Selected Bullion Investment Products: Silver

Silver Coin

Introduction

 

Silver is a metallic chemical element with the chemical symbol Ag (from the Latin argentum, for “grey” or “shining”) and atomic number 47. It is a soft, white, lustrous metal that has the highest electrical conductivity of any element and the highest thermal conductivity of any metal. Silver, in the form of electrum (a gold-silver alloy), was first coined to produce money around 700 BC by the Lydians. Later, silver was refined and coined in its pure form. The name of the British pound sterling reflects the fact that it originally represented the value of one pound of sterling silver. Today, silver is an important industrial metal, serving as a component in electrical conductors, mirrors, photographic film, and even disinfectant solutions. Of course, silver maintains great value as a precious metal, with widespread uses in jewelry, silverware, coins, and other collectables.

 

Silver as an Investment

 

Like other precious metals, silver is traded heavily as an investment. For over four thousand years, silver has been regarded as a form of money and store of value. However, since the end of the silver standard, silver has lost its role as legal tender in the United States. Like gold, the price of silver is driven by speculation and supply and demand. Compared to gold, the price of silver is notoriously volatile. This is because of fluctuations in demand between industrial and investment applications. Because of silver’s volatility, its price may swing 10-20% in a single week, which permits frequent profit taking for investors wishing to take short term positions in precious metals. Overall, however, the general trend of silver prices parallels that of gold, platinum, and other commodities. The price of silver has risen substantially in the past 10 years and has actually outperformed gold on a percentage basis in that time. The spot price of silver increased from $4.00 in 2001, to a high of over $48.00 in 2011—an increase of 1,100% in 10 years. With average annual gains of 110%, that is more than double the increase in gold over the same time period. Very, very, few investments have rivaled the performance of silver in the past decade. During 2015, silver prices have corrected to under $20, which potentially represents a great buying opportunity. Indeed, as global economic stability erodes and the demand for investment grade silver increases, the price of silver will skyrocket—with some leading experts predicting silver prices of $100 an ounce or more within the next 4 years.