. Additionally, there are daily and hourly changes that can make a big difference when it comes to buying in bulk.
  • Buy only from trusted sources: This may sound obvious, but it is. Due to the nature of the market, silver coins are available at almost every turn. Although most stores are legitimate, some may offer better prices and thus entice you to buy. However, never buy silver from unknown stores or those known for selling low-quality products. The return on investment in silver strictly depends on the product’s purity and value.
  • Beware of scams: There is e-commerce for everything from groceries to buying technology, right? The same applies to the online purchase of precious metals. With the rise of digital buying and selling, there are many stores that offer online sales of gold and silver. This is a great option to buy from trusted online vendors. It is best to check their reviews and research the company’s history and credibility before purchasing.

Conclusion

Silver, like gold, is considered a good hedge against inflation and an excellent (very) long-term investment. If you want to use silver as a short-term investment vehicle, you need to consider several factors. One of them is the gold-silver ratio, which is the amount of silver that can be used to buy one ounce of gold. Over the past 30 years, this ratio averaged 65. The ratio is close to 88, indicating that silver is undervalued relative to gold. Historical data shows that when the ratio crosses 80, silver is relatively cheap compared to gold, which is a bullish signal for silver.


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