Silver Investing: Can It Make Your Portfolio Shine?

Learning how to invest in silver can be a great defensive strategy for portfolios, especially when equity markets are trending lower or interest rates are low. Precious metal investments and the silver market
4 min read
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Key Takeaways

  • Silver is used in a number of developing technologies
  • Silver is historically less valuable than gold but can be significantly more volatile

When thinking of investing in precious metals, gold may be the first thing that comes to mind. Although silver investing sometimes gets hidden behind gold’s shine, that doesn’t necessarily make it less sparkly. That’s because even though silver historically trades at a lower value than the yellow metal, its value generally tends to be more volatile. 

In mid-October 2022, the December 2022 Gold futures (/GC) contracts were trading at around $1,675 per ounce compared to about $18.90 per ounce for December 2022 Silver futures (/SI). But silver can have an edge on gold. It draws demand from the investment arena as a precious metal and sees greater commercial demand for use in industrial applications. So, the price of silver is likely to be influenced by its industrial demand. 

Because it can conduct electricity and doesn’t corrode like other metals, silver is used a number of industries, including solar energy and in batteries for personal computers and electric vehicles. So, the growing demand from solar energy products may have helped silver gain popularity as an investment. Looking at a chart of Silver futures versus Gold futures (see figure 1), the two metals appear to move in sync for the most part, although there are times when they outperform each other.

Chart showing silver futures versus gold futures

FIGURE 1: IS THERE A SILVER LINING? Silver futures (/SI, candlestick) and Gold futures (/GC, purple line) generally move in sync, although there are times when one outperforms the other. Data source: CME. Chart source: the thinkorswim®  platform. For illustrative purposes only. Past performance does not guarantee future results.

The Allure of Precious Metals

Why all the interest in precious metals? There are several factors that may attract investors:

  • Physical demand. One reason investors have been drawn to precious metals is the potential of significant physical demand growth, driven in particular by consumers in China and India.
  • Flight to safety. Global events, such as virus outbreaks, politics, and trade wars, could give rise to uncertainty in the global equity markets. This may drive investors to assets like precious metals because they’re often thought to retain their value, although past performance does not guarantee future results.
  • Interest rates. Low interest rates could increase the appeal of precious metals to some investors.

How to Invest in Silver

If investors are considering adding silver to their portfolio, there are different ways to go about it.

Screening for Silver

If you’re interested in silver investing but aren’t sure where to start, consider using screeners. Here are two ways:

  • Screening for stocks: After logging in to your TD Ameritrade account, under the Research & Ideas tab, select Screeners Stocks. Next, select the Create a Screen tab. Then under Sector, Industry & Sub-Industry, select Materials > Metals & Mining > Silver.
  • Screening for silver ETFs, ETNs, and other ETPs: To screen for potential ETFs, under the Research & Ideas tab, select Screeners ETFs. Select the Create a Screen tab and under Overview, select Morningstar Category and then select Commodities Precious Metals or Equities Precious Metals.

Buy the metal outright. This may be the most straightforward way to invest in silver, but investors may have to pay markups and commissions. They’ll also have to think about how to store the metal. But keep in mind, you cannot actually purchase physical precious metals through TD Ameritrade.

Invest in stocks of silver-related companies. Silver-mining companies and firms involved in the production, distribution, and use of the metal can be considered silver-related companies. Generally, the profit margins of silver companies are thought to correlate with the price of silver. However, investors should consider other factors, such as geopolitics, corporate governance, energy, and labor costs. It’s a good idea to research the different companies before investing in them.

Invest in silver exchange-traded products (ETPs). Silver ETPs, such as exchange-traded funds (ETFs), could give investors exposure to silver, but keep in mind, all ETFs aren’t alike. They each have a different mix of silver assets, such as the physical metal, futures, options, or other investments that correlate with silver price movement. TD Ameritrade clients can learn more about available ETPs by using screeners (see sidebar).

Before investing in an ETF, be sure to carefully consider the fund’s objectives, risks, charges, and expenses. For a prospectus containing this and other important information, contact us at 888-669-3900. Please read the prospectus carefully before investing.

Exchange-traded notes (ETNs) are not funds and are not registered investment companies. ETNs are not secured debt and most do not provide principal protection. ETNs involve credit risk. The repayment of the principal, any interest, and the payment of any returns at maturity or upon redemption depend on the issuer’s ability to pay. The market value of an ETN may be impacted if the issuer’s credit rating is downgraded. ETNs may be subject to specific sector or industry risks. Leveraged and inverse ETNs are subject to substantial volatility risk and other unique risks that should be understood before investing. ETNs containing components traded in foreign currencies are subject to foreign exchange risk. ETNs may have call features that allow the issuer to call the ETN. A call right by an issuer may adversely affect the value of the notes.

Trade silver futures and options. This may be an efficient way to participate in the silver market, but it carries substantial risks and may not be suitable for every investor.

It’s important to know that while both gold and silver have liquid futures and options markets, trading in silver tends to be thinner than that for gold. Silver price moves also tend to be more volatile, so traders should carefully consider position sizing and the potential risks involved when trading a leveraged contract like silver futures.

One idea: New or less experienced traders may wish to explore micro-silver futures, which at 1,000 ounces per contract are 1/5 the size of the standard silver contract of 5,000 ounces.

There are other ways to trade silver as well.

More experienced traders might consider a pairs trading strategy using gold and silver. For example, pairs trading allows investors to trade two correlated securities in an attempt to profit on a regression toward (or divergence from) their historical relationship.

Get schooled: If you’re new to futures trading, check out “An Introduction to Futures and Options” from CME. 

Risks to Consider

Although consumer and investor demand could rise significantly, because of higher market volatility and increasing geopolitical risk, there are a number of potentially offsetting headwinds for precious metals. For example, a strong U.S. economy and U.S. dollar could make precious metals a less attractive investment.  

Futures and futures options trading involves substantial risk and are not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products.

Investments in commodities are not suitable for all investors as they can be extremely volatile and can be significantly affected by world events, import controls, worldwide competition, government regulations, and economic conditions.

Futures and futures options trading services provided by Charles Schwab Futures and Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.


Key Takeaways

  • Silver is used in a number of developing technologies
  • Silver is historically less valuable than gold but can be significantly more volatile
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