Investors worldwide consider investments in silver and all precious metals safe and very popular today. Silver is a desirable asset for investors and speculators and one of the world’s most popular precious metals. But not everyone knows that more than half of the demand for silver comes from the industry. This precious metal has many practical applications with great prospects ahead. This article is an overview of the basic concepts of trading in silver, and after reading it, you will learn more about how to invest in silver.
A brief history of silver negotiation
The history of investment in silver is very long and dates back almost 4,500 years. The ancient Egyptians valued silver more than gold because silver bars were rare in North Africa. The ancient Phoenicians, known as the most skilled merchants in the ancient world, imported silver from Cadiz and Tartessos and traded it in the Mediterranean, making great profits.
In the 5th century BC, a large silver deposit was discovered near Athens, and the city flourished. The ancient Lydians were the first to melt electro-coins, a natural alloy of silver and gold. In the eighth century, the Anglo-Saxons minted silver coins called ‘sterlines’ (240 coins per pound of silver). That’s why now the currency of Great Britain is called the “pound sterling”.
After Christopher Columbus’ expedition to the New World in 1492, large silver deposits were discovered in Mexico, Bolivia, and Peru. T
He provided Spain with world hegemony and wealth for the next 300 years. Also, due to the silver trade, Spain became the largest economy in the world. The name of the US dollar has its origins in the silver trade. The most popular currency in Europe was the silver thala. The Dutch called them ‘daalder, and after founding the city of New Amsterdam on the island of Manhattan, they brought the silver ‘daalder’ there. The inhabitants called it a “dollar.” New Amsterdam is now New York City, and investment in silver is part of its history.
After the discovery of the Comstock Lode deposit in 1859, the United States became the largest silver producer in the world, and the silver trade had to be regulated. In 1967, the United States stopped minting new silver coins and ended its program of repurchases of silver securities.
Silver has been a very important part of history for thousands of years and world curre. The silver trade has contributed enormously to the financial evolution of developed nations. In the coming years, we will see a continuation of the great history of investments in silver and the trade of this special metal.
Benefits and uses of this metal
Silver metal prices are affected by fluctuations in the supply and demand of precious metals. Silver has a high spectrum of adoption in health care, electronics, energy, jewellery, automotive, and especially industry. As a result, the situation in specific industries can cause the demand for silver to increase or decrease, affecting its price.
When compared to other raw minerals, silver’s usefulness is unparalleled. In order to construct desktop computers, portable computers, mobile phones, water filters, mirrors, batteries, and medical devices (silver is antimicrobial), silver is required. Silver’s numerous applications and lack of viable substitutes make it an attractive investment.The lack of price elasticity is also important because a certain amount of silver is required to produce a laptop or a phone. Even if the price of silver increases several times in the future, the producer of a phone or computer will still need the same amount of silver so that the demand will be constant or even greater. Silver inventories could cause manufacturers of electronic products to compete for their resources, increasing their prices.
Silver and gold are the metals that are contracting most quickly. According to the United States Geological Survey, silver could be depleted at the current extraction rate in just 25 years. Most of the silver is irrevocably exhausted. That’s why trading in silver could become increasingly popular and attract investors and speculators.
How do I buy silver?
You have the option of investing in silver or trading with silver. There are several differences between these methods.
Investing in Silver
Investment in silver is made through the real purchase of ETFs, shares of silver companies (for example, silver mining companies), or physical ingots or assets that give it ownership of the underlying instrument: silver.
Trading
Trading with money is speculative, and only the movement of the price of silver is important. Silver can be traded, for example, through a CFD on silver (a contract for difference) and using the potential of financial leverage. This type of contract is a financial one that pays the difference in the settlement price between the opening and closing operations without the physical transaction of the traded instrument.
Online or physically?
The traditional way to buy and invest in silver was to buy ingots or physical coins. Over the years, storage and insurance costs have caused this method to lose value.
The problems with this type of investment in silver are also the high commissions associated with that type of transaction and the large margin (the difference between the purchase price and the sale price). In addition, the physical delivery of coins and bars can take a long time, and their physical storage has risks such as theft and takes up a lot of space in the case of a larger investment. Currently, 100 kilograms of silver are worth about 75,000 dollars. Due to its heavy weight, this can create a problem when transporting such an amount of silver. There is also the risk of buying counterfeit coins and silver products.
Investing silver in physical coins is not very comfortable.
