Silver as a safe investment

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

Buying 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 worth more than gold!

A similar phenomenon can be observed with silver as with gold: the greater the uncertainty in society, the higher the price of silver bars and silver coins. The potential ability of silver to act as an emergency currency in times of crisis is also of interest to many investors.

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

An investment in silver can be made with relatively small sums. However, as with investment gold, the larger the denomination, the lower the premium. Buying larger units therefore makes perfect sense. However, one disadvantage that silver has compared to gold is that, unlike the yellow precious metal, silver is not exempt from VAT. This means that 20% VAT is included in the purchase of investment silver. However, silver that meets certain legal requirements can, under certain circumstances, be sold with differential taxation at a reduced tax rate.

But what is the silver price dependent on?

Silver is used more than gold in industry: Demand for the industrial metal is therefore much more dependent on the economy than is the case with the precious metal gold. If you look at the areas in which the material is used, the main sales (at more than 60 percent) are in the industrial sector, 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 again. However, this will not necessarily have an immediate effect on the price, as demand will have to rise more strongly for this to happen. And we must not assume economic growth in the industrialized countries, but rather look to the commodity markets in the emerging countries.

The energy transition could also become an interesting factor in terms of silver demand in the coming years. This is because silver is used in the production of solar panels due to its properties. Although the amount of silver used per panel has fallen significantly in recent years, the overall demand for silver from the photovoltaic sector has risen sharply due to the growth in solar cells.

How is the silver price related to the gold price?

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

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

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 industry requires ever larger quantities of the raw material silver, the amount of silver mined has been declining for years.

Silver deposits

There are around 510,000 tons of recoverable silver in the ground worldwide, of which an average of 30,000 tons can be mined each year. A shortage of silver is therefore foreseeable. The majority of silver currently mined comes from South America, China and Australia. Peru, Mexico and China are the top silver-producing countries. However, 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 the silver deposits will probably be exhausted in 29 years if production remains the same (study by the Rhenish-Westphalian Institute for Economic Research, 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, the proportion of silver in the earth's crust is just 0.0000079 percent. As a pure chemical element (solid silver), silver occurs in grain form or in veins as a wiry mesh and has been discovered at 3,850 locations worldwide to date.

In addition to solid silver, the precious metal is also found in sulphide minerals. Important sulphide silver ores include acanthite (silver luster), which has a silver content of around 87%. Of the 167 known silver minerals, the rare allargentum has the highest silver content at up to 99%. Stromeyerite (copper silver luster) and miargyrite (silver antimony luster) as well as chlorargyrite (silver horn ore) also belong to the silver ores.

There are also ores containing silver, which usually only have 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 extraction.