For many people, silver as an investment is a popular form of provision for old age. But how exactly can you invest in silver, and what advantages and risks come with an investment in silver? In the article below we would like to answer these questions quickly and precisely.
Frauke Deutsch: why you can trust me as an expert on the subject of “silver as an investment”
With my company BullionArt I have been active in the market for silver art for almost 20 years. This means I can draw on a wide store of experience in trading silver. Silver is a popular form of investment. We at BullionArt want to fuse the quality of timeless art with the intrinsic value of silver.
Why silver as an investment?
The reasons why investors invest in silver are varied. Historically, silver counts as a recognised crisis currency and offers a kind of hedge against inflation. At the same time, industrial demand for silver is high, while worldwide silver reserves and production are limited.
The history of silver as a means of payment and a store of value goes back to antiquity. For centuries silver was a central component of numerous currency systems. The fascination silver holds for people continues to this day.
Market dynamics and the development of the silver price
Like gold, silver is one of the precious metals. For that reason people ascribe an intrinsic value to silver. At the same time, silver is also used in various areas of industry. Accordingly, complex market dynamics come into play with silver, and these influence how the price of the precious metal develops.
The following factors influence the silver price:
• Supply and demand: the supply of silver is limited, as only a certain quantity of the precious metal is produced each year and the reserves are finite. If demand exceeds supply, the price rises. Worldwide silver reserves currently stand at around 530,000 tonnes, which corresponds to only 20 years of production.
• Inflation and interest rates: many investors use silver, much like gold, as protection against inflation. Rising inflation can therefore increase demand for silver. Low interest rates can likewise have a positive effect on the silver price.
• Economic growth: silver is used in the chemical and electrical industries, among others. If the order situation in these industries improves, this can also have a positive influence on the silver price.
• Geopolitical crises: in times of geopolitical uncertainty, demand for precious metals such as gold and silver frequently rises.
After the price of silver reached an interim high in the 1980s, the price moved between about 4 and 5 dollars in the 1990s. From 2005 onwards the price of silver rose markedly again.
During the financial crisis a new high of over 40 dollars was reached. In the course of the coronavirus crisis the silver price picked up markedly once more and in 2024 again passed the mark of 30 dollars per troy ounce.
One figure that investors and analysts pay attention to is the gold-silver ratio. It indicates the relationship between the prices of gold and silver. Since 2011 the gold-silver ratio has trended upwards. In 2024 the ratio repeatedly passed the figure of 80, which implies that silver is undervalued compared with gold.
Forms of silver investment
Investors who want to use silver as an investment have various options. The most important are:
• Physical silver (for example coins, bars, silver sculptures)
• Silver ETFs and other financial products
• Shares in silver mining companies
Physical silver: this is real silver in various forms. The most common are silver bars and silver coins. Sculptures in silver are an interesting alternative, such as the silver sculptures by BullionArt.
Anyone who chooses an investment in the form of physical silver keeps the precious metal either at home or in another secure place.
Silver ETFs and other financial products: silver ETFs and similar financial products such as funds allow investors to invest in silver without owning physical silver themselves. Participation in the price development of the precious metal takes place here through the price development of the fund units, which track the silver price.
Shares in silver companies: various companies involved in silver production can be traded on the stock exchange. If demand for silver and therefore the silver price rises, the share price of such silver companies usually rises as well. There is also the possibility of benefiting from dividend payments.
Each of the ways of using silver as an investment mentioned above comes with its own advantages and disadvantages. Shares in silver companies are as a rule more liquid than physical silver. In return, however, investors also face company-specific risks.
Silver ETFs make it possible to avoid any storage costs for larger quantities of physical silver (bars, for instance), but there is a counterparty risk, since investors own only fund units and no real silver. Fees are also payable.
Many investors prefer direct ownership of physical silver. Equally, storing larger quantities of silver can be costly. Higher transaction costs may also arise on purchase and sale.
Silver sculptures as an insider tip for silver fans
Anyone investing in physical silver thinks first of all of bars and coins. There is, however, a visually particularly appealing alternative: silver sculptures. These offer a number of advantages over conventional silver investments.
Silver sculptures combine the inherent value of silver with the value of high-quality art. For investors with a long-term outlook in particular, this offers the opportunity to benefit from a rising silver price and from the potentially rising value of special works of art.
Beyond that, figurines in fine silver are also visually appealing. Investors can use them to hedge against inflation and to enhance the look of their own rooms.
