Investing in silver is new to many. Even established gold investors may not have bought silver before. But that’s now changing, as we’re seeing just as many enquiries in silver as gold. So why are more and more people investing in silver?
Gold isn’t the only precious metal – Why you should invest in silver too
Why invest in silver, when gold is the ‘go to’ precious metal?
If you currently invest in a precious metal then it’s likely to be gold and with good reason. As the most popular of the precious metals, gold is recognised as a valuable commodity and is available in a range of formats and weights, which are easily tradable. Gold has historically been a reliable way to both protect and grow your wealth.
Silver’s the new kid on the block
But gold is not the only precious metal investment. Experienced investors know that, as with all types of investment, having all your eggs in one basket isn’t a good idea. It’s unlikely that all the shares in your portfolio are in one company, so why not consider diversifying your holdings in precious metals too? In fact, it’s not only us who are excited about the potential of silver. 5 years ago, 95% of our enquiries were for gold. Roll on to todsay, and our sales are now split 50/50 between the two precious metals. Metal diversification is a sound strategy for many reasons:
Silver’s historical position
Silver, like gold, has been considered a precious metal for hundreds of years and has been utilised as money throughout history. Its value is intrinsic, meaning that like gold, there’s never a shortage of buyers. As such, silver is a great vehicle for securing your wealth against threats such as volatility and for growing your portfolio.
Much of silver’s use can be roughly split three ways; between ‘silverware and jewellery’, ‘photographic’ and other ‘industrial’ uses. These are the key drivers of the worth of silver and why it has become such an attractive investment.
The use of silver, particularly in the photographic and technology fields, has been key to its rising value over time. In photographic materials, the silver can only be used once, meaning the volume of the available silver present on the planet is reducing every day. The technological uses for silver are naturally increasing, as more and more advances in technology are made every day – relying on silver for component parts.
Silver’s pivotal role in solar panels
In the manufacture of solar panels, silver plays a pivotal role. 90% of the structure of crystalline photovoltaic cells, which are widely used in the solar panels industry is made of a silver paste. When sunlight is received by the cells, a stream of electrons are generated. Silver is a metal with one of the highest conductivity ratios of both electrical and thermal energy. Therefore, silver is used to conduct the power out of the panels.
The solar industry alone uses 52.4mn ounces of silver, with each solar panel using around two-thirds of an ounce of silver, which is approximately 20gms. As the industry grows, with more and more townships across the world becoming more energy efficient and turning to green energy, the demand for silver will increase, as will its price. However, a reverse effect would also take place, as the rising price of silver is dissuading solar panel manufacturers from using too much of it in their operations.
Electronics is where silver really comes into its own
Then, of course, another silver hungry industry is the electronics industry, where silver is used in contact switches industry-wide. The electronics industry uses silver that has a fineness of 999.9, meaning silver with absolute purity. With the convergence of electronics with the automobile industry, most cars are now computer controlled and use several contact switches, gadgets like GPS, etc. Due to this, the demand for silver has increased hugely across the industry, particularly with the advent of smart cars. Silver is also widely used in brazing and soldering of metal joints, where operations are conducted at temperatures above 600 degrees centigrade. These joints are often used in applications like heating systems, air conditioning, and plumbing. As silver has strong anti-bacterial properties, it is ideal for use in these applications, especially where pipes may be used to deliver potable drinking water to homes.
The use of silver, and its value, has changed over time but one thing is certain – the demand is growing and the stock of available silver on the planet is steadily decreasing. An increase in demand and a slowly diminishing supply, usually means one thing for prices..!
Silver, unlike gold, isn’t merely desired but essential for industry and commerce and its necessity has put considerable strain on silver’s supply thereby increasing demand for silver investments. Historically gold and silver used to trade at a ratio of 12:1 which meant it took 12 ounces of silver to buy 1 ounce of gold. Today – the ratio has widened and it takes 60 ounces of silver to buy 1 ounce of gold. Most commentators and analysts believe that as a result, silver bullion is massively undervalued with many predicting it could reach $100 an ounce in the next five years.
As silver’s use in industry increases many financial analysts, investing experts, and even geologists believe that a silver shortage is upon us. Infact the Silver Institute predicts that silver demand for industrial purposes will increase by 36% by 2016.
The demand for industrial silver went up a lot more, rising to 599mn ounces in 2017. A large portion of this increased demand came from the solar industry, as there was a 24% increase in global solar panel installations in 2017. Solar photovoltaic cells use a silver paste, thanks to the incredible electrical and thermal conductive properties of silver. Silver is also an essential ingredient for the manufacture of electronics, including electronics used in the automotive industry. The industrial demand for silver from the electronics industry alone consumed around 249.9mn ounces.
