Should You Buy Silver as a Hedge Against Inflation?

Sometimes, silver is referred to as “poor man’s gold.” Due to their status as rare metals, either silver or gold may see price increases from investors seeking refuge during uncertain economic times. During inflationary periods, both precious metals tend to keep their worth better than certain other assets. Silver, however, may be seen as the “rich guy’s copper” in another sense since it is employed industrially considerably more often than gold. Given that rising prices often coincide with economic expansion and an increase in demand for products containing silver, this may support silver as a hedge against inflation in a manner that hasn’t been witnessed in the gold market.

Here are a few things to think about if you’re considering buying silver as an investment tool:

  • Gold vs. silver as an investment.
  • Silver’s price development throughout time.
  • Silver investment strategies.
  • The amount to put into silver.

Silver’s outlook for 2023

Gold vs. silver investments

According to Roberta Caselli, a commodities market analyst at Global X ETFs, silver is often called the “second gold” and serves as an inflation hedge. However, two significant variations exist between the two precious metals: the added industrial use of silver and the size of their respective markets. Silver is one of the most often used metals in jewelry and used in bullion and coinage. Moreover, it has various industrial uses for electric cars, solar panels, and electronics. According to the most recent Global Silver Survey conducted by Metals Focus on behalf of The Silver Institute, industrial silver manufacturing increased by more than 9%, much more than 508 million oz in 2021. In addition to serving a significantly larger function in the industry than gold, investors should be aware of another significant distinction between the two metals: The silver market is considerably smaller and more volatile than the vast gold market, claims Caselli.

The Silver Price in History

Since February 1915, the silver price has increased by almost 40% after accounting for inflation. This is advantageous for investors who wish to hedge against inflation and hold their investments for an extended period. Like so many commodities, silver can be highly volatile over shorter periods. Silver purchased in 1915, for instance, had lost over 50% of its inflation-adjusted values by 2001. Concerns over the Federal Reserve’s monetary stimulus program and the geopolitical unrest in Europe after the global financial crisis caused the price of silver to jump to nearly $64 per ounce in 2011. But, by 2020, the epidemic had driven the price of silver to fall below $12. Later, when hopes for a worldwide economic rebound materialized, it rocketed to nearly $30 in early 2021.

The Fed’s recent increase in interest rates has put pressure on silver prices. Since silver doesn’t pay interest like Treasurys, rising interest rates diminish the metal’s attractiveness as an investment. Sam Boughedda, lead sharemarket news columnist at and an equity trader, says that the most recent U.S. inflation statistics revealed that the rate of consumer price rises had slowed and that the price of silver had fallen.

But according to Collin Plume, CEO of Noble Gold Investments, a company that specializes in precious metals-based retirement savings accounts, or IRAs, and home delivery, silver is catching up to gold’s reputation as an inflation hedge due to an outlook for increased industrial demand, especially from solar farms.

Investing in Silver: A Guide

Metal itself. Purchasing actual silver is a standard method to invest in silver. Buyers may buy bullion coins like the 1-Oz American Eagles made by the U.S. Mint or 99.9% pure silver bars with weights ranging from 1 ounce to 100 ounces. Also, investors have access to “junk” silver coins. Before 1965, the U.S. Mint added significant amounts of silver to every dime, quarter, and half-dollar it produced. Many of these coins lack collectible appeal, yet they nonetheless have worth because of the silver they contain.

Any investor purchasing silver bullion should be sure to deal with recognized, long-standing dealers in metals or coins, such as JM Bullion, APMEX, and SD Bullion. According to Caselli, “the benefit of physical possession is that its worth closely matches the price swings of the larger silver market.” “Dealers’ ability to charge surcharges for buying and selling silver, which may significantly diminish returns, is a drawback. There may also be storage expenses, such as the price of renting a safe deposit box or purchasing a safe.”

Metal futures. Investors may also acquire silver futures, exchange-traded contracts under which the buyer commits to buying a certain amount of silver at a specified price on a selected delivery date in the future. Investors often use futures contracts to manage their portfolio risk or speculate within the silver market. As the contracts may be readily sold at any moment before expiry, they provide immediate exposure to real silver without the inconvenience of delivery or storage. Paper trading, according to Caselli, “offers investors access to silver without having to keep the metal physically, thereby enhancing liquidity and lowering the cost of ownership.” “Unlike the bullion market, investors may also employ leverage in futures markets.”

Mining stocks for silver. Shares in the silver mining industry are also available to investors. Pan American Silver Corp. (ticker: PAAS), SSR Mining Inc. (SSRM), and Hecla Mining Co. are a few of the biggest and most well-liked silver mining companies (HL). Since these businesses employ their operational leverage to generate earnings, which might raise share prices, Caselli claims that silver miners have historically outperformed bullion in favorable markets. “Unlike direct silver investments, miners may increase output as profit margins increase.” But, operating a business has risks unrelated to the silver market price. A mine must perform as predicted, and management can make better judgments.

ETFs for silver. Investors may want to think about exchange-traded money, or ETFs, which put mining businesses together according to particular requirements to mitigate the risk of investing in individual mining companies. ETFs, however, incur expenses that holding individual equities does not, and because of their diversity, they may function better than a single successful gold miner. Silver ETFs invest in diverse silver-related assets, including actual silver bullion, silver firm stocks, and silver futures contracts. For instance, Invesco DB Precious Metals Fund (DBP) invests in gold and silver futures contracts, Global X Silver Miners ETF (SIL) invests in silver equities, and iShares Silver Trust (SLV) invests in real silver.

Gold ETNs. Exchange-traded notes, or ETNs, are financial products that function like a bond and stock combination and may reduce investment risk. X-Links from Credit Suisse, a covered call on silver shares ETN (SLVO), is a silver ETN that pays investors a monthly payment and follows the price of silver.

Stocks that stream silver. Shares of silver streams or royalty corporations are also available to investors. These businesses don’t mine silver. Instead, they provide funding for a mining operation in exchange for a share of the revenue. Wheaton Precious Metals Corp. (WPM) and First Majestic Silver Corp. are well-known silver streaming stocks (AG).

Metal IRAs. A silver IRA is another option to invest in silver. By including a tangible product in your portfolio, a silver personal retirement plan, according to Plume, ” allows you to “invest in actual silver and acts as an excellent hedge against inflation.”

How much should I put into silver?

Silver has a lengthy history of acting as a reliable hedge against inflation over extremely long periods. But silver may not always be the most excellent investment to safeguard your wealth in any particular year or decade. The metal may help diversify an investment portfolio because of its low connection to equities and bonds. The amount that experts advise investors to invest in silver varies, but a decent general rule of thumb is to invest roughly 5% of your portfolio in commodities overall.

2023 outlook for silver

Consider many considerations to use silver as a shortened investment vehicle. One is the gold-to-silver ratio, or how much silver is needed to buy one ounce of gold. According to Caselli, this ratio has averaged 65 during the last 30 years. “The ratio is now close to 85, suggesting silver is cheaper than gold. As the ratio rises over 80, according to historical data, silver is comparatively less costly than gold, a positive indication for silver.”

Silver will surpass $30 per ounce this year, according to David Morgan, a precious metals expert and writer of the financial journal The Morgan Report, as inflation picks up and the Fed raises interest rates more than anticipated. Spot silver prices increase when inflation increases, according to history, claims Morgan. The likely that inflation will continue to be sticky and maybe even increase in the following months is relatively high, raising market prices for both metals.