Silver can be a bad investment for a variety of reasons.
Currently, at the international level, the price of silver per ounce is:
|Silver Spot Prices||Today||Change|
|Silver Price Per Ounce||$22.82||-0.63|
|Silver Price Per Gram||$0.73||-0.02|
|Silver Price Per Kilo||$733.68||-20.25|
So should you invest in this shiny metal using your favorite commodity trading apps? If you have a lot of money that needs diversification for a short term or long-term investment for handsome gains, this article is for you.
It's not hard to find an article ranking why silver is a good investment, but why is it a bad investment?
Types Of Silver Investment
You may invest in silver in a variety of ways. The most popular types of silver investments are listed below.
1. Bars: The most typical way to invest in silver is by purchasing silver bullion bars. People can acquire silver bar coins. This kind of bar is flat and rectangular in form. The silvers bar may be readily stored at home or in a bank's safe deposit box.
2. Coins: Another popular silver investment is the silver coin. Customers can buy silver coins and keep them in their homes. There are two types of silver coins: fine and junk silver coins. When buying silver coins, be sure to get a brand new, nice-quality coin because junk silver coins are old currency with a lower amount of metal.
3. Exchange-Traded Products: Investors can access the silver market through COMEX, and they don't have to acquire physical bars. Many people prefer this type of silver investment because it is simple and there is no need to worry about storing the metal but you may incur storage fees.
4. Certificates: Instead of a silver bar, you may purchase a Silver certificate of ownership. It's also an attractive investment because using the Silver certificate of ownership allows people to trade in the market without having to move actual physical silver.
5. Mining Companies: This is an indirect investment in silver since you will not deal with actual silver. You'll be dealing with shares of silver mining companies here. It's similar to investing in the stock market.
9 Reasons why Silver is a Bad Investment
These are the top reasons why silver is a bad investment:
1. Price Manipulation – This one reason alone can make silver a very profitable investment in the long term, even if it does drop in price from time to time. Silver has been manipulated by governments and bankers alike for decades with little signs of stopping despite lawsuits and protests. In fact, in 2011 it was proven that JP Morgan Chase & Co engaged in illegal activities when they tried manipulating the price of silver at their large clients' expense. Three plaintiffs had accused J. P. Morgan of manipulating the silver futures market from 2010 through 2011 through spoofing trades. The suit by hedge fund manager Daniel Shak and two commodity traders accused J.P. Morgan of manipulating the silver futures market, costing plaintiffs $30 million in losses. Why would these people still try to suppress the value of silver today? Maybe because they hold large stockpiles of it?
2. Silver is not an Industrial Metal – Unlike copper, aluminum, and other metals that are necessary for our current industrial society, silver is mainly used for decorative purposes and in jewelry. That means its value is mainly based on its rarity and not on its practicality. Now, I'm not saying why this makes it a bad investment; it just has no real intrinsic value.
3. Silver Isn't Rare (compared to gold) – Silver is quite abundant and can be found in large quantities on earth. In fact, there's about 70 times more silver available than gold on an ounce-by-ounce basis. This makes it much less rare and therefore less valuable.
4. Jewelry and Utilitarian Uses – Around 50% of all silver produced is used for manufacturing or industrial purposes, another 20% is used for jewelry. The usage of silver in these areas isn't expected to change anytime soon considering why it's so popular both as an investment and a fashion accessory. This limits the amount of potentially available silver which could cause price inflation if demand increases faster than supply.
5. It Doesn't Outperform Gold – Among precious metals, silver actually performs the worst compared to gold and platinum. Even though it doesn't perform as well during times of economic stability, it's just as volatile, if not more so than gold when other factors are thrown into play such as geopolitical turmoil or war that would drive governments to stockpile it for survival-related reasons. However, some analysts predict that silver and gold will have a bull run in 2023.
6. Silver Coins, Rounds & Bars Aren't as Liquid as Gold – This means that it is harder to find a buyer for silver investments when compared to gold. The pool of interested investors is much smaller and this could lead to wild price fluctuations if sentiment changes (see reason number 4).
