Is silver a precious metal
The pale metal does not sparkle so nicely, is rather matt, and for the neck or the finger it is usually only the second or cheaper choice. If it were only about looks, silver couldn't compete with gold. But if you look at the performance of silver, the often underestimated commodity can very well keep up with its big brother, in fact, even surpass it: Silver is currently worth over half more than in April 2020, while gold is barely trading higher than twelve months ago .
At the same time, a look at the price trend on the stock exchange shows that anyone who invests in silver needs strong nerves. While the white metal temporarily traded below twelve euros per troy ounce in 2019, i.e. exactly 31.1034768 grams, it is currently being traded for just over 20 euros, and in 2010 silver even briefly scratched the 50 euro mark (see chart).
So the course jumps are big. Those who join at the wrong time can easily make losses. Financial experts such as Rainer Beckmann, managing director of the asset manager Ficon, assume that continued strong demand will drive prices up further in the future. He prophesies a "great future" for silver. Consumer advocates, on the other hand, regularly warn that silver as an investment is a risky and speculative thing. What is behind the silver boom and what interested parties should consider before buying.
Why are precious metals considered a currency in crisis?
Whenever things get turbulent on the stock market and in the world, investors like to flee into so-called hard currencies. Silver and gold are among the most popular. These raw materials are rare enough to be really expensive, but at the same time they are available in sufficient quantities to be used as exchange currency. A total loss is virtually impossible due to the sheer value of the material. Gold and silver have been used as currency all over the world for centuries.
Is silver the better gold?
In the past five years, the price of silver (plus around 50 percent) has outperformed gold (plus around 40 percent). However, because the silver market is significantly smaller than the gold market, prices also fluctuate more. Folker Hellmeyer, chief analyst at the investment consultancy Solvecon Invest, says: "Silver is more aggressive in downward movements and therefore more risky than gold. On the other hand, silver is usually more dynamic in upward movements too." In contrast to gold, silver is also affordable for people on a budget. Because a kilo bar of gold currently costs almost 50,000 euros, while a kilo bar of silver costs less than 1,000 euros.
How is the silver price calculated?
The price of silver is always given with the price per ounce, more precisely with the price for one troy ounce. This is the most common international unit of measurement. (The gold price is also given in price per troy ounce). An ounce of silver is currently worth between 20 and 22 euros. But be careful: the price is always traded in US dollars on the stock exchange. As a result, fluctuations in the dollar against the euro can mean that investors can make or lose money, even if the price of an ounce does not move.
Why is silver so popular?
A major advantage of silver is its versatility. The white metal is very popular both as a precious metal with jewelers and as an industrial metal for the economy. There, silver is used, among other things, for the expansion of renewable energies and digitization, for example as a conductor on circuit boards in smartphones and screens or in solar panels. Almost two thirds of the annual amount of silver mined is immediately used in some form. The "Silver Institute" expects global silver demand to rise by around eleven percent in 2021. The experts warn, however: If the economic recovery does not develop as strongly as expected, this could also have a negative impact on the price of silver.
How can I buy silver?
The most common way is the so-called physical purchase. This means that customers purchase the precious metal from a dealer in the form of coins or bars. According to Robert Hartmann, founder of Pro Aurum, the largest precious metal dealer in Europe, investment coins such as the Canadian "Maple Leaf" or the South African "Krugerrand" are particularly popular. Compared to coins that are minted in Europe (such as the Austrian "Philharmonic"), these have the advantage that they pay less tax when they are bought.
Why is silver significantly more expensive to buy than on the stock exchange?
The biggest catch with a physical purchase is the high mark-ups. Seller Hartmann calculates: "With physical silver there are tax, minting, freight and delivery costs on top of that. That means that today you have to pay 26.60 euros for a silver Krugerrand with us. The silver price on the stock exchange is around 21 euros. So that adds up to around 27 percent. " The surcharges for silver bars are even higher because they are subject to the full VAT rate (19 percent). The pale metal has to make up for these surcharges after the purchase.
How can I keep silver safe?
An often underestimated problem: If you buy silver for several thousand euros, you shouldn't just put it under the mattress or hide it in a sock box. The costs for a safe, a locker at banks or private providers are on top of the acquisition costs.
What are the alternatives when buying silver?
Exchange-traded securities offer an alternative to physical purchase. Although these don't shine as beautifully as a freshly polished silver coin, they are comparatively easy to buy and sell. ETCs (Exchange Traded Commodities) are special certificates that replicate the price of silver. The deposited silver is usually stored centrally in one place. ETCs are now also available as savings plans from a monthly amount of 25 euros. ETCs also involve risks that are difficult to understand for laypeople: The papers are designed as bonds. If the issuer goes bankrupt (as has happened quite often in the past), investors have to laboriously enforce their claims in insolvency proceedings. In one of the most famous scandals, investors in the Pim Gold company lost a total of around 140 million euros. Investment advisor Beckmann therefore strongly advises "to rely on physical deliveries for precious metals. Whoever owns the metal directly gains the highest level of security, since the precious metal then really belongs to him and is not shown purely via a security." Hellmeyer recommends that its customers invest no more than five percent of the money invested in gold or silver. Other experts cite an upper limit of ten to 15 percent, for example. Either way, in the end, investing in silver is a bet: that someday someone will be found who is willing to pay more for the metal.
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