Investing in Silver

Silver enjoys a reputation for being one of the most stable and valuable precious metals for investors of all levels today. It consistently performs well in the commodities market and can stabilize and diversify your portfolio effectively.

However, before you invest in silver, you can benefit from understanding how it is priced and what kind of performance you can expect out of it. You can also utilize the fundamentals of investing in silver to grow your wealth and save for your retirement.

The Historical Use of Silver

Silver as a form of currency dates back to 3000 BCE when early civilizations like the Athenians and Mesopotamians first created coins from it. It became a standard form of currency throughout this part of the world and was often combined with gold to make a mixture called electrum with which to make coins.

Silver also became a standard form of currency in the earliest days of the United States. In 1794, the Mint began making coins from silver. These coins included the Flowing Hair silver dollar, the Draped Bust silver dollar and the Seated Liberty silver dollar. The Draped Bust silver dollar remains especially popular among coin collectors today.

The earliest recorded value of silver in the U.S. was $1.29 for a troy ounce. This price remained standard until the Civil War. After the war, prices for an ounce of silver fluctuated. By the early 1900s, prices had gone over $10 for an ounce.

Still, compared to gold and platinum, silver remains the most affordable precious metals for investors to buy. Prices for a troy ounce of silver have not gone above $140 for the last 100 years.

Why is Silver Valuable?

As you contemplate whether or not to add silver to your portfolio, you might wonder what actually makes this precious metal so valuable. Why do investors want to buy it today, and why is the demand for it so high?

Silver is valuable as a precious metal investment for a number of reasons. First, it is a limited natural resource, meaning supplies of it are finite. As the demand for it continues to grow, silver retains a high value among investors and consumers alike. This high demand for it helps silver retain or increase its commodities market value.

Further, silver is versatile and can be used for a number of different applications. Manufacturers use it to make products like auto parts and cell phone components. It is also used to make batteries and parts of electronics.

Even more, silver is a form of global currency. Most countries around the world accept it as a form of payment for goods and services.

When you add it to your portfolio, you have the reasonable assurance of it performing well and adding to your wealth. You can also cash it out and use it as payment regardless of where you retire.

Some Benefits of Investing in Silver

A number of benefits come with investing in silver today. Primarily, silver is affordably priced, especially compared to other precious metals like gold and platinum. If you want to buy into the precious metals market, you can easily do so when you buy silver, as prices for an ounce typically remain under the $50 mark right now.

Further, silver is in high demand right now among manufacturers and jewelry makers. This high demand safeguards the price of your silver investment. You can buy into it with the reasonable assurance of it at least holding, if not increasing, its value over time.

Even more, silver retains its value relatively well even when economic factors like recession and inflation can sink other assets like stocks and bonds. You avoid the fear of checking your silver prices, only to find they have fallen because of high inflation numbers or an ongoing recession. This stability can give you the peace of mind you want when you are saving for retirement.

Finally, you can buy silver in a variety of forms today. You can get it in bars, bullion and coins when you buy it from a trusted company like Sedona Bullion.

Where is Silver Mined Today?

Deposits of silver are found in a variety of countries today. It was first discovered in Turkey in 5000 BCE. However, it is now found in dozens of locations around the world and one of the most actively mined precious metals.

Currently, the largest producer of silver in the world is Mexico. This country produces more than 5600 metric tons of silver each year. Production is owed largely to the Mexican silver mining company Fresnillo, which is the world's largest silver producer based on volume.

Other countries that produce silver include:

• Peru
• China
• Chile
• Russia
• Argentina
• The U.S.
• Bolivia
• Australia
• Poland

Silver can also occur naturally as the by-product of the extraction process of other precious metals like copper, lead and zinc.

The dozens of silver mines throughout the world produced more than 26,000 tons of silver in 2022. That amount was an increase from the 25,000 tons produced in 2021 and the 23,500 tons produced in 2020. The highest production year came in 2018 when silver mines produced close to 27,000 tons that year.

How Much Silver is There Today?

As noted, the silver mines throughout the world produce tens of thousands of tons of silver each year. The yearly production adds to the amount of silver that already exists today.

Estimates put the current amount of silver at four billion ounces. This estimate is thought to be conservative, however. Still, most of the silver available in the world today comes in the form of bullion and bars.

The U.S. government is one of the largest holders of silver today. It began collecting and stockpiling silver in 1968.

The U.S. Treasury donated 165 million ounces of silver to the Silver Strategic Stockpile, also called the Strategic and Critical Materials Stockpile. Even after 25 million ounces were removed in 1970, it is thought that the U.S. still owns around 140 million ounces of silver.

As with the U.S. gold supply, the stockpile of silver that the U.S. owns is kept at Fort Knox in Kentucky. The silver reserves are kept as a form of protection against inflation and economic instability. It also acts as an alternative to gold bullion and an affordable investment option.

The Jewelry Making Demand for Silver

Jewelry is one of the most common consumer goods made from silver today. In fact, jewelry manufacturers place a significant demand on the world’s supply of silver each year.

For example, in 2022, jewelry manufacturers utilized around 202 million ounces of silver with which to make necklaces, rings, earrings and other pieces of jewelry. This demand is double the amount of silver utilized in 2021.

Moreover, India was the largest consumer of silver used for jewelry making both years. The demand for silver both years in that country was an increase from the prior year because of Covid lockdowns and the halting of jewelry making during the pandemic. After lockdowns were lifted, demand for silver increased significantly as consumers resumed ordering and buying jewelry.

