Silver as a safe investment

Silver Philharmonic coins as a classic silver investment © Own image

Silver and gold - when there is a crisis in the global economy, precious metals are in high demand again. Silver coins are seen as a way to have a means of payment that retains its value even in times of inflation.

Buy silver as an investment

Silver coins have been used as a means of payment for thousands of years. The Greeks, Romans and Egyptians already appreciated the coveted precious metal and used it as a stable investment. There were even times in history when silver was even worth more than gold!

A similar phenomenon can be observed with silver as with gold: the greater the uncertainty in society, the more likely the price of silver bars and coins will rise. Interesting for many investors is also the potential property of silver to act as an emergency currency in times of crisis.

The purchase of silver for investment purposes serves to diversify the precious metals portfolio. Physical silver can be purchased in the form of silver coins or silver bars.

 

Argor Heraeus | 1000 Gram | Silver Bar 1.131,30 

An investment in silver can already be made with relatively smaller sums. As with investment gold, however, the premium on silver decreases with larger denominations. The purchase of larger units therefore makes sense. A disadvantage that silver has compared to gold is that silver, unlike the yellow precious metal, is not exempt from sales tax. Thus, the purchase of investment silver includes the sales tax of 20%. However, silver that meets certain legal requirements may be sold subject to differential taxation at a reduced tax rate.

But what does the silver price depend on?

No historical data available

Silver is used in industry to a greater extent than gold: Demand for the industrial metal is therefore much more dependent on the economy than is the case with the precious metal gold. If we look at the material's areas of application, the main sales (more than 60 percent) are in industry, where silver is used as an industrial metal for printed circuit boards or in medical technology. If the economy picks up, demand for silver will also increase. However, this does not necessarily have an immediate effect on the price, because demand has to increase more strongly for this to happen. And we must not assume economic growth in the industrialized countries, but look at the commodity markets in the emerging countries.

In the coming years, the energy turnaround factor could also become interesting in terms of silver demand. Because of its properties, silver is used for the production of solar panels. Although the amount of silver used per panel has decreased significantly in recent years, the growth in solar cells has led to a sharp increase in the overall demand for silver from the photovoltaic sector.

How is silver price related to gold price?

Many analysts see a strong correlation between gold and silver prices. Silver is, so to speak, the "little brother" of gold and reacts with a delay to changes in the gold price. Silver rises in value especially when there are bottlenecks in gold.

 

The gold-silver ratio describes the price ratio of gold and silver. © own image

The gold-silver ratio is also often calculated here to see whether one of the two metals is currently overvalued or undervalued. For the gold-silver ratio, the gold price is divided by the silver price in dollars. The higher the ratio, the lower the value of silver against gold.

Currently (November 2022), the gold-silver ratio is around 80, which suggests that silver is undervalued right now.

In addition to demand, however, supply is also an important factor in the development of the silver price. It can be stated here that supply and demand have been diverging for years. While the industry requires ever larger quantities of the raw material silver, the mined quantity of silver has been declining for years.

Silver deposits

Worldwide, there are about 510,000 tons of recoverable silver in the ground, of which an average of 30,000 tons can be mined per year. A shortage of silver is therefore foreseeable. Most of the silver currently mined comes from South America, China and Australia. At the top of the list of silver-producing countries are Peru, Mexico and China. But Russia, the USA, Poland and Canada are also among the top producing countries. The highest silver reserves in the ground are found in Peru followed by Chile, Australia and Poland (as of 2010).
Important mining sites in the past included Schwaz in Tyrol, Freiberg in the Ore Mountains, Kongsberg in Norway and Batopilas in Mexico.

A serious study from 2009 determined that silver deposits will probably be exhausted in 29 years if production remains constant (study by the Rheinisch-Westfälisches Institut für Wirtschaftsforschung, the German Federal Institute for Geosciences and Natural Resources and the German Fraunhofer Institute).

Although silver occurs 15 times more frequently in the ground than gold, it accounts for just 0.0000079 percent of the earth's crust. As a pure chemical element (native silver), silver occurs in grain form or in ore veins as a wiry mesh and has so far been discovered at 3,850 sites worldwide.

In addition to native silver, the precious metal is also found in sulfidic minerals. Important sulfide silver ores are, for example, acanthite (silver glance), whose silver content is about 87%. Among the 167 known silver minerals, the rare allargentum has the highest silver content of up to 99%. Stromeyerite (copper silver glance) and miargyrite (silver antimony glance) as well as chlorargyrite (silver horn ore) also belong to the silver ores.

In addition, there are ores containing silver, which usually have only an extremely low silver content of 0.01 - 1 percent. These are often galena and chalcopyrite. Silver is therefore often a by-product of copper or lead mining.

You want to buy silver as an investment or crisis hedge?

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