Gold is the glamorous big sister, getting the headlines and most of the attention, but silver is the quiet, wealthy younger sibling. Silver works harder, with many more industrial applications than gold – and silver has cornered the jewelry market. It is a less extravagant, more affordable portfolio partner.
Silver sales soar
Investing in silver can be a nice entry-point for adding precious metals to your holdings. In fact, American Eagle silver bullion coins produced by the U.S. Mint far outsell the gold version on a per-ounce basis. Affordability is certainly one reason why. Here are some key considerations regarding silver investments:
- The silver market is much smaller than gold, and like gold, prices are extremely volatile.
- About half of the silver mined in the world is produced for industrial use, far more than gold. Only about 12% of gold is mined for industrial applications
- The 2012 average price of $31.15 was the second highest on record, according to The Silver Institute.
- Mexico is the world’s largest silver producing country, followed by China, Peru, Australia and Russia.
- Annual silver sales have recently seen record-setting volume, including physical bar investment, exchange traded funds and mutual fund sales.
Investing in silver
For years, precious metal investments were limited to physical holdings such as bullion bars, minted coins, medallions and collectable coins. But now investors can buy and sell silver futures on commodity exchanges, as well as own shares of silver exchange-traded funds and mutual funds.
Each investment has its own pluses and minuses. Silver bars require transport, storage and insurance. Coins and medallions are certainly easier to move and store, but you’ll pay a premium over bullion bar prices. While coins are easy to cash-in, medallions can be a bit of a chore to redeem.
Futures contracts are sophisticated and very risky investments, usually best left to professional traders. But ETFs and mutual funds provide ready liquidity and are easily accessible by investors, though still subject to wide price movements.
Investors may also want to consider investing in mutual funds and stocks of silver mining companies. Of course mining companies are a breed apart and don’t always strictly track silver prices. Miners must be analyzed by revenue growth, balance sheets, and production costs, as well as environmental and political factors.
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