Investor interest in silver rose as these modern uses became more commonly known a decade ago, but really took off when the financial crisis hit in 2007. As a proportion of world end-user demand, investment grew from 5% to above 22% in 2013. Prices soared to 30-year highs in 2011 as claims of global supply shortages also took hold. But hitting almost $50 per ounce – a 10-fold gain from only 8 years before – silver drew out a flood of scrap recycling. Historically the all-time high of $49.45 per ounce was hit in January 1980 when Texan oil barons the Hunt brothers famously tried to corner the market, hoarding silver as a hedge against inflation.
Because silver is primarily an industrial metal, its price can move more in line with copper over the medium term. But its strongest daily correlation is always with gold, they’ve moved in opposite directions on fewer than 25% of all trading days since 1968.
How can ordinary people buy investment silver? Silver ETFs have proven popular with private investors, holding shares in a trust fund which then stores metal at a bank, typically in London. Smaller bar and silver coins have also grown sharply in demand since the financial crisis, now accounting for one-fifth of end-user demand. But dealing spreads can be wide (10% bid-ask), and sales tax applies in many countries. Private investors can avoid these costs, but still own physical metal outright,
Because private investors cannot usually buy silver through the wholesale spot market, they often buy coins or small bars, or invest through a derivative, such as an ETF.
Choosing to buy silver coins or small bars can cost you 10% or more over the metal’s spot-market value. That is before you account for any local sales tax. The VAT on silver bought in the UK for instance runs to a further 20%, and you cannot reclaim that cost when you sell. That makes the typical loss between prices to buy and to sell silver worse still for private individuals.
Investors buying small silver bars or coins usually have to arrange storage themselves, which may present a significant security risk if kept at home.