How to Invest in Silver: The Best Ways to Buy and Sell It

Dubbed ‘poor man’s gold,’ silver often gets a second look by investors seeking safe and secure investment. However, recent global economic and geopolitical uncertainties after the COVID-19 pandemic have demonstrated that silver can be just as attractive as gold.

In 2023, the price of silver – along with gold – surged, reaching as high as $26 per troy ounce (oz) despite central banks implementing aggressive rate hikes and various bank failures, including the closure of Silicon Valley Bank.

Silver is likewise a strategic metal with a greater range of industrial and medical applications than gold. The precious metal can be found in electrical wiring, computers, mobile phones and medical devices.

Recently, with the energy transition race, silver stands to benefit from the demand to build solar photovoltaics and electric vehicles.

If you are looking into investing in silver but are not sure how to start, this article will cover investing in silver for beginners and professionals alike. It will cover how to buy silver, the most popular ways of investing in silver, and the associated risks.

Key Takeaways

  • Silver is known for thermal and electrical conductivity as well as anti-corrosion and anti-bacterial properties, making it popular for industrial applications.
  • More than half of silver output is used for industrial purposes, compared to 10% of gold.
  • Global economic growth may have a higher impact on the price of silver due to its greater use in industry than gold.
  • Pure silver miners are uncommon because silver is typically discovered in combination with other minerals like copper, gold, or aluminum.
  • Silver price hit a record high at $49.51/oz in April 2011

Why Investors Buy Silver

Even though silver is not equally well-known as gold as an investment option, investors are nonetheless keen to include the white precious metal in their portfolios as a supplement to more conventional assets like stocks and bonds.

There are various ways to invest in silver and diversify risks in your investment baskets.

Before deciding which silver investments could provide maximum benefit and minimize losses, consider your overall investment objectives and risk tolerance.

If you want to know more about how to invest in silver, the following section discusses the different options to invest in silver as well as explores their pros and cons.

Silver Historical Chart

How to Invest in Silver: Four Popular Ways to Go

1. Buying Silver Bullion, The Old School Way

Bullion ­– bars or coins – remains the most popular way of owning silver, much like gold.

Based on a survey by the Silver Institute, demand for bar and coin rose by 22% year-over-year (y/y), reaching a new high of 332.9 million ounces in 2022.

The surge was attributed to global economic downside risk and the war in Ukraine, which spurred demand for haven assets.

So, how to invest in physical silver? Explore your options.

Buying Silver Bars

If you are looking for physical silver as an investment, buy silver bullion in 99.9% purity. The price of a silver bar is determined by the metal’s intrinsic value. Silver bars come in different sizes, from one ounce, ten ounces to 100 ounces.

Buying Silver Coins

If you want to invest while indulging in your passion for collectibles, silver coins could be the answer. Official coins from government mints or limited-edition collectible coins can attract greater prices due to their rarity.

Silver coins are alloyed with other hard metals, such as copper. This is because pure silver is too soft; it has to be strengthened with hard metals to make silver coins more durable.

A US coin, for example, contains 90% silver and 10% copper. Jewellery makers typically use sterling silver, which is 92.5% silver alloyed with 7.5% copper.

How to invest in silver coins is no different than purchasing silver bars. Licensed and trustworthy pawn shops, jewelry stores, and specialist dealers are the best places to buy silver bullion. Additionally, you can buy silver bullion from internet sellers.

Nevertheless, you should check that those online sellers are authorized dealers of precious metals and look for their physical addresses. If you are not sure where to buy silver, you can contact your local precious metals and jewelry associations or government authorities that regulate precious metals trading.

Before you buy silver, make sure that you check on the current price or the spot price. Collectible silver coins or medals are normally more expensive than the silver’s spot price because sellers apply premiums or costs such as craftsmanship and labor.

The Upside of Buying Physical Silver

Psychologically, it provides peace of mind because investors hold a tangible asset that can be cashed in when it is needed.

The Disadvantage of Buying Physical Silver

Like gold, investors are exposed to the risk of theft. Investors must make arrangements to securely store the precious metal, either at home or in professional vaults such as deposit boxes in banks.

Storing silver bullion incurs additional costs, including insurance and storage fees, on top of taxes. Consequently, when cashing in the silver, investors may receive less than the purchase price.

