Investors and traders may hold physical silver or other investments that are backed by the precious metal itself.
Precious metals such as silver have long been an alternative to traditional investments such as stocks and bonds. When times get tough, or the economy faces severe inflationary pressures, some investors turn to silver to hedge their bets or to invest more defensively.
Investors like silver for many reasons, but many see it as a store of value in uncertain times, while others see silver as protection against inflation. Traders like silver for its high volatility and price swings.
If you are ready to trade and invest in silver here is a quick guide to help you get started:
- Select a silver market to trade or invest in: Choose between spot and futures prices (XAGUSD) or a selection of silver stocks and ETFs.
- Make a trading and investing plan: Decide whether you would like to trade on silver short-term or invest in silver in the long-term - and how you're going to manage your risk.
- Open a live account: Fill in our online form to create a trading account or invest account.
For a more comprehensive overview of how to trade and invest in Silver, follow our in-depth guide below.
Ways to Invest and Trade in Silver
Silver investing and trading are two methods of gaining exposure to the price of silver (XAGUSD). Investing in silver assets would give you ownership of the underlying, while trading silver is purely speculative. There are a variety of silver markets available to trade in, including:
Owning physical silver, either as coins or bullion, is a psychologically and emotionally satisfying way to invest in silver. You have possession of it and can use it, if necessary. And in some cases, it’s relatively easy to access.
If the price of silver rises, you can make a profit on silver coins and bullion, but that’s the only way you’ll make money here, since the physical commodity does not produce cash flow, unlike a quality business.
Risks: It can be easy to overpay for physical silver, so be sure to note the spot price to ensure that you’re getting a fair price. Similarly, if you need cash in a hurry, you may not be able to get the full value for your physical silver, especially if you need to go through a dealer.
ETFs that own silver
If you don’t want to own physical silver directly but also want a lower-risk method, you can buy an exchange-traded fund (ETF) that owns physical silver. You’ll have the potential reward for owning silver if the price rises, but fewer risks such as theft. An ETF that owns physical silver will deliver the return of silver prices minus the ETF’s expense ratio.
ETFs offer another advantage, too. You’ll be able to sell your silver at the market price, and the funds are highly liquid. So, you’ll be able to sell your funds at what’s likely the best price, and you can do so on any day the stock market is open.
The two main ETFs owning physical silver are iShares Silver Trust (SLV) and Aberdeen Standard Physical Silver Shares ETF (SIVR). Traders can also wager on the silver market via an ETF that owns futures contracts through ProShares Ultra Silver (AGQ), though it’s better as a short-term bet than a long-term hold, because of how the fund is structured.
Risks: Like gold and other commodities, silver can be volatile, especially over short periods. But with an ETF you’ll be able to dodge some of the bigger risks of owning physical silver yourself, namely the risk of theft, the illiquidity and the poor pricing when it’s time to trade.
Silver mining stocks
You can also take advantage of a rising silver market by owning the stocks of companies that mine the metal.
By owning a miner, you can benefit in two ways. First, if the price of silver rises, the company’s earnings should rise along with it. In fact, silver miners’ profits will rise faster than the price of silver, all else equal. Second, the miner can raise production over time, also increasing its profits. That’s an extra way to win with silver, over and above just betting on the price itself.
Some of the most profitable silver-mining companies are even able to offer investors dividends, which may be appealing for those who are in it for the long haul.
A dividend is especially attractive in the often-unstable mining sector because it gives investors a degree of security: if a company pays a dividend, it generally feels that it has the cash to do so and believes it will have the ongoing profits it needs to keep those payments coming.
Risks: Any time you invest in an individual company, it’s important to do extensive analysis on it, to be sure that you’re buying a high-quality company that can succeed. Many miners are risky outfits, and some have yet to dig a hole in the ground, let alone mine silver from it. Plus, because their profits depend on the volatile price of silver, mining stocks can be volatile, too.
ETFs that own silver miners
If you’re not looking to do a lot of analysis on silver miners but still want the advantages of owning a mining company, you can turn to an ETF that owns silver miners. You’ll get diversified exposure to miners and lower risk than owning one or two individual mining stocks.
Three ETFs are classified as silver miners, according to ETF Database: Global X Silver Miners ETF (SIL), iShares MSCI Global Silver Miners ETF (SLVP), and ETFMG Prime Junior Silver Miners ETF (SILJ).
Risks: A sector ETF reduces the costs of any single miner doing poorly, but anything that hits the whole industry, such as a falling price of silver, will likely ding the fund significantly. And pay close attention to what’s in those funds, since they’re not all created equal. Some may offer more exposure to higher-quality companies, while others focus more on riskier junior miners.
