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!
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.
[mks_icon icon=”fa-info-circle” color=”#72982b” type=”fa”]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.
[mks_icon icon=”fa-info-circle” color=”#72982b” type=”fa”]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.
[mks_icon icon=”fa-info-circle” color=”#72982b” type=”fa”]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.
[mks_icon icon=”fa-info-circle” color=”#72982b” type=”fa”]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.
– 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.
– 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.
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.
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 looking for investment for a precious metals IRA, then we recommend you check out our precious metals ira companies page for more information.
Or alternatively, if all you want to do is purchase bullion then there are 2 leading companies we recommend. Simply visit their sites for all the information you need. The companies we recommend are regarded as the best in the industry, but check them out for your self.
Platinum is probably the most under appreciated precious metal amongst investors historically, but we are now starting to see an increase in Platinum investment.
Its value is closer to gold than it is silver (at the time of writing an ounce is $866), however, the return on investment is not as great as either gold or silver, yet. This is probably due to the fact that over 70% of it comes from one country, South Africa and therefore, the return depends on mining and the economic state of the country. Currently (over the past 5 years 1/2010-11/2015) the return has been poor as its value as steadily decreased from $1,697 to $866 an ounce.
For the smart investor, diversification is key. It is for this reason that many investors have taken to investing in gold and silver, with an aim of protecting their savings in the face of an unpredictable investment environment. It does have a much shorter history in the financial markets than gold and silver, and this is because, for a long time, the price has remained significantly higher than that of gold. In fact, less than a decade ago, the price was 150 percent that of gold. Fast forward to today and the price has fallen to levels that are permissible for the willing investor. That being said, it remains scarcer than other precious metals, and for this reason, tends to attract higher prices per unit. These prices tend to change depending on supply and demand. During periods of economic uncertainty, the price tends to go down. This offers an opportunity for an investor to acquire it at reduced prices and diversify their investment portfolio in the process.
If you are wondering whether you should be thinking of investing in alternative, like Platinum investment, the answer is yes. And here are the reasons why:
1. It has recorded a steady and improved performance in the market, compared to silver and gold (although of course, like all investments it fluctuates). In the past, there was not much popularity surrounding this metal, and many investors opted to go for gold and silver. In today’s market, it has proved to the point that it can hold its own, and many investors are turning to it in a bid to get better returns.
2. A strong demand for vehicles creates a higher requirement for it. It is not only a precious metal but an industrial one as well. It is used in catalytic converters, creating over 40 percent of its use. It is also used in other areas as a replacement for gold, such as for jewelry, dentistry and even in electronics. As auto sales increase, the demand will go up, resulting in better prices and higher returns for investors.
3. There are certain factors that could result in a lower supply, meaning better prices for the investor who already has it in their portfolio. Key on the list of factors is the fact that almost all (75 percent) of the world’s supply comes from South Africa. Reliance on one main producer means that any upsetting developments and instability in that country’s mining industry have a huge impact on prices. An example is the mine strikes and turmoil that occurs in South Africa.
4. Renewed growth in China is an opportunity for demand to grow, bearing in mind that China is one of the world’s biggest consumers of platinum jewelry. In fact, China is responsible for 23 percent of the world’s demand, and an increase in this demand will result in an increase in demand for the metal, hence higher production.
In order for it to be saleable in the commodity market, the ingots must first be assayed in a similar manner to what is done to gold and silver. If you wish to buy and store it in its physical form, you have the option of getting bars, coins, and bullion. If you are thinking of adding it to your retirement account, you will require the services of a custodian. The custodian will find the it for you, get the paperwork sorted on your behalf and keep the it safe for you.
Alternatively, if it is not for an IRA, you can opt to utilize various routes to invest in it. For instance, Swiss banks give the option of buying and selling the metal like foreign currency, by making specific trading accounts available. What this means is that you, the investor, will not own the actual metal. Rather, you will have a claim against the bank for a certain quantity of metal. This is a much easier route to follow, especially if you are freshly ventured into the field of investing in this and other precious metals.
• The first thing you need to do is gather as much information as possible. Investing in precious metals is a great way to protect yourself and your finances against economic uncertainties, and Platinum investment is no different, but you must be knowledgeable about what you are doing in order to succeed. If you are in doubt, always consult a financial advisor. In fact, a financial advisor should be the first person you talk to once you decide that you want to invest.
• Decide how much risk you are willing to take on. This should be arrived at after intelligent financial calculations. You must correctly determine how big a portion of your finances you are ready for Platinum investment. Precious metals are much less volatile than stock markets, mutual funds and so on, but it does not mean that they come with zero risk.
• Follow the correct procedure when investing. Unfortunately, many investors are scammed when investing in precious metals because they have no clue that there are proper channels and regulations that have been stipulated to regulate this type of investment. To avoid falling into this kind of trap, seek the services of a reputable financial advisor and only use the services of financial institutions that have been accredited and approved for such investments.
If you have been wondering how to protect your financial future, consider diversifying your investment portfolio. It does not matter whether you are building a nest egg for your retirement, or just saving something for a rainy day, precious metals, and platinum, in particular, have the ability to offer you financial protection.
Just like silver, this metal is both used for investment product and industrial use. As such, it can move out of direct linkage with gold based on the pushing and pulling occasioned by industrial demand. In the recent past, the platinum/gold spread has narrowed down to below $100 per ounce. This has been mainly due to gold’s falls. There continues to be widespread support for this alternative to gold, although the demand for it sometimes gets relatively muted.
Investors have been waiting on global stocks to get depleted, which would mean better prices because of the supply crunch. When it comes to comparing it with gold, it is important to remember that they have one main difference: while as mentioned it has investment and industrial appeal, gold is driven purely by speculators and investors. The market is also smaller and less liquid compared to gold.
During periods of low global economic growth, it is usual for both prices to converge. It is very rare for the price to fall below that of gold, and when this happens, it usually does not stay there for long. This is because both metals have hedge qualities. When the economy is booming and growth is at an all-time high, its price tends to skyrocket faster than gold prices.
If you are thinking of Platinum investment as a gold alternative, it is important to keep in mind that the current prices may not seem very attractive. However, a synchronized global economic growth is something that would boost its price. At the moment, the global economic growth is not synchronized, as can be seen from the recovery in the US and the UK but struggles in Europe and China.
Keeping in mind that the two largest markets as mentioned are autocatalysts in Europe and jewelry in China, a growth in these two markets will have a direct impact on rising prices.
Gold is facing competition from other assets such as properties and equities, meaning that it has not done as well as expected. That being said, investors who are interested in reaping long-term rewards continue to invest in both too.
If you are wondering which precious metal to invest in between these two, a deeper analysis of market trends and a consultation with your financial advisor should make things clearer for you. And remember, he who does not invest, does not stand the chance to reap returns.