When you want to sell your investment in silver, you must first find a distributor who will buy it. You can always change your mind. For these reasons, online silver trading and the modern style of silver investment are becoming increasingly popular. There is a whole range of instruments, such as ETFs, that give you exposure to the price of physical silver or a group of mining companies, individual shares of listed companies, certificates backed by physical silver that the investor does not have to store at home or pay the place of deposit, and, of course, contracts for difference, the so-called silver CFDs.
Trading silver online is also cheaper; the costs of trading and spreading are much lower than in the case of physical trading. Also due to the liquidity of the market. You can close your position with a mouse click at any time when the silver market is open. That’s why trading silver online has so many advantages and is the most popular type of investment in silver today.
Trading CFDs on Silver
This type of negotiation is aimed at traders and speculators aware of the risk. Trading silver CFDs offers the advantages of low commissions, a very low margin, and the possibility of using financial leverage. Thanks to leverage, trading silver requires only a certain percentage of the entire position. For example, the use of 1:10 leverage gives you the opportunity to open a $10,000 contract using only $1,000. This option is for high-risk investors and intraday traders. Using leverage can give, in a corresponding and appropriate way, to the risk of investing in silver a greater benefit but also a greater loss in open positions.
The spot price of silver is the price at which silver is currently quoted; buying at this price means that silver could be exchanged and delivered “on the spot” physically. CFDs on spot prices of silver give you exposure to the current price of silver without the need to own the physical asset.
Trading silver CFDs also provides the opportunity to open short positions, in which traders make money when the instrument prices fall. This allows the implementation of many different strategies during the negotiation sessions on the price of silver. We also provide many different indicators on our trading platform, such as the relative strength index (RSI) or Fibonacci levels, which can make your silver trading more efficient.
Stocks and ETFs on SilverShares
One way to invest in silver is to buy shares of gold mining companies. In this case, investors obtain stock market exposure from companies related to silver mining, such as Silvercorp Metals (SVM.US), Hecla Mining Company (HL.US), or Endeavor Silver Corp (EXK.US) of the NYSE.
Silver producers depend heavily on the current market price of silver. When silver prices rise, the prospects for these companies are usually good because their financial performance is also expected to increase. The shares of these companies are very volatile, but they can offer a much higher rate of return than the price of the raw material itself.
Therefore, silver prices and some mining companies have a significant positive correlation. It is worth noting that gold mining companies can also pay dividends, which is a great advantage over direct investment in precious metals. This factor can be particularly important for long-term dividend investors and suggests that, in some cases, buying shares of mining companies can be a very smart way to invest in silver.
ETFs:
invest in silver by buying exchange-traded funds (ETFs), which make your silver portfolio more diversified and can track the movement of physical silver bullion or the price of a group of companies within the silver industry.
Trading with silver ETFs gives you a wider exposure than you would get from a position in individual stocks. This type of investment in silver is more balanced and also offers the opportunity to receive dividends from ETFs with distribution or buy ETFs with accumulation and create diversified portfolios with lower risk but also with less growth potential.
The best time to start investing in silver
Many market participants and silver investors wonder when the best time is to invest in silver. Investors are comparing both investments in silver and gold, which is well known as a “safe haven” asset. This means it is considered a relatively safe asset during difficult times, such as financial crises or recessions. Silver is more volatile than gold, and, of course, there is a correlation between these two precious metals, but not in all cases.
Silver can become popular during periods of high inflation because inflation generally makes people worry about the decrease in the value of their money. Some are looking for good investments in well-known assets, which may be in high demand in the future.
In nature, there is only 16 times more silver than gold, but at the same time, silver is 75 times cheaper than gold per ounce. This shows that silver could be potentially undervalued given the main factor that drives the price of the precious metal, which is a rarity. Silver also has several thousand uses in industry and many other branches, while gold does not.
Silver is an asset that appeals to long-term investors and risk-taking speculators. Investing in silver could help investors build a well-balanced portfolio.
The relationship between silver and US returns is very important for trading silver and long-term investment in the metal. It emerged after the global financial crisis. When investors buy U.S. government bonds (US Treasury bonds), US yields sometimes fall, which can be a positive sign for silver prices (and also for gold prices). But when investors decide to sell U.S. Treasury bonds, yields tend to rise. This is negative for silver and gold prices. Precious metals speculators should closely observe this correlation in the future to find the best time to buy or trade silver.
Silver prices probably have a greater growth potential than gold. Speculators, funds, and ordinary investors prefer this asset’s more unpredictable market. Since nothing has changed in approximately 4,500 years, silver investment seems to have a bright future.