Advantages of investing in silver
Silver as an investment offers investors a whole series of advantages. The most important are:
• Inflation protection and crisis currency
• Diversification of the portfolio
• A lower barrier to entry compared with gold
• Sharply rising demand for silver
Inflation protection and crisis currency: much like gold, silver is seen by many people worldwide as a way of hedging against rising inflation. Silver has been used as a currency in many places worldwide for thousands of years. A certain advance of trust in silver as a stable investment in times of crisis rests on this historical acceptance.
This can also be seen in the fact that, historically, the silver price has often risen significantly in times of high inflation.
Diversification of the portfolio: one of the basic rules of investing says that investors should not put their money into a single investment. Anyone who stakes everything on one or a few cards risks considerable losses if the market does not develop as hoped.
To prevent this, it makes sense to diversify your own portfolio through investments in numerous different assets. Ideally, investors should invest in different asset classes such as shares, bonds, property and also precious metals like gold and silver.
Lower barriers to entry compared with gold: gold is without doubt the most popular precious metal. Equally, the high gold price is a considerable barrier to entry for new investors. Buying larger gold bars is unaffordable for a good many investors. Here silver offers an inexpensive alternative, thanks to its considerably lower price per troy ounce compared with gold.
Sharply rising demand for silver: silver is in high demand not only among investors and in the jewellery industry. The precious metal is also used in various areas of industry. Smartphones, for example, are a considerable source of silver consumption. Each device contains an average of 306 mg of silver.
Demand for silver has also risen in the field of renewable energies in recent years. The solar industry is becoming an ever larger consumer of silver. Should the production of solar modules reach the forecast figure of 1,000 GWp by 2030, it could account for up to 94 per cent of annual worldwide silver production.
Risks and challenges
Although investing in silver offers a number of advantages, it also comes with some risks and challenges that cannot be dismissed.
The silver price is subject to considerable volatility. While the silver price stood at around 5 dollars per troy ounce at the turn of the millennium, in the course of the financial crisis it climbed at times to more than 45 dollars per troy ounce. In the period that followed, however, the silver price fell back to as low as 15 dollars.
The long-term trend does point upwards. Interim losses in value can never be ruled out, though. Aspects not to be neglected here are market manipulation and speculative influences on the silver price, which small investors can hardly foresee.
On top of this come problems and costs around the secure storage of larger quantities of silver. Investors do not usually leave large amounts of physical silver lying about in a drawer. Storing large quantities of precious metal securely involves additional costs, which can reduce the return.
Note: here you will find 21 mistakes that you as a private investor should definitely avoid when investing in silver.
Here silver sculptures by BullionArt offer an advantage over plain bars and coins. The sculptures can simply be placed in your own flat or house, because nobody (a burglar, for instance) recognises that they are made of fine silver. No storage costs arise here.
Silver compared with other asset classes
Silver differs from other asset classes such as shares, ETFs and property. At the same time there are also some things they have in common. Here is an overview of the decisive differences and similarities in each case:
Silver vs. shares
The performance of shares depends to a large extent on company performance. Market conditions and other economic factors likewise play a role. The company-performance factor does not apply to silver. With silver as with shares, however, the interplay of supply and demand determines the price in each case.
Unlike shares, silver earns no dividend. Any return therefore comes solely from a rise in the price of the precious metal.
Silver vs. ETFs
ETFs are exchange-traded index funds that track the performance of a particular share index. ETFs are therefore diversified by their very nature compared with other asset classes. Silver, on the other hand, offers investors the opportunity to diversify their portfolio by additionally investing in something other than shares or share funds such as ETFs.
ETFs come with management fees, which reduce the annual return to a small degree. With physical silver there are no such fees. In return, storing and securing larger quantities of physical silver can involve additional costs that do not arise with ETFs.
Silver vs. property
Property is a very popular form of investment. Compared with silver (and with many other asset classes), however, property is a very illiquid form of investment. Selling a property can often take months. Selling silver, by contrast, is considerably easier.
Unlike silver, property does offer additional ways of earning a return. Besides an increase in value, it also brings potential rental income with it. At the same time, owning property also involves ongoing costs.
Strategies for investing in silver
Anyone interested in silver as an investment can choose between various investment strategies. On the one hand there are different kinds of silver investment, as already explained above. Beyond that, a distinction can be made between a long-term and a short-term investment in silver.
With a long-term silver investment, investors aim at a gain in value over years or even decades. Long-term trends play the main role here, such as rising demand for silver from industry.
