How to invest in silver in Australia
A guide to investing in silver sources
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Silver has been a valuable commodity for hundreds of years and while its purposes have changed throughout history it has never lost its place on the market. In part due to its inherent malleability, silver has managed to adapt to the changing times, keeping its value high even today.
This page will discuss different ways to invest in silver from Australia and some of the risks that you may face.
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.
Silver has a number of uses which make it a desirable asset in many modern industries. 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 in to 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), Investigator Resources (ASX: IVR).
- A lot of options to choose from.
- 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.
Invest in silver ETFs
Investing in a silver-themed exchange traded fund (ETFs) 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 two. This makes ETFs an easy and flexible way of adding silver to your portfolio.
In Australia, there's only one ETF that tracks physical silver prices as of December 2020: 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: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. 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 as well as make longer-term investments.
- Futures are a real gamble and if you make the wrong choices you could potentially lose a lot of money.
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.
Buy silver bullion
Rather than investing in silver stocks, you may decide to invest in physical silver, in the form of silver bullion bars or coins, to sell on your own terms at a later date.
"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 it's important to check how much you're paying by weight before buying silver.
While you have full control over the asset, buying physical silver is a longer term investment and you will have to find a buyer to realise a profit. Like other investments, physical silver prices are still influenced by the market.
It's up to you to decide how you want to store physical silver. Some people keep it at home, others entrust it to a custodian. Both options have different costs and risks.
- Direct control over your asset.
- Silver looks pretty in a pile on your floor.
- Physical silver can sell at a premium compared to the spot market.
- Physical storage can be inconvenient.
- Buying physical silver often means paying premium prices.
- There is a risk of fraud, especially when buying silver online.
- It can be difficult to find silver buyers, especially if you want to sell at premium prices.
Compare silver bullion dealers
How much is silver worth now?
Why do people invest in silver?
There are two 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 two 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 silver essential for many electronics, healthcare and other applications.
Silver's also malleable, ductile, reflective, relatively corrosion-resistant and not overly common, which historically made it a practical choice of metal for jewelry, coins and similar applications.
These also formed a practical foundation for silver's status as a precious metal.
Silver as a precious metal
Silver (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. These estimates, however, 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, and 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 of time, 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 is 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.
Frequently asked questions
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