Why is Silver Known as the Poor Man’s Gold
Gold is one of the most coveted metals on earth, which has been the case for centuries. An ounce of the precious metal currently goes for as much as $1,727.8 (Source: GoldPriceZ). This incredibly high price makes it one of the most valuable commodities out there and attractive to investors, especially those looking to store their wealth safely. The price stability of gold comes in handy for this particular purpose.
Unfortunately, gold’s extremely high price tag makes it inaccessible to many people out there, making it a reserve for the rich. Investors who cannot access gold due to its expensive nature shift their attention to silver because its price performance seems to be influenced by the same factors as gold. The latter tend to gain when inflation levels increase, and more people buy gold to protect their wealth from erosion due to fiat currencies losing value.
Many investors also buy silver as a tool for protecting their wealth, making it just as useful as gold. However, there are some major critical differences between the two, such as the fact that silver is much cheaper compared to gold. An ounce of silver currently trades at $24.86, which is significantly more accessible than the price of gold. Another notable factor about this shiny metal is that its price is more volatile than its yellow counterpart.
Why silver’s lower price is attractive to investors
There has lately been an influx of Chinese investors interested in trading silver. At the heart of the sudden interest in the metal was the question of whether silver is underpriced. Ross Norman, the CEO of Metals Daily, a website that provides news and information on precious metals, evaluated that the ratio between gold and silver was at 126 on March 26, which is the highest ratio between the two metals in the last 4000 years.
The Metals Daily CEO noted that the ratio findings indicate that silver is severely underpriced compared to gold. His conclusion suggests that silver might still have a lot of potential upside. This explains the sudden interest in silver among Chinese investors. Increased demand for the metal led to higher prices in Shanghai, subsequently causing better performance for silver-related funds and stocks.
The idea that silver is currently underpriced has also attracted retail traders on Reddit, the same retail traders that influenced the GameStop rally. This might be good news for those investing in the metal because it might fuel a strong rally. Unlike gold, silver’s higher volatility profile is a perfect fit for retail traders looking to get into precious metals at a favorable price tag. The current potential upside and the fact that one can purchase a substantial amount without having a boat-load of money makes it an appealing investment option.
How to buy silver
There are multiple ways of getting into silver trading. The most common of them is purchasing physical silver coins or bars that can then be stored in safe deposit boxes or personal safes. This approach is still good, but buyers should consider purchasing the silver from reputable dealers to avoid buying counterfeit or low-quality silver. However, buying physical silver has its shortcomings, among them being the cumbersome nature of having to travel to and from the location where you need to buy or and sell. In other words, this approach is very illiquid. Other options offer better liquidity when trading silver.
Online commodities trading
Many online brokers offer different investment types, including forex, stocks, and commodities. The latter is the category in which you will likely find gold and silver as tradable assets. The good thing about this approach is that many online brokers will allow you to buy and sell silver at the click of a button.
This is one of the best ways to invest in silver, especially if you are good at trend investing. It is also ideal for investors that want to venture beyond traditional avenues such as fixed income securities and equity. Futures contracts allow traders to participate in the commodities market without actually having to own the underlying commodity. This option offers a lot of liquidity, which means traders can quickly take advantage of opportunities in the market and exit fast if they need to do so.
Exchange traded funds or ETFs offer an easy way to invest in areas that would have otherwise been tricky to get into. This option is also one of the least expensive methods of investing in precious metals. iShares Silver Trust is a good example of an ETF that investors can consider.
Things to consider when investing in silver
Although silver is influenced by factors similar to those that influence gold prices, its performance can be volatile at times, which is why investors should consider spreading out their risk. One way to do so is by investing in other stable assets such as gold. This might be the case, especially now that silver is getting a lot of attention from retail investors.
Silver currently offers an attractive price point for investors looking to use it as a store of wealth or speculative trading. Some analysts believe that it might be undervalued. The metal also has other uses beyond its perceived value. It is quite popular in India, where it is used to make ornaments and jewelry. Its chemical properties, such as good electrical conductivity, also make it an attractive industrial use.
What does the future hold for silver?
The ongoing global pandemic and concerns of a looming economic crash continue to fuel concerns about the future. Many investors are consequently looking for alternative places to store their wealth securely. Gold has already earned safe-haven appeal thanks to the fact that it is immune to inflation, and the same can be said for silver. The demand for inflation-free investment opportunities is one reason why silver is currently getting a lot of attention which will likely influence its performance moving forward.