A proven approach with a long-term investment in precious metals as well as in shares is what is known as cost averaging. Here investors invest in the market regularly, regardless of how the price happens to be developing. In this way it is possible to invest at an average price over the long run. The risk of mistiming the market is thereby eliminated.
Set against this is a short-term investment strategy, which focuses above all on speculating on short-term market fluctuations. Anyone wanting to achieve returns with silver in the short term has to draw on extensive market analysis and try to time the market correctly, which can be difficult for private investors in particular.
A particularly popular approach is diversifying your own portfolio by buying silver. The price of silver depends in part on the economic development of certain branches of industry. At the same time, silver is also sought after as protection against inflation in times of economic uncertainty. As a result, the silver price develops to a certain degree independently of the share market.
Availability and scarcity of silver
The worldwide occurrence of silver is finite. Current reserves are estimated at only 530,000 tonnes. Beyond that, 55% of the 1,740,000 tonnes of silver produced comes from just four countries. Silver is thus a decidedly scarce raw material.
According to the German raw materials agency, demand for silver is likely to rise markedly in the coming years. The growth of the photovoltaic industry, among other things, is said to be the reason for this. Set against that are only limited possibilities for increasing silver production. It is therefore expected that, despite an anticipated rise in production to 27,000 tonnes per year by 2027, the silver market would remain in deficit in the medium term.
Even medium-term forecasts predict a ten-year high for the silver price before long. Long-term forecasts are of course very difficult here. If demand for silver rises as expected, however, this should have a very positive effect on the silver price over the long term.
Regulation and taxation
Value added tax is always payable when buying silver. While the reduced rate of 7% still applied to silver up to 2013, the value added tax payable has amounted to 19% since 2014. The option of saving tax through the margin scheme when buying foreign investment silver through domestic dealers no longer exists either.
Beyond that, capital gains tax can also be payable when selling silver. If profits arise on the sale of silver, they must be taxed at your personal marginal tax rate. There is a personal allowance of 600 euros per year.
Capital gains tax is only payable, however, if the silver acquired is sold again within 12 months of purchase. Once the twelve-month holding period has expired, any profits are free of withholding tax.
Practical tips for investors
Anyone who wants to use silver as an investment has to bear a number of things in mind. First, you have to decide on one of the many ways of investing in silver. First and foremost among these is buying physical silver.
Physical silver comes in various forms and sizes – from small silver coins, through silver bars of different sizes, to artfully made silver statues by BullionArt.
One particular point to note here: the smaller the silver unit, the larger the share of production costs. This premium makes buying silver more expensive and thereby reduces the return on a later sale. It therefore makes sense to invest in larger units of investment silver straight away rather than buying in small pieces.
Another point that has to be considered is choosing the right dealer. Today there are numerous different precious metals dealers, both physical and online. Investors should be sure to choose a reputable dealer, because supposedly cheap offers can well conceal a scam.
Silver as part of provision for old age
Silver can certainly be an option for private provision for old age. In that case the silver investment should ideally be part of a diversified portfolio spread across various asset classes.
The silver price is subject to regular fluctuations. Historical price developments suggest, however, that the price rises above all in times of crisis. Rising demand within industry could also mean that the silver price rises over the long term. At the same time, though, the silver price develops to a certain degree independently. That makes silver suitable as a means of diversifying your own investments.
Compared with classic pension products, silver offers advantages as well as disadvantages. The advantages include, besides the diversification already mentioned, the absence of ongoing costs and of a counterparty risk, as exists with investment funds, for instance. Classic retirement products in particular, such as life insurance, building society savings contracts and the like, bring only comparatively low returns. Anyone who sells their investment silver at a favourable moment can certainly achieve higher returns.
Future prospects for silver
Various factors play a role in the future prospects for silver. Besides the quantity still available to be mined, these include above all further technological development and the industrial demand connected with it. Geopolitical and economic trends can also have a decisive influence on how the silver price develops from here.
Experts predict a bright outlook for silver, brought about among other things by a change in drive systems in the car industry and by rising demand for solar modules. The switch to purely electric mobility alone could result in additional demand for silver of up to 80 million ounces per year.
Beyond that, silver is also used in numerous other areas of industry. Silver is used, for example, in LED chips, for glass coatings, in water treatment and in medicine. Worldwide demand for silver is already close to a record level.
At the same time, the potential for further increases in silver production is limited. A future peak in demand could therefore lead to a silver market in deficit over the long term.