This increased demand is expected to continue in the coming years, even as much of the world continues to experience inflation on consumer goods. Because of the predicted demand for silver in places like India and China, people who invest in this precious metal can anticipate solid returns on the money they put into it. Analysts expect silver to offer solid performances in the commodities market.

The Industrial Demand for Silver

Like the demand for silver for jewelry making, the industrial demand for silver likewise is expected to increase. Analysts predict that this demand will grow by eight percent in the coming months.

The industrial demand for silver comes as more investments are made in factors like the power grid, SG networks and photovoltaics. Growth in consumer electronics and increased vehicle production also are tied to the increased industrial demand for silver.

As it stands now, the demand for silver for industrial use tops more than 630 million ounces.

The United States is the world’s largest consumer of silver, utilizing around a fifth of the yearly production total. Other countries that consume large amounts include India, China and Japan.

Manufacturers use silver to make a wide variety of products. Some of the most common items made from or with silver include:

• Thermal or infrared coatings
• Silverware
• Solar panels
• Electrical switches
• Air conditioning parts
• Water purification components
• Photography mechanisms
• Mylar recording tape
• Adhesives
• Plumbing pipes
• Wire smoldering

Many chemical industrial processes use silver as a catalyst. Silver is also used in industrial processes for pigmentation, most commonly in the making of stained glass.

Investor Demand for Silver

Given the increased demand for silver for jewelry making and industrial purposes, it should come as little surprise that the demand for silver among investors likewise continues to increase. Investors know that the more silver remains in high demand, the higher the prices for it will climb.

With that, commodities analysts predict that investors will put high demands on the world’s silver supply in the coming months. Some say this demand will be as much as 13 percent higher than what investors purchased last year.

They theorize silver could skyrocket as well because of the fluctuating values in printed currency. As the American dollar and other forms of printed money lose value, silver retains much or all of its value. Investors know they can use silver to back up their portfolios’ value without having to worry about what impact the sinking or rising of printed money values will have on their investments.

Further, market analysts say inflation will persist throughout much of the world in the coming year. Silver retains its value even as paper assets like stocks and bonds lose theirs because of inflation. Investors who want to recession-proof their portfolios know they can achieve this by investing in silver.

What Determines the Price for Silver?

A number of factors go into determining the price that investors pay for silver. The most common factor that can drive up or bring down the price for an ounce of silver is production. When production of silver is high, there is more silver for investors to buy. Therefore, the prices for it may remain relatively low and more affordable for people who want to buy this precious metal.

Alternatively, when production levels for silver are low, the prices for it can increase notably. With less silver to buy, investors scramble to purchase the limited supply available to them. This increased demand can drive up prices significantly.

Additionally, silver prices tend to follow the same trends as those for gold. When gold prices go high, so do prices for silver, in most cases. Likewise, when gold takes a plunge in the commodities market, so does silver. Precious metals investors can typically predict how well silver will perform just by watching how gold itself performs in the market.

Finally, the economy, while not a major driving factor, can determine if silver goes up or down in price. By keeping watch of the economy’s performance, investors have a reasonable idea of what they might pay to purchase silver.

Understanding Silver Spot Prices

As a silver investor, you also need to understand what silver spot prices are and how they can apply to any silver that you want to buy. Simply put, a silver spot price is the price at which you could buy or have silver delivered to you right now. They are based on the futures contract of the most front month. For example, if you want to buy silver in July, the spot price you will pay will be based on the contract month for the most front month of September.

The silver spot price you are quoted will be based on the currency value in which you want to buy silver. For example, if you plan on using American dollars, the spot price for silver will be quoted to you based on that monetary system.

Spot prices for silver can also include premiums for additional costs associated with buying silver. These additional costs can come from factors like:

• Refining
• Mining
• Manufacturing
• Minting
• Hedging
• Warehousing

The premiums can also include the costs of marketing silver to buyers and investors.

How to Invest in Silver

Investing in silver is not nearly as complicated as what you might believe. In fact, one of the easiest ways to invest in silver is to open a self-directed precious metals individual retirement account, or IRA.

To open this type of account, you first need to select a custodian for it. Most custodians are financial institutions like banks or credit unions.

After you apply for and open the account, you can then fund it using cash or by transferring funds from an existing account, like a 401(k) or Roth IRA. Once you transfer the funds or put in cash to open the account, you can direct your custodian to buy silver on your behalf.

Your custodian will buy silver in the form that you choose. Your common choices are bars, bullion or coins.

You must also select a depository at which to keep your silver. You cannot legally keep it yourself if you want to utilize the federal and state tax advantages for this type of IRA. Your depository will keep your silver stored under your IRA’s name.

What to Do after Investing in Silver

After you invest in silver, you can then sit back and enjoy the dividends that come from putting money into this in-demand precious metal. As an investor, you should keep track of what silver is trading at on a regular basis. You can use this information to decide if or when to buy more silver or sell any silver you have to safeguard against losses.

The ideal way to keep track of your investment is to download an app that tells you real-time prices for silver. You can get updated information anytime using this type of resource to determine if your silver investment is performing well or if it has taken a dip in prices on any given day.

You can also get transparent information about silver prices when you buy yours from a supplier like Sedona Bullion that has a solid reputation for trustworthiness and honesty. Your silver supplier can give you updated information about what kinds of prices you can expect to pay for any silver you want to buy. You can also get details about how prices may vary for bullion, coins or bars.

Silver can be a solid addition to your investment portfolio. It has long enjoyed a reputation for steady performance in the commodities market and handsome returns for people who put their money into it.

Investing in silver in forms like bars, bullion and coins can be easier and more convenient when you get it from a trusted supplier. Contact Sedona Bullion to learn more about the fundamentals of investing in silver today.