Is Silver a Good Investment Right Now?
As investors migrate toward safe haven investments in the wake of a market sell-off, precious metals come into focus. Gold is, for lack of better phrasing, the gold standard for a hedge against inflation and stock market turbulence. Right alongside it, albeit to lesser notoriety, is silver. It begs the question: is silver a good investment in the face of a market downturn?
While the spot price per ounce of silver is magnitudes lower than gold, it’s nonetheless a viable investment in uncertain markets. In 2022 especially, silver has become something of a draw for retail investors looking to put their cash into commodities. This is do to silver’s year-to-date performance and its historic presence as a safe haven investment.
Here’s a closer look at the increasingly compelling argument for investing in this precious metal and why silver is a good investment right now.
Silver’s Historical and Year-to-Date Performance
Historically speaking, silver is about as steady of an investment as you might hope to find. The all-time spot price chart for silver shows a relatively stable asset with one major spike in 2010-2011 and a slow descent over the following five years. From August 2010 to April 2011, the price per ounce of silver shot from ~$18 to $50, largely fueled by worry over the U.S. debt ceiling at the time.
Since deflating and trading sideways at roughly $17 per ounce in 2016-2019, silver saw a slight dip at the height of the COVID-19 pandemic. This precious metal has been volatile in 2022. It was trading as high as $26 in April, but the price has dipped down to just over $21 more recently. However, even though its year-to-date returns are negative, it’s still outpacing returns by the S&P 500.
The reason silver captured the attention of investors isn’t because of its performance against stocks. Rather, it’s because silver outpaced gold’s year-to-date returns earlier in 2022. Now, silver has dipped into the negatives, while gold maintains positive year-to-date returns. This isn’t a problem that is unique to silver either. Both platinum and palladium also have negative year-to-date returns.
Why is Silver Performing so Well in 2022?
Since recovering from lows in April 2020, the price per ounce of silver is up more than 70%. According to commodities analysts, this precious metal still has runway ahead of it. Why? The answer has to do with a combination of investor and industrial demand.
While silver is a universal commodity, it’s also a practical metal. For instance, silver is a common component in solar panel production, as well as in electrical contacts and batteries. As tech manufacturing continues to grow, silver remains an in-demand commodity with a price tag to reflect its applicability. In particular, as green technologies find footing in emerging sectors, silver’s price will continue to rise.
In 2022, silver is also on the rise because inflation is. A tangible asset, investors rely on silver and gold to temper the hit of inflation. With runaway inflation rates over the past several months, many investors have sought silver as a safe haven, driving up demand.
Finally, silver prices in 2022 are aided by the Russo-Ukraine War. Russia is the world’s fourth-largest producer and exporter of silver (the country produced 2,000 metric tons in 2019). However, with a blanket embargo on Russian exports, a significant chunk of the world’s silver supply has become locked up. The result is a higher price per ounce as the world’s supply consolidates.
Is Silver A Good Investment for You?
Investing in commodities can be a new experience for those usually invested in equities. Thankfully, you don’t need to become a silver bug and stash bullion in a safe to take advantage of silver as a safe haven investment. There are plenty of silver stocks and ETFs out there. Some of the most accessible include:
- iShares Silver Trust (NYSEARCA: SLV), a silver-focused precious metals ETF
- SSR Mining Inc. (NASDAQ: SSRM), a silver-focused mining company
- Wheaton Precious Metals Corp. (NYSE: WPM), a diversified mining company
- Fortuna Silver Mines Inc. (NYSE: FSM), a silver mine prospecting company
Note that these investments aren’t all pure-play silver. Like any precious metal investment, it’s important to look at the total sector for opportunities: prospecting, mining, refining and holding. Those looking to invest specifically in silver will do well in an ETF. Investors who want broad exposure should consider multiple investments across the value stream.
Silver as a Hedge Against Future Volatility
2022 has kicked off with turbulence and uncertainty, and current events suggest there’s more in store. Now’s the time to consider safe haven investments, and precious metals are at the top of the list. Not only has silver performed relatively well so far in 2022, it offers positive prospects for the foreseeable future thanks to its role as both a physical asset and a practical material.
With uncertainty looming behind inflation rates and the prospect of protracted conflict between Russia and Ukraine, silver is more a safe haven than ever before. It’s best to think about an investment in silver as insurance. It’s always in demand, highly practical and a tangible commodity. It represents everything investors need for peace of mind as they seek shelter from a stock market that continues to fluctuate.
Is silver a good investment right now? For those seeking a hedge, absolutely. It’s a cheaper alternative to gold, with all the potential of this universally recognized safe haven. Whether used to diversify a portfolio or as a direct hedge against inflation, silver stands as a smart investment in the current climate.