Silver derivatives are a popular way to wager on the rising or falling spot and futures prices of silver without any of the hassles of owning physical silver. Derivatives are a form of a contract between a trader and a broker aimed at profiting from the price difference between when the position is opened and when it closes.
Silver derivatives are an attractive way to play the silver market because of the high amount of leverage available.
In other words, you must put up relatively little capital to own a relatively large position in the metal. If the silver price moves in the right direction, you’ll make a lot of money very quickly, though you can lose it just as quickly if you’re wrong.
Risks: The leverage in trading works both ways, meaning it magnifies your gains and your losses. If the market moves against you, you’ll have to put up more money to hold the position. And if you can’t, the broker will close out the position and you’ll be stuck with a loss.
Trading Silver (XAGUSD)
When you trade Silver through derivatives like XAGUSD, you’re entering a contract for difference, which is an agreement to exchange the difference between the opening and closing price of your position.
Derivatives can be advantageous if you’re a trader with a short-term outlook. This is because leveraged trades enable you to speculate on the price of an asset by going long (buying) or going short (selling).
One of the main benefits of leveraged trading is the ability to use leverage, giving you full market exposure while only having to commit a deposit to open your position (known as a margin). But trading with leverage carries risk. While it can amplify your profits, it can also magnify your losses.
You might want to trade silver if:
- You want to speculate on the price of silver rising or falling
- You want to leverage your exposure
- You want to take shorter-term positions on silver
- You want to hedge your portfolio
- You want to trade without owning the underlying asset
How to trade silver?
How is silver traded using contracts for difference? Derivatives are flexible instruments that allow traders to speculate on various silver price fluctuations, whether it’s an upward or a downward movement. Derivatives are considered more suitable for taking a short-term position on the XAGUSD price, due to overnight fees.
To start silver trading online, rather than buying physical metal you could sign up for an account with a provider like CAPEX.com. Rather than requiring a specific silver trade app, you can trade silver derivatives along with other commodities, stocks and ETFs.
If you would like to start trading on silver with CAPEX.com follow these steps:
- Create a trading account
- Choose the underlying silver product you want to trade
- Use your trading strategy to identify potential trading opportunities
- Open your first position
- Monitor your trade using technical and fundamental analysis
- Close your position based on your trading strategy
Read also: How to trade Gold
Pros and cons of trading silver derivatives
Commodity prices can be highly volatile, experiencing wild price swings. Trading silver derivatives is a way to try to profit from drastic silver price fluctuations, though the chance of making large profits goes hand in hand with the risk of large losses.
Trading silver saves you the cost of paying for silver storage. It also gives you the opportunity to trade silver in both directions. Whether you have a positive or negative view of the XAGUSD price, you can take a long or short position to try to profit from the price movement.
Moreover, trading silver through derivatives is often commission-free, with brokers making a profit from the spread and traders trying to speculate on the overall change in price.
The 10% margin offered by CAPEX.com means that you need only 10% of the value of the trade you want to open, and the rest is covered by your provider. For example, if you wanted to open a 100 ounces trade on Silver, you’d put down a margin (10% with CAPEX.com) to trade the movement of silver price – an initial sum of $200 if Silver trades at $20 per ounce.
However, you should be aware that trading with leverage also carries risks as they are leveraged products that multiply the size of losses if the price moves against your position, as well as maximising gains if the price moves in the same direction. That’s because any profit or loss is calculated using the full size of the position, rather than your margin amount. So, with our XAGUSD trading example, your profit or loss would be calculated on the full $2.000, not your $200 margin.
It is important to do your own research and understand how leverage works before you start trading.
You should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader.
Our demo account is a great place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how leveraged trading works – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.
Investing in Siver
When you invest, you’re taking direct ownership of shares in a company or ETF. Because of this, investing might be preferable if you have a positive long-term outlook on that share or ETF because you’ll stand to benefit from any price increases. You could also receive dividends and voting rights if available to shareholders.
Leverage isn’t available when you’re investing directly, so you’ll have to commit the full value of the position upfront. But this also means that your maximum risk is capped at the total cost of your investment. For example, if you bought $2.000 worth of silver mining shares, the maximum you could lose is $2.000 – if the share price falls all the way to zero.
Remember that, when you invest, you can only profit when share prices or the value of an ETF rises above the price that you opened your investment.
You might want to invest in silver if:
- You’re interested in buying and selling silver stocks and ETFs
- You’re focused on longer-term growth
- You want to build a diversified portfolio
- You want to take ownership of the underlying asset
- You want to gain voting rights and dividends (if paid)
How to invest in silver?
How to invest in silver using stocks? A stock is a security that represents an ownership share in a company. When you purchase a company's stock, you're purchasing a small piece of that company, called a share.
