Silver might be considered second best by many, but it is beating gold on the stock market this year. Investors took an early shine to gold in the pandemic, and the price hit a record high in the summer.
But silver has since come out on top. By early September, the value of silver had risen 52 per cent since the start of the year.
And while its rise has now been reduced to 39.9 per cent, a £10,000 investment made at the start of the year would still be worth £13,991. The same investment in gold would be worth £12,781.
By early September, the value of silver had risen 52 per cent since the start of the year
Precious metals have been boosted by the stock market turmoil, which has sent investors flocking to so-called ‘safe haven’ assets that are seen as a more reliable way to store value during times of economic uncertainty.
Gold and silver have benefited partly because falling interest rates have made it less attractive to buy government bonds – another traditional safe haven.
Gold is the flagship safe-haven metal, while silver tends to be riskier. This is because most gold is held in investments, which keeps the price steady, but more than half of the silver produced each year is used as an industrial metal.
This means it can be much more susceptible to swings in demand or predictions about the world economy – as economic growth usually indicates more metal will be consumed.
How is the metal used?
Until the arrival of digital cameras, silver’s main use was in photographic film.
It is now used in a variety of everyday objects from mobile phones to parcel-tracking chips and, of course, jewellery and tableware.
It is highly resistive, and malleable and is the best conductor of all metals. It is also anti-microbial.
This means it is used in medical equipment and water purification, as well as electronics.
One more recent area of rapid growth for the use of silver is solar panels.
At the moment this is likely a strength for silver – because when the global economy begins to recover from Covid and industrial production picks up, the need for it will rise, and with it, its value.
Silver is also a key green metal and is used in solar panels. The push for renewable energy could raise prices considerably in the long-term.
Experts at Citigroup predict silver prices could boom if Joe Biden wins the U.S. presidential election, and delivers his sweeping green infrastructure plan.
It has been a rollercoaster ride for silver prices over the past decade, peaking at $48.55 an ounce in April 2011, before falling to $14.11 in September 2018.
Gold prices have rallied by more than a third this year and have broken the $2,000 (£1,530) an ounce mark for the first time ever.
Many think if gold continues to surge – with predictions of up to $3,500 (£2,677) by the end of 2021 – then silver will rise as well.
John Meyer, investment director at SP Angel, says given how much money has recently flowed into gold, it could be a good moment to consider silver.
He says: ‘There is so much money in gold exchange-traded funds that once people start to sell and money starts to come out, you could lose in the stampede.’
He also points out that silver is almost always a by-product of mining for other metals, mostly copper and gold.
When prices of a commodity fall sharply, companies often begin producing less to bolster prices.
A £10,000 investment in silver made at the start of the year would still be worth £13,991. The same investment in gold would be worth £12,781
But because silver is usually not mined on its own, if prices start to tank, provided copper and gold prices are still steady, silver will be produced at the same rate.
Cautious investors who want to dabble in silver could choose to buy shares in one of the established precious metals miners.
FTSE 100-listed Fresnillo and FTSE 250-listed Hochschild Mining both have silver mines but also produce gold – which means they tend to benefit from rises in either metal.
Fresnillo, which has seven silver mines in Mexico, is so far the year’s best-performing blue-chip stock – with its market value more than doubling from £4.7 billion at the start of the year to £9.8 billion now.
Hochschild Mining has jumped by 36 per cent to £1.3 billion. Investors could also look at exchange-traded silver funds, such as the Aberdeen Standard Physical Silver Shares ETF.
Or there are funds that track miners and prices – such as Merian Gold & Silver.
Silver can also be bought as physical bullion. This can be done through companies such as BullionVault, which can store it for you for an annual fee.
The Royal Mint also offers silver in bars ranging from 100 ounces to 1 kilogram – and can be sent to you directly or to a storage facility of your choice.
But analysts warn investing in silver is not for the fainthearted. Russ Mould, of broker AJ Bell, says: ‘Silver itself offers no yield and the price can be very volatile, so trading silver via trackers like exchange-traded commodities can be dangerous work and this is only suited to risk-tolerant investors who are able and willing to suffer losses in pursuit of profits.’