Silver (AG) is a soft, white, and radiant metal, used in jewelry, photography, and electronic circuits among other things. Because of its beauty, rarity, weight and lack of corrosion, it has been used as a form of money and a store of value for thousands of years. It has also recently become a popular investment vehicle.
Demand for silver mainly comes from industrial applications, jewelry, silverware, photography and investors. Industrial applications account for the largest component of demand, where silver is used in electrical contacts, conductors, mirrors, and in catalysis of chemical reactions. Industrial demand for silver accounts for 46% of total demand, and because silver has such a large industrial usage, the price of silver is much more volatile than gold.
The chart shows different areas of demand for silver. The use of silver in Photography has steadily been declining with the advent of digital cameras, but investment demand, including coin sales, has rapidly been increasing.
The vast majority of silver supply comes from new mining and production. As opposed to gold, the vast majority of silver is used in industrial applications that are being disposed after the product has outlived its usefulness. As a result there is more âabove groundâ gold than silver, despite silver being 16 times more abundant in the ground. Net silver supply from âabove groundâ stocks is estimated to be around 142.9 million ounces, which is a far cry from the 5.3 billion ounces of âabove groundâ gold supplies. The chart show different components of silver supply.
Mexico, Peru, and China are by far the largest silver producers and the chart shows the top 10 largest silver producers.
Silver has a number of unique properties including its strength, malleability and ductility. It is electrically and thermally conductive, sensitive to high reflectance of light, and itâs able to endure extreme temperatures. Silver has historically been used in coins, photography, jewelry, and silverware. Today, silver has a large industrial application, where it is used in batteries, brazing, soldering, catalysts, and electronics. In addition, silver is also being found in new emerging technologies, including medical applications, water purification, solar energy, mirrors, and coating.
Silver is traded on multiple future exchanges, including, Australian Securities Exchange, Chicago Board of Trade, Dubai Gold and Commodities Exchange, New York Mercantile Exchange, and the Tokyo Commodity Exchange. There is also large network of gold and silver dealers that sell physical bullion coins and bars.
There a multiple ways of investing in silver, including buying the physical metal itself, ETFâs, silver certificates, online accounts, and silver stocks.
Physical metalPurchase physical silver bullion coins and bars from a dealer.
ETFâsThere are multiple silver ETFâs but, iShares Silver Trust (SLV) is one of the most popular silver ETFâs. The trust holds physical silver in a custodian bank, and is designed to reflect the price of silver on the market less expenses and liabilities. Although you are subject to the risk of relaying on a custodian to actually hold your silver, this EFT is a very cost efficient instrument and an excellent trading vehicle.
StocksSilver mining stocks offer leverage to silver as their profits go up more than physical silver itself. Because of its leverage mining companies offer more upside potential than physical silver. However, picking the right stocks makes all the difference since mining shares are inherently more risky.
Online Silver AccountsGoldmoney works just like online banking but your account is denominated in gold grams or silver ounces. Once you signed up for an account you will wire your US dollars, Euros, or British pounds into your goldmoney account. You will use that money to buy silver. Gold money will then go out on the London bullion market association and fund your account with physical silver.
Silver future contractsFuture contracts of silver can be bought on a futures commodity exchange. Futures are popular among trader and offer a lot of leverage with high rewards and high risks.
Silver is 16 times more abundant than gold in the ground and it was priced at comparable ratio for hundreds of years. However, over the last 40 years the relation between gold and silver has been fluctuating between 15 and 90. The gold to silver ratio give precious metals investors an idea of which metal is more under or overvalued.