To invest in stocks online, rather than trade on silver prices or funds for speculation or hedging, you could sign up for an account with an investing provider like CAPEX.com. You will gain access to 10 global markets and +5.000 stocks.
If you would like to start investing in silver stocks with CAPEX.com follow these steps:
- Create an investing account
- Choose the silver mining stocks you want to invest in
- Use your investing strategy to identify potential opportunities
- Open your first position
- Monitor your position using technical and fundamental analysis
- Close your position based on your investing strategy
Read also: How to invest in Gold
Pros and cons of investing in Silver
There are several key reasons for investors to hold silver in their investment portfolios:
- Hedging against market volatility. Silver is seen as a safe-haven asset that could hold its value during times of uncertainty when stocks and bonds tend to fall in price.
- High liquidity. Silver is an actively traded commodity that offers tight bid-ask spreads which means it is highly liquid, including various silver-linked instruments from physical silver bullion to silver derivatives, silver mining stocks and silver exchange-traded funds (ETFs).
- Long-term demand trends. Silver’s use in growing technologies including electric vehicles (EVs), solar panels and 5G telecom equipment could increase demand in the coming years.
- Declining mining supply. Production from silver mines is expected to drop in the long term due to lower recovery rates from ore in the ground and a lack of new mining projects.
On the other hand, having silver exposure also has its disadvantages:
- Market volatility. The silver market is volatile, this creates opportunities for speculation but also raises the risk of losses.
- Changing monetary policy. Changes to central bank policies on interest rates can reduce the attractiveness of silver relative to other assets. Higher interest rates could make silver less favourable than interest-bearing savings accounts and other financial instruments.
- Storage costs. Holding physical silver is a direct way to gain exposure to the precious metal, but investors must arrange a safe place to store the metal and pay storage and insurance costs. Therefore, silver traders and investors might explore other options of silver trading, from silver mining stocks and ETFs to silver derivatives (XAGUSD).
What moves the price of silver
Silver, like any market, is driven by supply and demand. However, Unlike gold, the price of silver swings between its perceived role as a store of value and its role as an industrial metal. For this reason, price fluctuations in this market are more volatile than in the market for gold.
While silver roughly trades in line with gold as an item to be hoarded, the industrial supply/demand equation for the metal exerts an equally strong influence on its price.
Use in industry
The properties of silver make it uniquely positioned for use in industry – it’s highly conductive, anti-bacterial, malleable, and ductile. As such, silver is used in batteries, LED chips, dentistry, water purification, and medicine. All of this creates a steady demand for the metal that isn’t dependent on investment.
According to the World Silver Survey 2022 by the Silver Institute: “Silver demand is forecast to post steady gains in the next few years to successive record highs. Industrial demand for instance is expected to see initial gains as economies continue to recover from the pandemic and through structural change.”
The US Dollar
Silver is denominated in US dollars, which means that the two generally have an inverse relationship. So, if the dollar weakens, silver becomes cheaper to purchase, which can lead to increased demand and higher prices. Alternatively, if the dollar strengthens, silver becomes more expensive, and demand is likely to fall.
Sentiment surrounding the health of the global economy is an important driver for silver. Periods of economic expansion reduce interest in the metal as a store of value, with investors opting for other assets in a risk-on environment.
Conversely, during recessions and periods of uncertainty, investors tend to increase their exposure to silver. In times of high inflation, traders often consider silver a trustworthy store of value, as fiat currencies lose their purchasing power.
The availability of silver supply from mining also affects the market, as tight supply supports higher prices. The closure of silver mines in major producing countries like Mexico and South Africa during the Covid-19 pandemic provided support to the market as demand outpaced supply.
Given the strong investment demand for silver, its price tends to follow the direction of gold, which is the primary precious metal market. Silver is viewed as a more affordable alternative to gold for investors with smaller portfolios, as silver trades at much lower prices than the yellow metal.
The gold-silver ratio refers to the number of ounces of silver needed to buy one ounce of gold. Traders look at the gold-silver ratio to gauge the performance of silver relative to gold.
Silver price predictions - XAGUSD
The silver markets (XAGUSD) have climbed from the $18 per ounce level since the start of the Covid-19 pandemic, as investors have bought physical precious metals and financial instruments as safe-haven assets during ongoing economic uncertainty.
The silver price (XAGUSD) jumped to an eight-year high in February 2021, briefly touching the $30 per ounce psychological level, as the market attracted the attention of retail investors.
The price of silver has been falling by about 40% from highs, as precious metals markets have come under pressure from strength in the US dollar, with the Dollar Index (DXY) climbing to a 20-year high of 108.54 on 14 July 2022. Silver has underperformed gold as investment interest has waned.
