How to Invest in Silver
Silver has had a rich history as one of the world’s most important metals for monetary exchange and for ornamentation purposes. Although no country today uses silver in a precious metal backed currency, demand for the product has picked up thanks to declining confidence in fiat currencies and the metal\’s relatively cheap price when compared to others in the precious metal group. Furthermore, unlike gold, silver has a variety of industrial uses that ensures that demand for the product will remain high should currencies like the dollar remain stable.
Silver has appeal as an investable asset for several reasons. First, if investors continue to lose faith in the fiat currencies and the U.S. dollar in particular, demand for silver could rise. This is especially true in emerging markets where other precious metals remain out of reach but silver is still a relatively inexpensive option on a per ounce price basis. Silver is also seen as a potential hedge against inflation allowing investors to protect at least part of their portfolio from this phenomenon. Lastly, since silver has a number of industrial uses, investors can consider silver a play on increased manufacturing or industrial activity as the product is needed in a number of applications ranging from batteries and electronics to medical and photographic materials.
Investors seeking exposure to silver have a multitude of options. In addition to buying futures contracts on silver or purchasing and holding the physical metal in the form of coins or bars, there are a number of ETF and equity options available as well. Investors can purchase stocks or ETFs of companies that mine the metal. Investors also have the option of buying silver ETFs, either ones that track the futures for the metal or those that physically hold the product in secure vaults.
Ways to Invest in Silver
There are 4 ways to invest in Silver: ETFs, Futures, Physical, and Stocks. Click on the tabs below to learn more about each alternative.
What are Silver ETFs?
Exchange-traded funds have become a popular option for investors seeking exposure to silver, as this structure allows for low expenses while eliminating complexities introduced by physical storage. There are dozens of silver ETFs available to investors around the world, including both physically-backed funds and products that achieve exposure through futures contracts. Silver ETFs available to U.S. investors include:
|SILJ||ISE Junior Silver ETF||Silver Miners ETF|
|SLV||iShares Silver Trust||Largest Silver ETF|
|SIVR||Physical Silver Shares||Low expense ratio|
|DBS||PowerShares DB Silver||Futures-based exposure|
There are a number of inverse and leveraged silver ETFs as well, including AGQ (2x daily long) and ZSL (2x daily short).
In addition, there is an ETF that offers exposure to stocks of companies engaged in the extraction of silver See more on the Global X Silver Miners ETF.
What are Silver Futures?
Silver futures are traded on the COMEX division of the NYMEX under the ticker SI. Contracts represent 5,000 troy ounces of the precious metal, and are priced in U.S. dollars and cents per troy ounce. Trading is conducted for delivery during the current calendar month; the next two calendar months; any January, March, May, and September falling within a 23-month period; and any July and December falling within a 60-month period beginning with the current month.
Additional resources on silver futures:
How to Buy Physical Silver
Though silver is far cheaper than gold, the precious metal maintains a sufficiently high value-to-weight ratio to make achieving exposure through physical possession practical. There are a number of ways to purchase silver bars or silver coins, including web-based bullion dealers, trade shows, and others.
It is also possible for investors to gain physical exposure to silver through certain exchange-traded funds. The underlying holdings of products such as SLV and SIVR are silver bars stored in secure vaults. As such, these products will generally move in unison with spot silver prices, allowing investors to avoid any potentially adverse impact of futures-based strategies.
How to Buy Silver Stocks
Investors seeking silver exposure have the opportunity to invest in stocks of companies responsible for discovering and mining the precious metal. Because the profitability of silver miners depends on the market price for their goods, these stocks often exhibit a strong positive correlation with spot silver prices.
Many mining companies extract multiple metals, meaning that stock prices can be impacted by movements in the price of silver, gold, and various other precious and industrial metals. There are, however, a number of publicly-traded companies who focus exclusively or primarily on silver:
- Silver Wheaton Corporation (SLW)
- Pan American Silver Corp. (PAAS)
- Silvercorp Metals (SVM)
- Silver Standard Resources (SSRI)
- First Majestic Silver Corp (AG)
For a more complete list of silver miners, see the holdings of the Global X Silver Miners ETF.
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