Many investors tend to follow the price of gold and use it as a hedge against inflation, but there are potential opportunities attached to silver investing too.
You can follow the prices of silver and other metals at http://moneymorning.com/tag/silver-prices/ and maybe even spot an entry point that you find attractive, if you are considering the idea of trying to make money out of silver.
Living in the shadow
There is no doubt that gold often captures the headlines in comparison to silver, and the recent rally in gold prices has been the subject of plenty of coverage, but the comparable rise in the value of silver means that it shouldn’t really be living in its shadow.
Silver has not risen as high or as fast as gold has managed to do in 2016, but a rise of around 8.5% still compares very favorably with plenty of other commodities and financial markets.
The U.S Mint reported a 17% increase in silver coin sales for March 2016, in comparison to the same period of time the previous year, and inflows into a basket of silver ETFs have been seeing their highest numbers for over five years.
Silver might live in the shadow of gold, but on these numbers, it seems to warrant more attention from investors than it always gets.
One of the fundamental reasons why gold prices are moving upwards at such an impressive rate currently, is the fact that there is a fair amount of uncertainty in financial markets, and when investors get nervous they very often seek safer waters and invest in some gold.
What is prompting a rise in the price of silver is a similar scenario and line of thinking to what has prompted such renewed interest in gold.
Silver has enhanced its status recently as a viable alternative currency, meaning that some investors took the view that this metal could do the same favor for them that gold has in the past.
Market uncertainty can go some way to explaining why the price of silver has risen, but it doesn’t tell the whole story about its versatility and importance as a commodity.
Key industrial component
Where silver definitely starts to get interesting as an investment opportunity is when you consider its role as a key industrial component.
You could struggle to manufacture solar panels without using silver for the photovoltaic cells that are used in the panels and there are a diverse number of medical devices and technologies that rely on silver as part of the manufacturing process.
The fact that silver is in demand as an industrial component and is used in a number of new technologies, would suggest that demand is going to remain strong for the metal moving forward.
Another point to consider when you take into account that industrial demand for silver is strong is that production levels have been falling recently in response to a more general fall in commodity prices and a need for miners to limit mining production in general as a way of cutting costs.
This could result in a tightening of silver supply, which may have the effect of pushing silver prices higher in response to demand.
Solar energy could drive prices higher
There is a growing demand to use alternative energy sources and it is envisaged that a growth in solar energy could help to drive silver prices higher.
It has to be said that silver prices were as high as $40 an ounce a couple of years ago, but having now fallen to a more acceptable cost level more recently, solar manufacturers appear to be choosing to use silver in their manufacturing process rather than trying to find alternative materials.
Solar manufacturers are expecting demand for their product to continue at a pace that is close to double-digit growth over the next few years. If that is the case, this could well help to maintain strong demand for silver.
Investing in silver
The balanced view would probably be to say that silver prices may prove weaker than gold prices as an alternative currency, however, it certainly has good prospects for a rise in value if the economy picks up and manufacturing figures rise.
The simplest way of investing in silver would be to buy coins or bullion, but there are issues and costs associated with storage that you need to consider. ETFs are proving popular and you can gain exposure to the silver price by choosing a fund that tracks the silver price or includes or offers exposure to silver miners.
Understanding how silver prices are driven can help you to try and make money out of a metal that doesn’t always deserve to live in the shadow of gold.
Evie Jones has always been wise for her age, and at college became fascinated with securing her future through investing. She has learnt a lot over several years and shares her knowledge with like-minded people online.
Categories: Precious Metals Market