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Investing in Silver

Written by Nik Rainer | 5 minutes
THU 20-06-2019
Ask a group of random investors if they pay attention to commodities. A large part will answer that they closely follow the price of oil and gold. Understandable, because these are the most traded commodities. Yet it is possible to invest in almost every conceivable (sustainable) commodity.

From palladium, rice, wheat and oranges, to coffee and cocoa. If it exists, you can probably invest in it. Also in silver, if that interests you.

The rise of silver
Perhaps you have jewelry and silverware? Or is it incorporated? Perhaps less known, but the good electrical conductivity makes silver a particularly suitable material in electrical and electronic products. For that reason, silver is increasingly being used for industrial applications. Silver also has a high degree of resistance to bacteria, which makes it very suitable for the production of surgical instruments. Opposite this question is that the number of silver mines is limited.

Also not unimportant: silver is also called the brother of gold by stock market traders. Just like gold, for many investors silver is a safe haven in turbulent trading times. And there has been plenty of turbulence in recent years. No wonder that the shiny metal has also become increasingly popular among investors.

A closer look at the price of silver
Just like the gold price, the silver price is expressed in dollars per troy ounce, or 31.1034768 grams. After having moved between $ 9 and $ 19 for years, the silver price reached a peak of no less than $ 49.50 in April 2011. From that moment on, the price dropped to $ 13 until the end of 2015 with the necessary "panic peaks". Since the summer of 2018, the price has fluctuated between $ 14.00 and $ 16.50. If you are an BinckBank customer for your own investment, once you have logged into your account, you can follow the silver price development in real time.

How to invest in silver?
If you want to invest in silver, you can of course buy physical silver. However, it can also be done via the stock exchange by buying physical silver ETFs or (indirectly) through investments in silver mines.

Physical silver ETFs
A number of banks actually have silver in a safe and make it possible to invest in silver via an ETF. At the Amsterdam stock exchange, for example, you will find the ETFS Physical Silver ETF. In the opinion of the ETF, the operation is simple. If the silver price is $ 14.50, it will be converted to euros and you will receive the price (theoretical value) of this silver ETF. At least almost. The provider of this ETF charges 0.49% annually in costs. This cost item depresses the current value of the ETF over time. In this way there is a difference between the current value of the ETF and the theoretical value.

What else?
Just as with many other raw materials, the silver price can fluctuate considerably. Do you expect the price to rise and are you considering an investment? Then take into account the fact that the silver price can fall to levels below your purchase value. This is called price risk. Also be aware that you do not receive a dividend and that you run currency risk. When trading in the ETF you also have to deal with a bid and ask price. With purchase you pay slightly more and with sales you receive in most cases slightly less than the current value. In any case, keep in mind that the ETF, except for a cost reduction, follows the silver price one-on-one.

Invest in silver mining companies
Rather than the precious metal itself, invest in mining companies. These so-called miners mine silver ore with a specially equipped infrastructure. Some players in this area are First Majestic Silver Corp. and Coeur Mining Inc. Realize that investing in such companies is generally more risky than investing in large solid companies with good financial health and proven business models. That is why spreading is important.

For a long time this spread could easily be achieved with various ETFs, for example with the iShares MSCI Global Silver Miners ETF.

Investing in commodities at BinckBank

At BinckBank you can invest in many individual miners and ETFs that track commodities. We also offer a substantial selection of investment funds with the theme of commodities. We even have a smart tool: the "Fund comparator". With this tool we help you on your way with making the investment choice (in raw materials) that is bestsuits you. You can compare all investment funds and ETFs offered via BinckBank in many ways.
If you're not yet a BinckBank customer, do you want to learn more about investing in silver or other commodities and are you interested in an account? Open it immediately!

The author has no position in the funds mentioned above.
Investing involves risks. You can lose your stake.


Nik Rainer

Nik joined BinckBank in 2016 as part of the team responsible for rolling out the Saxo Bank international service. Nik has held positions at various banking institutions such as Hambros Merchant Bank, Standard Chartered Bank and Morgan Stanley and brings his solid financial background to the role. Working with the development of new client services and relationship management, Nik also contributes to local publications and forums.

The information in this article should not be interpreted as individual investment advice.  Although BinckBank compiles and maintains these pages from reliable sources, BinckBank cannot guarantee that the information is accurate, complete and up-to-date. Any information used from this article without prior verification or advice, is at your own risk.  We advise that you only invest in products that fit your knowledge and experience and do not invest in financial instruments where you do not understand the risks. 

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