Silver price is attempting to stabilize around the psychological threshold of $19 per troy ounce.
Silver price forecast for 2022 and beyond
“Geopolitical and economic issues, including the Russian invasion of Ukraine, multi-decade-high inflation, lower global growth projections, and increasing interest rates, present challenges to forecasting precious metals this year,” the Silver Institute noted in April.
Scotiabank’s silver price prediction for 2022, issued on 1 February, is an average price of $24.50 per ounce. While the bank is yet to update its forecast for the metal, its analysts are closely watching the silver price dynamics.
The World Bank’s Commodity Markets Outlook in April 2022 saw the silver price averaging $24.2 in 2022. The bank’s silver price forecast for 2025 saw the precious metal averaging $22.5 throughout the year, and continuing to fall to an average of $21 in 2024.
According to TradingEconomics’ global macro models and analysts’ expectations, “silver is expected to trade at $18.33/oz by the end of this quarter”. The website expects the commodity to trade at $17.30 in 12 months’ time.
While analysts are typically cautious in issuing long-term forecasts for commodities, algorithm-based forecasting services regularly provide price outlooks for larger periods.
WalletInvestor’s XAGUSD price forecast for 2022 is bullish – the website sees the precious metal closing the year at the $20.155 mark. The platform’s prediction for 2025 sees silver growing even further, to an average price of $29.059 by the end of that year.
Gov.capital, another algorithm-based forecasting service, issued a silver price prediction stating that the metal would close out 2022 at a potential average of $20.601. The platform sees silver rising to an average of $34.833 by the end of December 2023, $50.904 by December 2024, and $73.486 by December 2025.
No analyst or forecasting service provided a silver price forecast for 2030.
When considering silver price predictions, it’s important to keep in mind that high market volatility makes it difficult to give long-term estimates. As such, analysts can and do get their predictions wrong.
Read also: Gold analysis and price prediction
History of Silver
Evidence of the first silver mines dates to 3000 B.C. in Anatolia, a site in modern-day Turkey. Most of the silver mining in that part of the world shifted east to Greece by 1200 B.C., as that civilization expanded. In 100 A.D., Spanish silver mines fed the Roman Empire's economy.
Silver's popularity increased in the years 1000 to 1500, thanks to improved technology, more mines, and better production techniques. The quest for silver and other precious metals gave rise to Spanish fleets that sailed all over the world, seeking wealth and new lands to conquer. It was a vital part of the mercantile system.
Silver production in the United States peaked in the 1870s with the Comstock Lode in Nevada, and by the end of the 19th century, humans produced more than 120 million troy ounces every year. One of the most iconic ways humans used silver was as a form of currency.
In the early 1960s, supplies of silver in the United States dwindled to all-time lows. Therefore, the U.S. government decided to stop using silver in its coins after 1964. Any American dimes, quarters, half dollars, or dollar coins with a date of 1964 or earlier contain 90% silver. If the price of silver is $20 per ounce, these silver coins are worth approximately 14 times their face value in the precious metal content alone. A silver dime is worth $1.40, whereas a silver dollar is worth $14 at a $20-per-ounce price.
Silver Trading and Investing - FAQs
Can I profit from trading in the silver price?
Yes, if the position you take on whether silver’s price is correct you would generate a profit. If you were investing in silver, you could only profit by going long. But trading silver markets with derivative products means you can take advantage of rising and falling market prices.
How do you trade in silver?
You can trade in silver with spot markets, futures, options, stocks and ETFs. To open a position, you’ll need a leveraged account.
What moves silver markets?
Silver is incredibly volatile as there are a wide range of factors that can influence its price, including its use in industry, the value of the US dollar, its status as a safe-haven investment, inflation and the demand for other metals.
Is Silver a good investment?
Whether silver is a suitable investment for you depends on your risk tolerance, market outlook and whether you expect it to rebound or fall further, among other factors.
We recommend that you always do your own research, and consider the latest silver price news, market trends, technical and fundamental analysis, and expert opinion before making any investment decision. Remember that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.
Should I invest in Silver?
That depends on your view of the commodity. You will need to draw your own conclusions on how silver is likely to perform over the coming years. Keep in mind that past performance doesn’t guarantee future returns. And never invest or trade money you cannot afford to lose.
Will Silver prices go up or down in 2022?
At the time of writing, analysts were cautious about the outlook for silver prices in 2022, as the price could come under pressure in the second half of 2022 as central banks, such as the US Federal Reserve, raise interest rates.
Keep in mind that analysts can and do get their predictions wrong. You should do your own research to make informed trading decisions. Past performance is no guarantee of future returns.
Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.
Key Way Markets Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance and forecasts are not reliable indicators of future results.