2. Investing in Silver Stocks

Another way of investing in silver is by buying shares in silver miners or the so-called silver streaming, a company that finances silver miners to mine the precious metal. Buying silver stocks can be an option for investors who prefer investing in silver without owning physical silver to avoid storing the bulky bullion or coins as well as the fees.

The share prices of silver mining firms are typically correlated with the fluctuation of the silver price. Whenever the price of silver rises, the share prices of silver mining companies usually follow suit, and vice-versa when the price falls.

Their share prices may also benefit from industrial demand. Compared to gold, silver has more industrial and medical applications, including electronic devices and cables, autos, solar panels, and medical devices such as breathing tubes. According to the Royal Mint, more than 50% of silver mined output is used for industrial purposes, compared to only 10% for gold.

To start investing in silver stocks, open an account at a brokerage firm and deposit funds in the account. After that, investors can buy silver stocks of their choice. If you’re still not sure how to invest in silver mining stocks, consult with a financial planner or advisor.

Like any investment instrument, investing in silver stocks also has pros and cons.

The Advantages of Buying Silver Stocks

On the one hand, buying silver equities is a more practical option than purchasing silver bullion, as it provides greater convenience and liquidity.

In addition to potential share price gains, investors may receive dividends or a portion of a company’s profit, assuming that it is well managed to generate profits.

The Main Challenge of Buying Silver Stocks

However, choosing which silver equities to invest in may be tricky because most precious metal miners do not primarily mine silver.

This is because silver is commonly found in metal ores alongside gold, copper, aluminum, and zinc.

What might help potential investors is to check whether miners have a high proportion of revenue or production coming from silver.

Top 5 Silver Mining Stocks to Watch

Below are the top five silver miners based on production, according to the Silver Institute.

Company Location Silver Production (2022) Ticker Symbol Market Capitalization (Feb 2024)
Fresnillo Mexico 51 million ounces FRES $4.71 Billion
KGHM Polska Medzp Poland 42.7 million ounces KGH $5.59 Billion
Newmont USA 29.7 million ounces NEM $38.78 Billion
Glencore Switzerland 23.8 million ounces GLCNF $62.76 Billion
Hindustan Zinc India 22.3 million ounces HINDZINC.NS $16 Billion

3. Investing in Silver Futures and Options

Trading in the derivatives market is another way to invest in silver that gives you the option of taking physical possession or continuing to bet on the price of silver. Buying silver in the derivative market can be done through futures and options.

Futures and options are essentially hedging methods against the rise and drop in the prices of underlying assets. Traders and investors use them to manage and minimize potential losses due to asset price fluctuations.

Let’s look into how to invest in silver futures and options.

How to Invest in Silver Futures

Silver futures are contracts to buy and sell the white, malleable metal at a fixed price, quantity, and quality on a specific future date. Buyers have the option of whether to take the physical silver delivery or settle it in cash on the contract’s execution date or expiration date.

If traders want to continue gaining exposure to the market once the contract expires, they can roll it over by settling the initial contract and initiating a new one with a later expiration date.The latter is common practice in futures markets, where the purpose is to speculate on the asset’s price.

Silver futures contracts are traded in exchange markets, such as Commodity Exchange Inc. (COMEX), a division of the Chicago Mercantile Exchange (CME) and Shanghai Futures Exchange.

Trading brokerage firms can facilitate the trading of silver futures contracts by opening a brokerage account. Additionally, with the growing popularity of fintech, investors can now trade futures contracts conveniently via trade applications.

How to Invest in Silver Options

Silver options, as the term implies, provide traders with the option or right, but not the obligation, to purchase or sell silver at a specified price and quantity on a specific date in the future before the expiry. Silver options are also traded at exchanges, just like futures contracts.

Holders or traders can profit by buying (a call option) and selling (a put option) the option when the silver price rises above or falls below the so-called strike price – the price at which silver is purchased.

If traders predict the price of silver will climb, they can profit by purchasing the silver option when it rises above the strike price before expiration. This is the call option. However, if the price goes in the opposite direction, the investor will lose money.

On the other hand, if investors believe the price of silver will fall, they can exercise the put option, which involves selling the option when it goes below the strike price to profit. If the price rises above the strike price, holders will lose money.

Compared to other silver investments, futures and options may not be ideal for novice traders since they demand a thorough understanding of the risks and technicalities of derivative trading.

If you want to know more about how to buy silver futures and options, it’s better to consult with your broker or other financial experts.

