How to invest in silver in Australia
Here's a guide to your different investments options, the benefits of investing in silver and the possible risks.
Like gold, silver has been a valuable commodity for hundreds of years and is now seen as a safe haven during volatile markets. In uncertain or higher-inflation environments like we have today, investors will turn to precious metals including silver, adding to their appeal.
Silver has remained valuable in part due to its inherent malleability. This guide will discuss different ways to invest in silver from Australia and some of the risks you may face.
If you're looking to invest in silver in Australia, you have 4 main options:
- Buy physical silver
- Invest in silver stocks
- Buy silver exchange-traded funds (ETFs)
- Trade silver via the futures market
Buy physical silver
If you're looking to invest in silver, you can do so by buying the asset itself and storing it.
This is one of the more traditional ways of investing in silver as it allows you to get your hands on the tangible asset. There are a few ways to get exposure to physical silver, including but not limited to purchasing silver bullion and silver coins.
"Bullion" refers to high-purity silver that is officially recognised as being at least 99.5% pure silver. When buying silver bullion, it's important to remember that you are purchasing by weight regardless of whether it's in the form of a bar, a coin or anything else.
More collectible forms such as commemorative silver coins will often be much more expensive per gram than silver bars, so check how much you're paying by weight before buying silver.
- Easiest way to start investing
- Physical silver is far cheaper than physical gold so you can get started for less
- Over the long-term, silver generally delivers inflation-beating returns
- Physical silver can sell at a premium compared to the spot market
- You have to store the silver somewhere
- Security risks – you lose your investment if it gets stolen
Buy silver shares
One common way to invest in silver is over the stock market.
When you buy shares in a silver mining (or related) company, you can typically expect your stock to rise in value as the price of silver increases.
The main difference between investing in physical silver and stocks in the silver industry is you're exposed to the same risks that come with buying into any company, such as bankruptcy. By that same token, there can be additional benefits such as dividends or potential higher returns.
In Australia, there are more than a dozen listed companies engaged in silver mining, including: South32 (S32), Silver Mines (SVL), Newcrest Mining (NCM), Golden Deeps (ASX: GED) and Investigator Resources (ASX: IVR).
- Control over your investment
- Leave the market when you want
- You might get dividends
- Stocks are vulnerable to market fluctuations
- Valuable metals can be especially volatile and prices may vary wildly for no real reason
Investing in silver ETFs
Investing in a silver-themed ETF can be an easy way of gaining exposure to silver prices or companies in the silver sector. ETFs are investment funds that trade on stock exchanges and track the prices of underlying assets.
Some silver ETFs simply track silver spot market prices while others track a collection of companies in the silver mining industry, or a combination of the 2. This makes ETFs an easy and flexible way of adding silver to your portfolio.
As it currently stands, there's only one pure-play silver ETF in Australia, the ETF Security "ETFS Physical Silver" ETF (ETPMAG). You can learn more about how this works in our comprehensive guide to ETFs.
- A quick, easy and flexible way of buying, selling and trading silver
- Gain far-reaching access to silver assets at reasonable prices
- Can be safer than buying individual stocks
- Can incur management fees, trading fees and other expenses
- You do not take any personal custody of silver
Compare online brokers to buy stocks and ETFs
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Purchase silver futures or options
By investing in silver futures, you are agreeing to buy an asset at a future set price. In other words, you are agreeing to pay today's prices for an asset that gets delivered sometime in the future.
If the price rises between the time the futures contract is purchased and the contract expiry date, buying at today's prices will be a profitable trade. The difference between the price you paid for an asset and its price at the time of delivery is the profit.
This system also lets traders profit from falling prices. If a trader thinks prices will drop, they can also buy a "short contract". This means they put in an order to sell the asset at today's prices for delivery in the future. Now, if prices drop between the time the short contract was purchased and the contract expiry date, the price difference will be the trader's profit for the trader.
With traditional futures trading, you're dealing with physical commodities. Typically only professional traders buy and sell contracts over the futures market.
Retail traders in Australia typically trade silver futures through contracts for difference (CFDs). CFDs are derivative investment products that allow you to trade on the future prices of underlying assets such as commodities, stocks and indices. Because they allow you to trade using borrowed funds (leverage), they can be highly risky and are only for more experienced traders. Learn more about CFD trading in the complete guide.
- Under the right conditions, futures can yield solid rewards for their investors
- Futures and options can be used to day trade and make longer-term investments
- Can profit on the price of silver going up or down
- Futures markets are incredibly risky and should only be used by sophisticated investors
- With leverage, you can lose more than your initial investment
- Markets don't always behave the way you would expect
Compare CFD broker to trade silver futures
Trading CFDs and forex on leverage is high-risk and you could lose more than your initial investment. It may not be suitable for every investor. Refer to the provider’s PDS and consider the risks before trading.
How much is silver worth now?
Why do people invest in silver?
There are 2 main ways people think about silver's value as an investment. One is as a practical and in-demand commodity whose properties give it many practical applications, similar to zinc or aluminium. The other is as a precious metal with a finite supply and inherent "folk value" similar to gold.
Silver prices are based on a combination of these 2 factors, which gives it a unique investment profile.
Silver as an industrial commodity
Silver's chemical and physical properties, such as its conductivity and antibacterial properties, make it essential for electronics, healthcare and other applications.
It's also malleable, ductile, reflective, relatively corrosion-resistant and not overly common, which historically made it a practical choice of metal for jewellery, coins and similar applications.
These also formed a practical foundation for silver's status as a precious metal.
Silver as a precious metal
Silver's (and gold's) innate value as a precious metal is typically described in the context of its finite supply or scarcity.
It's not certain how much silver is left in the world, but some estimates suggest that Earth will run out of silver by 2050. However, these estimates depend on a range of assumptions around silver's continued use, how much we recycle and how likely miners are to uncover large previously unknown sources of silver.
One economic theory holds that a commodity such as silver, which is in constant demand while having a finite supply, should carry a constantly growing intrinsic value.
Proponents of this theory will often contrast the scarcity of silver with the theoretically infinite amount of government money, such as Australian dollars, that can enter circulation.
For this reason, silver is often regarded as a hedge against inflation and currency devaluation. Its prices have been known to run opposite to the changing values of currencies.
Is silver a safe investment?
As mentioned above, silver is a staple material for many modern industries and there are a number of routes available for investing in it. However, regardless of which way you approach it, your investment will inevitably come with risks:
- Fluctuating prices: Valuable metals have a tendency to fluctuate in price over small periods, sometimes with no real cause.
- Storage: Finding somewhere to store physical silver can be a hassle, and storing it with a broker will come with a fee.
- Fraud: While it is tempting to look for the best prices, if it's too good to be true, it probably is. When buying physical silver, trade with reputable dealers to avoid being fleeced.
- Political and environmental events: Political and environmental issues can make the mining, refining and trading process more expensive for companies, causing price fluctuations.
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