For Those Who Want to Invest in Silver

Silver

If you’d like to invest in a precious metal asset, or if you’re simply considering it, gold isn’t your only option: silver can be an excellent—and far more affordable—alternative. 

This is especially true for beginning investors looking to invest in a safe haven asset without spending more than they should. 

A safe haven asset is an asset that tends to hold its value, or even increase in value, during economically unstable times.

That’s not to say that investing in silver is entirely without risk. Like any other asset on the marketplace, the value of silver rises and falls. What separates silver (and gold) from so many other assets, however, is the consistency of its purchasing power. 

Not only that but there are times when silver acts as a safe haven asset when gold does not

Here’s a look at what you need to know when deciding whether to invest in silver. 

Silver as a Safe Haven Asset 

Often, during unsteady economic periods, such as the 2007—2008 market crash, investors move their money into safe haven assets to preserve or even increase their wealth. They may also move their money into safe haven assets to hedge their wealth against potential inflation.

The safe haven assets that investors move their money into during tumultuous economic times include precious metals like gold and silver, as well as the Swiss franc and the US dollar, T-bonds and T-bills, and even cryptocurrencies, which some economists and financial experts consider safe haven assets, though the point is debatable. 

But precious metals, including gold and silver in particular, are assets that have long held the reputation of being a relatively reliable hedge against inflation. 

What Sort of Silver Should You Invest in? 

Silver, like gold, is a physical asset that, unlike the Canadian dollar, the US dollar, and other currencies, has intrinsic value. Keep that in mind when buying silver in Canada or the United States. 

When investing in silver as an asset, you must choose whether to buy the precious metal itself—in physical form—or proxies that represent silver value, such as silver Exchange Traded Funds (ETFs) or silver stocks. 

For beginning investors, buying the precious metal itself in the form of silver bullion may turn out to be the wise route to take. By doing so, you can reduce counterparty risk and keep direct control over your assets. 

Silver Bullion

What is silver bullion? 

  • Silver bullion refers to silver that is at least 99.9% pure and comes in the form of bars, coins, or ingots.
  • Central banks and institutional investors can hold silver bullion as reserves. 
  • Whereas silver bars and ingots cannot be used as legal tender, silver coins can
  • When you purchase a silver bar, ingot, or coin, you basically purchase 1 oz of silver bullion 
  • You can buy silver bullion from silver bullion dealers  
  • If you live in Canada, there is no tax on silver bullion. It’s considered an investment vehicle. And you can invest in silver bullion (excluding coins) through your RRSP

Silver Bullion Premiums

Silver bullion has a low barrier of entry. That means that premiums on silver tend to be much higher than gold premiums. 

Typically, the average ounce of gold will sell for about 3-5% over spot price, whereas the average ounce of silver will sell for approximately 15%-25% over spot price. 

Because silver has a low barrier of entry and higher premiums than gold, financial advisers recommend that investors treat silver bullion as a long-term hold—10 or more years—and gold bullion as a medium-term hold—5 or more years. 

Bottom Line

Silver bullion has a lower barrier of entry than gold bullion, as well as a lower price per ounce. 

As of this writing, the price per ounce of silver is USD 23.24. The price per ounce of gold, by contrast, is USD 1,796.00. 

So, for beginning investors, silver bullion is seriously worth considering.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.