4. Investing in Silver ETFs

Another option to buy silver without physically owning it is buying exchange-traded funds (ETFs). ETF is a fund that invests in a basket of assets, which can be stocks, market indices, or commodities.

Investors can purchase ETFs backed by physical silver or silver futures contracts. They can purchase both types of silver ETFs if they like.

So, how do ETFs work, and how to invest in silver ETFs? Investors can purchase and sell silver ETF shares on any day the stock market opens, just like they can with stocks.

The upside of purchasing silver ETFs is that investors can sell the fund at a market price or at what is likely a favorable price.

Silver ETFs can be traded through a standard brokerage account.

According to ETF.com, the following funds were the largest Silver ETFs as of February 2024:

ETF Name Ticker Issuer AUM
iShares Silver Trust SLV Blackrock $9.90B
Abrdn Physical Silver Shares ETF SIVR Abrdn Plc $1.01B
Global X Silver Miners ETF SIL Mirae Asset Global Investments Co., Ltd. $805.27M
Amplify Junior Silver Miners ETF SILJ Amplify Investments $599.04M
iShares MSCI Global Silver And Metals Miners ETF SLVP Blackrock $147.16M

Benefits of Investing in Silver

Investors looking to diversify their investment portfolio might consider investing in silver. These are the primary advantages of purchasing silver.

Wealth Protection

Silver, like gold, can keep its value during market turbulence or political turmoil or even gain it, which appeals to investors as a haven asset. This is because silver supply is also limited while demand continues to rise from both investment and various industries.

According to The Silver Institute, the total silver supply was unchanged in 2022 due to a one percent drop in mine output. Meanwhile, total silver demand in 2022 grew by 18%, spurred by industrial demand. The agency projected silver supply could grow by 2% in 2023 while demand was expected to drop by 6%.

Inflation Hedge

Silver is generally resistant to inflation, which tends to erode the purchasing power of fiat currencies and the value of other investments like stocks and real estate.

Diversification

For investors looking to diversify and mitigate risks, silver could be an option. Silver tends to fluctuate in tandem with the movements of stock markets, bonds, or commodities, but the correlation is not enormous, allowing for a degree of independence in its performance.

Affordability

Silver has typically been less expensive than gold, making it more accessible to average investors seeking to diversify their portfolios with real precious metal assets.

Benefits and Challenges of Investing in Silver

Challenges of Investing in Silver

Aside from its many advantages, silver does have certain disadvantages. Some main downsides of investing in silver include:

The Absence of Cash Income

Like gold, silver only returns to its holders through price appreciation, unlike stocks, which can deliver profits to owners through share price increases and, in some cases, dividends. If you are looking for an investment that can bring in regular income, silver may not be a great fit.

Liquidity

Selling real silver can be more difficult than selling gold, especially if you need money quickly. Furthermore, while selling silver, sellers may not receive the whole amount due to fees such as insurance, storage, and craftsmanship costs for valuable coins.

Influence of Global Economy

Due to its industrial application, silver prices can be influenced by global economic activity. For example, decreasing economic growth frequently dampens demand for the construction of new buildings, consequently slowing demand for silver used in the manufacture of electric wiring.

Greater Volatility

Silver’s role both as an industrial commodity and as an investment makes the metal’s price more volatile than gold. According to Scharf, DeSarro, and Leogrande Group at Morgan Stanley, the volatility in silver price is two to three times greater than that of gold.

The Bottom Line: Should I Invest in Silver?

Known to store its value throughout history, silver could be an alternative safe haven asset to gold. It is a good wealth protection and hedging instrument against inflation.

Buying physical silver, shares of silver miners, futures and options, and ETFs are the major ways to get exposure to the silver market.

However, investors looking into adding silver to their portfolio must consider if it fits with their overall investment objectives and the level of risks they are willing to take.

Do your own research and always remember your investment decision depends on your attitude to risk, your expertise in the silver market, the spread of your portfolio, and how comfortable you feel about losing money.

The information in this guide does not constitute investment advice and is meant for informational purposes only.

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References

  1. World Silver Survey 2023 (Silver Institute)
  2. MINE PRODUCTION (Silver Institute)
  3. Silver ETFs (ETF.com)
  4. Gold vs Silver: 4 Key Differences You Should Know (Morgan Stanley)

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Fitri Wulandari

Fitri began her journalism career in 2001 as a business reporter for the English-language daily The Jakarta Post, focusing on macroeconomics and energy. When she joined Dow Jones Newswires in 2004, she began covering commodities.