Silver is often seen as the not so popular brother of gold, but there are actually some ideal circumstances in which silver is a better choice than gold.
Gold bullion may be perceived as the foundation of the world’s wealth. It has long since proved to hold its value even in the most volatile of economic circumstances, but silver has its own investment advantages.
Think of it in the long term
Silver should be considered a long term investment primarily because all silver bars are taxed at a rate of 20 per cent. This gives the metal the time required to increase in value so that you can realise your investment and still make a profit.
And the long terms prospects are good, although it must be stressed that silver bullion is more volatile than gold. Between March and August 2020, silver prices rose by 140 per cent. Silver bullion also increased by 10 per cent after the Russian invasion of Ukraine in 2022.
Silver tends to be a popular ‘go to’ reserve in times of crisis, when other stocks are too volatile and gold is too expensive. It helps to spread the risk and increases the portfolio diversification as its use and demand in manufacturing is still being discovered.
The industrial use of silver
56 per cent of the supply of silver is used in industry. As the world turns more and more towards environmentally friendly ecologically inspired technological inventions, silver is going to be more in demand. As a metal it is electronically conducive, reflective and thermally conductive. As a result, its use is prevalent in electronics, batteries, medical applications
The fact of the matter is, the stocks of silver are declining. Governments tend not to stockpile silver in the same way as gold, partly because it takes up so much space (requires about 128 times more storage space, and is inclined to tarnish over time. So if there were to be a sudden demand in silver, possibly due to a global crisis such as the Ukrainian invasion, then demand would increase, as would prices as a result.
The difference between sterling silver and silver bullion
Silver bullion is 99.9 per cent pure. Sterling silver is 92.5 per cent pure.
In its purest form, silver is too soft and malleable to be used in most applications. It can be used in more delicate jewellery designs – pieces that will not take much wear and tear so will not decline in quality. Pure silver is also used in most industrial applications.
To make it more suitable for a wider range of different applications and designs, an alloy can be added to the silver to give it additional strength. Although this makes it more durable for a different number of uses, it does make it more prevalent to oxidisation.
Pure silver, on the other hand, will tarnish, but will never oxidise or rust.
Historically sterling silver was used in common coinage, with evidence of its monetary use dating right back to the reign of Henry II back in the twelfth century.
So is silver a good investment opportunity?
In short, there are three main reasons why silver should be considered a viable long term investment opportunity:
- Its use in industrial applications is continuing to grow with the advances in electrical and battery powered technology. Silver is a crucial component.
- Its rarely stocked by governments as it requires too much space and storage. As a result, demand for silver could skyrocket in volatile times, which will push prices up.
- Historically its value has been volatile, but the overall trend is upwards. It could be a fruitful diversification in your overall portfolio.