Here’s the best bit….
electric car industry, which is also growing in leaps and bounds. Experts believe that by 2030, 25% of the global automobile industry will be electric. So, on the one side, we have increased industrial demand that seems to be increasing steadily over the years, clearly outpacing the production volumes. The leading countries across the world for silver production are Mexico, China, Peru, and Russia. Sadly, production volumes have been plummeting globally. Recently, the Peruvian government released a statement that declared a significant fall in silver production from mines in the country. In fact, the fall in production volumes is as much as 12%. So, you can see where this is headed. A scarcity of a much in demand resource, with the demand curve rising steadily over the years would eventually lead to the spot prices of silver skyrocketing. Current spot prices are at $16.58 levels for a troy ounce. However, many investors believe that prices are likely to reach $20 an ounce in 2018. Still, others believe that in time, silver could be as dear as $130 an ounce. Obviously, as we move into the future, investors who believe in the rise of silver, need to get in early in order to stay invested long term and maximise their gains from the difference in buying and selling price.
Silver is undervalued
The historical ratio between gold and silver is currently out of sync. Throughout history, silver has, on average, been around 10-15 times cheaper than gold. Right now this gap has widened so that 1 ounce of gold, for example, will buy an astounding 75 ounces of silver. Many experts have identified this significant undervaluing as a huge opportunity to purchase silver.
Why invest in silver coins or bars?
In addition, silver has many other strengths, making it a very worthwhile choice to strengthen your portfolio. People that ask themselves, “Why consider investing in gold?” end up considering silver investment. Consider the following benefits of investing in silver:
- Low entry point– because of silver’s relatively low price (when compared to gold), it’s an attractive precious metal when either first investing in metals or when adding to an existing portfolio. As silver is much cheaper than gold it only takes a small price change to effect a large percentage increase in growth. It’s fair to say that consequentially – silver is more speculative than gold but together they provide a good balance within your precious metals portfolio.
- Good ‘hedge’ against other investments– Silver is typically not linked to falls in the stock market or interest rates, so when stock markets fall or interest rates are low for example, your silver investment still has the potential to rise.
- VAT Free– Unlike physical gold, when purchasing physical silver as an investment you usually have to pay VAT, but even so, silver can be a VAT-free investment. Very few dealers can offer VAT-free silver, but we offer two opportunities, both of which are VAT-free. You can exclusively buy the world’s most popular silver bullion coins, including the best selling silver Britannia, without paying VAT – and have them delivered to your door. It took us 9 months with VAT specialists to work out the secret formula to be able to deliver silver coins without charging VAT in the UK. If you prefer silver bars, again, we offer the chance to purchase them VAT-Free as we store them offshore. Learn more about how we’ve exclusively developed the VAT-Free silver program here. Physical Gold Ltd has created a Tax Free Silver product that allows investors to capitalise on the current buying opportunity whilst avoiding the need to pay VAT or in fact – any tax at all.
- Likely to yield higher returns than cash deposits– with interest rates low, your returns may well be better than cash investments such as ISAs or bank savings. Like a bank though, your investment can be securely held by us, so there’s no need to hide your silver bars under your mattress!
Contacting Physical Gold to discuss silver investments
If you’re interested in investing in silver or would like to add to an existing gold investment, then simply contact Physical Gold here. As a leading precious metals dealer, we’re able to offer competitive prices on gold and silver and organise secure holding or ship your silver directly to you. Whether you’re interested in purchasing VAT free silver bars, simply for investment, or you prefer silver bullion, our experts can guide you on how to buy silver and where to get the best silver deals in the UK. You can also buy silver online from a reputed online silver broker. When you buy silver products from Physical Gold, be it silver bars or bullion, you can rest assured that every product comes with a certificate of authenticity, as well as a buyback guarantee.
If you are investing in bullion coins or numismatic coins, we also have some great coin accessories that would help store your collection safely, without damage, in the event you decide to take delivery of your investment at your preferred location. In terms of delivery and storage, we have some excellent options, where you can choose not to take delivery of your purchases and opt to have them stored at our LBMA approved secure storage vaults, and simply receive the paperwork that entitles you to access them at any time you want.
The first step in buying your silver from Physical Gold is to simply open a free account online, select your purchases and put them in the online shopping cart. From there onwards, you need to select your delivery options, complete any further steps, pay for them and sit back and relax. Call our investment team now on 020 7060 9992 and speak to a consultant.
Our consultants can also talk through your requirements, to ensure you make the best investment for your personal situation.