A lot of attention has been on gold recently, but another precious metal has appeared to be making headlines. Silver recently hit an all-time high and is still trading above $50 per ounce.
Rick Kanda, Managing Director at The Gold Bullion Company, has explained why demand for silver is rising and what people should consider before investing in the precious metal.
Why is demand for silver rising?
“Demand for silver is rising, in part as a result of a major turning point; traditionally, paper contracts (ETFs) have been settled in cash. However, more recently, we are seeing a growing shift where investors are demanding the physical metal as a settlement instead, which is putting a drain on resources.”
What is the current global supply of silver like?
“The physical global supply of silver is relatively low, producing short-term metal shortages. The main issue is that the amount of silver that is ‘owned’ in the financial system currently exceeds what is actually available, causing a huge drain being placed on resources, specifically in financial hubs like London, where metals were often leased out, meaning ETF providers didn’t actually have the metal; they just had a lease. This is the outcome of a larger problem, as supply from silver mining has not kept up with demand for the last 5 or 6 years, meaning that the silver market has already been running at a deficit.”
What to know about investing in silver.
“Similar to gold, investing in silver bars and coins can serve as an inflation hedge as well as a portfolio diversifier. The main difference between the two, as touched on above, is that silver comes with higher volatility than gold, as there is a much higher industrial demand, a smaller market size, and in the UK is subject to 20% VAT.”
“Factors like economic uncertainty and industrial demand cause silver prices to fluctuate constantly; however, silver is much more affordable than gold, making it within reach for smaller investors. The lower entry price point makes silver an excellent first step for anyone looking to dip their toe into precious metals. You can begin enjoying the potential benefits of holding a tangible asset that acts as an inflation hedge and portfolio diversifier, while gaining valuable hands-on experience in buying, storing, and managing physical bullion without the large commitment first.”
Rick finishes: “Paper investors are now increasingly demanding the physical metal and finding that there isn’t enough supply, showing a supply and demand imbalance, and this imbalance is a major issue driving up silver prices.”