How to Invest in Silver

As the value of paper currencies such as the U.S. Dollar, Euro and Pound Sterling continue to be eroded by quantitative easing policies and the recent financial crisis, investors have increasingly turned to hard currencies like silver to provide both a safe haven and a real store of value in these troubled times.

Silver and other precious metals like gold have also been used traditionally by prudent investors to protect against the potential for a high inflationary environment. As interest rates approach zero in most of the major currencies, the prospects for future inflationary pressures arising seem considerable.

Those investors considering placing a portion of their portfolio in silver and silver related assets have numerous options to choose from.
Some popular silver investment vehicles will be discussed further in the sections below.

Buying Physical Silver

Perhaps the most traditional way to invest in silver involves purchasing the physical metal in one of its relatively pure forms. In most cases, this means buying silver bars, silver coins, silver jewelry or even silver wire.

While physical silver offers the security of a hard asset, it can also present a challenge with respect to its safe storage and transportation since it requires protection against theft or other types of loss. Insuring silver can also be quite costly.

Some physical silver investors employ a secure safe installed at home or rent a safe deposit box at their bank to hold their stash of physical silver.

Trading Spot Silver or Silver Futures Contracts

For those interested in trading or investing in silver based derivative contracts rather than the physical metal, many retail forex brokers offer easy and cost effective access to trading spot silver on a margin basis. This alternative could be especially suitable for those with a small initial deposit or who prefer to trade in smaller amounts and avoid having to deal with the hassles of taking physical delivery.

For larger silver traders, many commodity futures exchanges offer silver futures contracts that derive their price from the value of the physical metal. Although physical delivery is possible with some of these contracts, it typically occurs only at the request of the contract seller.

Investing in Silver Trusts, ETFs and Mining Stocks

Yet another popular way to invest in silver that is especially suitable for equity traders involves buying paper assets like silver trusts, which have their values linked to the price of silver that they purchase and hold and are traded on stock exchanges.

Also typically traded on stock exchanges are the Exchange Traded Funds (ETFs) that invest their managed funds primarily in silver or silver linked assets.

Some investors who prefer to purchase a stock with a silver sensitive price might opt to buy equity in a silver mining concern instead. Nevertheless, the value of such stocks depends not only on the value of the metal or metals that the company mines, but also on its assets and the future prospects for the issuing corporation.

Trading Spot Silver and Silver Futures Contracts

For those interested in becoming more active silver traders and speculators, some online forex brokers offer even retail customers with a small amount of trading capital a margin trading facility based on the spot price of silver, although generally without providing an option for physical delivery.

Larger traders who can access major commodity futures exchanges can take advantage of the highly liquid markets and the margin trading facility in silver futures contracts that these organized marketplaces provide. Such contracts usually have circumstances in which physical delivery can occur, although typically only at the contract seller's option.
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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