Will You Find a Silver Lining in the Commodity Market this Month?

By: Robert Bell
Robert Bell
Having worked for years in the UK banking industry, I began writing and reporting financial markets after migrating abroad… read more.
on Feb 4, 2020
Updated: Apr 3, 2020

Silver is sometimes considered as being a less attractive commodity than gold. Yet, this precious metal has long been regarded as being a smart investment. Is February 2020 the right time to buy some?

Why Is Silver a Popular Commodity?

Silver meets all of the criteria to be viewed as a valuable, sought-after commodity. For a start, it is extremely rare. Only around 1.5 million tons of this metal have ever been mined.

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In fact, it is estimated that there is now less silver to be mined than there is gold. Part of the reason for this is that silver is more widely used in the likes of dental implant, mirrors, LED chips and for soldering purposes.

What this means is that silver has a tendency to be more volatile than gold. While the majority of gold is used for investment purposes, silver is largely used for industrial applications.

Because of this, its price rises and falls according to economic progress around the planet. More technological progress leads to a greater demand for silver.

The Recent History of the Price of Silver

At the time of writing, silver is valued at around $17.65 per ounce. Following a strong start to 2020, it has tailed off slightly in recent days.

Silver started this year at just under $18. However, if we go back to January 2019, we can see a price of $15.50. A year further back and it was just over $17.

In between these dates, there have been lots of peaks and troughs. The lower value of silver compared to gold (gold is currently at $1,485 per ounce) is certainly one of the reasons for this increased volatility.

Choosing Between Gold and Silver

Around a billion ounces is the total annual supply of new silver each year. This compares favourably to the figure for gold, which is 120 million ounces. However, the far lower value of silver means that the market is ultimately smaller and more subject to fluctuations.

It is also worth noting that the market cap of silver is a lot smaller than that of large companies such as Apple and Microsoft. So, any substantial movement in the market can lead to large price movements.

This means that the reasons for choosing silver or gold are very different. Gold is usually seen as a safe haven. This is a steady sort of investment that is viewed as being particularly useful in times of economic crisis.

On the other hand, silver gives you the chance for larger gains. You need to be prepared to ride out some price drops if you choose this metal. Investing in silver also means having to choose the moments for buying and selling wisely.

Of course, the lower prices also means that it can be a more affordable investment for someone who wants to start off gently in the commodities market. It is probably also best for someone who is happy to sit on it for a while, with no urgent need to cash in.

What Are the Price Predictions Like?

As we have seen, silver prices rose at the turn of the year but have dropped a little since then. Taking advantage of these frequent downturns is vital for silver investors. Since it has such a wide range of uses, the price can be expected to bounce back, as a look at the history of its value will show you.

Price predictions for silver vary widely. The number of different factors that influence the price make it extremely difficult to predict the future. Yet, a look at the market and the long-standing value of the metal means that now is a good time to look into it fully before making your mind up.

Where to buy right now

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