Silver trading: how to invest in silver

Like gold, silver is a precious metal and it can go up in value. Over the last few years, the price of silver has gone up, which makes trading silver and investing in silver very interesting. The expectation is that the price of silver will only keep on climbing!

Demand for silver

The demand for silver can be split into two parts: demand for silver as a safe haven and demand for silver for industrial purposes. Eighty-five percent of mined silver is used for industrial purposes. However, its use as an industrial material doesn’t solely explain the increase in price of silver.

How to trade in silver?

silver tradingIt is possible to buy silver through a special company that physically sells it. However, this isn’t very practical because the costs are higher than the market price of silver and you’ll need to store your silver properly. When you want to trade silver to profit from it, it’s more interesting to do so through a broker. At Plus500 you can start trading CFD silver with a free demo of 40.000 pounds.

Investing in silver as a safe haven

The strong increase in the price of gold, caused by the global economic crisis, makes the double role of silver very apparent. Traders and investors looking for a good and affordable safe haven during the recession have shifted silver from an industrial material to a monetary material. This is mostly why the price of silver has gone up.

As a trader, you need to see silver in its own regard, without any connection to gold. The silver market is about 19 times smaller than the gold market or the bond market. The relatively small size of this market combined with increasing industrial demand for physical silver means that buying silver now can be very profitable.

Important note: gold and silver move together in a ratio of about 1:33.

Industrial demand for silver

According to The Silver Institute, about 900 million ounces of silver are used annually while only 700 million ounces are mined. This means that we use more silver annually than we mine. The supply of silver is thus decreasing as we speak.

In 1950 this supply was about 10 billion ounces and, according to the American CPM Group, the supply was 3.5 billion ounces in 2010. This of course implies that the price has gone up a lot since that time. The consumption of silver has mostly taken place in the West. If you consider the fact that more and more people in Asia are using phones, DVD players and iPods, you will understand why buying silver can be a very interesting investment!

Silver is the new gold

The demand for silver is huge, and there are only a handful of silver mines. This is mostly because silver is also a by-product of lead and zinc mines. Silver is becoming the new gold and – although it is referred to as ‘the poor man’s gold’ – it could prove to be a safer investment than gold.

More and more traders are making a move on silver. The biggest advantage is that it protects you against inflation and economic insecurity. Besides that, trading in commodities (including silver) is seen as an important part of every well-diversified investment portfolio. If you have bonds and stocks in your portfolio, then it is wise to add some commodities like silver and gold as well.

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