Is Silver a Good Investment?

Investing in precious metals has always been viewed as a popular and secure way of building wealth due to these commodities' relative security. Unlike stocks, precious metals like silver and gold are backed by a tangible item of value, which gives some investors confidence. 

But is silver a good investment for you? Here’s everything you need to know to decide whether to add it to your portfolio. 

History of Silver

In 2011, the price of physical silver skyrocketed, reaching $46.08 per ounce. This price rise was linked to the U.S. debt ceiling crisis because the nation was “running out of money.” 

The Budget Control Act of 2011 ultimately put an end to the crisis. However, the price of silver remained elevated throughout mid-2013, which is when it began to decline. Silver bottomed out on March 20, 2020, reaching $12.35 per ounce. Here’s a breakdown of key dates in the silver price roller coaster between 2011 and 2020:

• Nov. 16, 2008: Silver dropped to $9.50 per ounce.
• Aug. 23, 2010: Silver began a sharp climb from its $17.99 per ounce price. 
• May 2, 2011: Prices peaked at $46.08 per ounce.
• June 27, 2011: Prices dropped to $33.58 per ounce. 
• Aug. 22, 2011: Silver rebounded to $43.32 per ounce before declining sharply. 
• Oct. 17, 2011: Prices dropped over $10 to $31.62 per ounce in two months. 
• July 23, 2012: Silver further declined to $27.04 per ounce.
• June 24, 2013: Prices dropped below $20 per ounce.
• Jan. 4, 2016: Silver dropped to $13.62 per ounce, its lowest point in nearly eight years.
• April 3, 2020: Silver dropped below $15 per ounce after a small multiyear rebound.

The May 2011 peak represented the second-highest silver price in history. The precious metal topped at under $50 per ounce in early 1980. Silver was valued at under $10 per ounce most of the time between the 1980 and 2011 peaks. 

Uses of Silver

Silver is an incredibly versatile metal with multiple industrial applications. Manufacturers use it in: 

• Electronics
• Automobiles
• Mirrors
• Water purifiers
• Solar panels
• Electric vehicles. 

Silver jewelry remains quite popular as well. 

The metal has also played a key role in transitioning away from fossil fuels, with solar panels relying heavily on silver. Here are three common forms of traded or commoditized silver:

• Silver bullion
• Silver coins
• Silver bars

If you invest in physical silver, it will most likely take one of these forms. These items are usually 99.5% to 99.9% pure. For example, American Eagle Silver Bullion Coins, which are still being issued, are 99.9% pure silver. 

Factors Affecting the Price of Silver 

Like all precious metals, silver is subject to the laws of supply and demand. Here’s a look at the types of market demand and other factors that influence the price of silver:

• Historical Trends: Silver prices have had long-term, albeit modest, appreciation.
• Industrial Demand: Silver is widely used in the manufacturing and tech sectors.
• Ecological Transition: Demand for silver has increased due to the shift toward renewable energy sources.
• Monetary Demand: Silver is a monetary asset that may be used to hedge against inflation.
• Global Demand: Developing countries are seeing increasing demand for silver.

Until the 2010s, silver prices appreciated very modestly. However, they stayed well below the 1980 spike. However, that has appeared to change, as silver prices remain incredibly high due largely to widespread industrial demand. 

Pros and Cons of Investing in Silver

Investing in silver may be a good tactic for diversifying your portfolio. However, it’s important to consider the pros and potential cons. The following explores both sides. 

Pros

The benefits of investing in silver include:

• Protects during times of inflation or economic uncertainty
• Represents a physical asset, unlike stocks or bonds
• More affordable than gold
• Price can be volatile, offering a potential for short-term gains
• Has been a valuable asset for centuries

You also face several potential downsides of investing in silver, such as the following: 

Cons

The drawbacks of buying silver as an investment include:

• Potential for volatility
• Supply and demand fluctuations
• Currency risk
• Liquidity risk

Silver can be less liquid than other investments, making selling quickly harder. Prices can also be volatile, meaning you may take a huge loss if you buy it at a historic peak. 

Silver has only peaked near the $50 per ounce value twice. While it has since rebounded from the 2020 fall, it remains valued at roughly $25 to $30 per ounce, well below the previous peak. 

How to Invest in Silver

Investing in silver can be a smart way of diversifying your portfolio. There are a large number of options for buying the precious metal. Here are a few popular choices to consider:

• Physical Silver: Including coins, bars, and bullion
• Silver ETFs: Exchange-traded funds provide exposure to silver prices without having to hold the goods yourself 
• Silver Mining Stocks: Offer you a chance to invest in companies that mine silver 
• Silver Futures: Allow you to speculate on the future prices of silver
• Silver Options: Give you the right to buy or sell silver at a predetermined price

When deciding which silver investment strategy to use, you should consider the current composition of your portfolio. For example, perhaps you are already heavily invested in stocks or ETFs. 

If so, you should probably be familiar with them enough to add silver to your portfolio. Conversely, if you want a tangible item with intrinsic value, consider purchasing silver and holding it yourself. 

Is Silver Investment Right for You? 

Silver can be a good option, but you must know the risks before investing. Price volatility represents the biggest danger of buying large amounts of silver. You can reduce this risk by diversifying your portfolio or exploring alternative investment tools, such as options, ETFs, or mining stocks. 

Is Silver a Good Investment? That’s a Choice You’ll Have to Make

Is silver a good investment? It can be, but the precious metal can also be quite volatile. If you decide to invest in silver, gold, or other precious metals, it’s important to research price fluctuation trends. 

As with all investments, buying low and selling high can help you make a nice profit. However, mistiming the market will mean big losses. Silver may also fit into your portfolio if you are looking for a long-term holding that can steadily gain value over time. 

Frequently Asked Questions