7. Silver ETFs are Risky – When you invest in a Silver ETF, you're actually investing in a trust that owns physical silver. Sounds safe, right? Not really. These trusts are often very risky and have been known to tank along with the price of silver, sometimes the volatility is even faster. It's backed by data that when interest rates increase, commodities prices decrease. This is risky especially since the U.S. Federal Reserve is raising interest rates.
8. Mining Costs Are Rising – The cost of mining silver has been rising faster than the price of silver itself, making it less and less profitable for miners. This could lead to a decrease in the production of silver, further driving up prices.
9. It's Not as Durable as Gold – Silver is a softer metal and isn't as durable as gold making it more susceptible to scratches and tarnishing. Gold doesn't corrode which is why it's often used for jewelry and other decorative items.
Silver Investment Risk Factors
There is always a chance that an investment will go sour, and silver investment is no exception. There are several risk elements involved in the silver market. They are as follows:
1. Sensitive To Recession: The risk of investing in silver is that the price of silver is unpredictable. COVID-19 had a negative impact on metal prices. The cost of silver is typically determined by industrial development. As a result, the cost of silver will plummet significantly if there is an economic recession. With the news of the new Omicron variant, it's not a great outlook for the stock market and commodities. In fact, the value of silver is almost entirely dependent on its demand. If demand for something rises, it will also rise in value. If demand drops, the cost of the item drops as well.
2. Vulnerable To Technology Shifts: There's a chance that silver may be replaced with other metals. Alternatively, if the demand for silver falls, so does the price. The fall in photographic film usage had a significant influence on the value of silver.
3. Limited Income: Unlike a bond or a stock, silver does not pay out any interest or dividends. As a result, the earnings are restricted to Silver. If the price of silver rises above the purchase price, you can only make money.
4. Unpredictable Rise In Price: Silver has several uses, and the value of the metal can vary substantially from day to day. As a result, purchasing Silver may be difficult for some people. In fact, if you are a novice investor, you might not be able to find the best point of entry into silver and wind up paying an excessive amount for it.
How to Invest in Silver
Still interested in investing in silver? Look no further if you want to diversify your investment portfolio and start investing in commodities. Commodity trading enables you to speculate on the global market for real goods like gold, oil, wheat, coffee, and more.
It's critical to find the best commodity trading company like eToro and TD Ameritrade, if you want to succeed in the dynamic commodities market. So, let's have a look at each of the top ten commodity trading applications to assist you to decide which one is best for you.
Let's take a look at how they compare in terms of pricing:
|Commission||Spot Gold Spread||Spot Crude Oil Spread||Deposit Fee||Withdrawal Fee||Inactivity Fee|
|eToro||None||45 pips||5 pips||None||$5 per withdrawal||$10 per month after 12 months|
|Charles Schwab||$1.50 per contract||None||None||None||None||N/A|
|AvaTrade||None||0.34 pips||0.03 pips||None||None||$50 per month after 3 months|
|Capital.com||None||1.41 pips||0.44 pips||None||None||None|
|Forex.com||None||2.0 pips||N/A||None||$25 per withdrawal under $10,000||$15 per month after 12 months|
|Plus500||None||1.12 pips||0.04 pips||None||None||$10 per month after 3 months|
|TD Ameritrade||$2.25 per contract||N/A||N/A||None||None||None|
|IG||None||0.3 pips||2.8 pips||None||None||$12 per month after 24 months|
|Interactive Brokers||$0.25-$0.85 per contract||0.15 pips||N/A||None||None||$20 per month|
|Libertex||0.03-0.78%||N/A||N/A||None||None||$5 per month after 6 months|
How to Trade Silver
There can be tremendous opportunities from trading in the silver market, assuming you do it well despite the risks outlined above.
As technology and trading efficiency continue to advance, traders are becoming more and more interested in trading silver, gold, and other highly valued staples of trading.
Part of the reason why this appeal remains so strong is the emergence of top brokers like eToro that let you trade silver. These trading markets and opportunities have helped bring silver trading to the modern generation and ensure it still remains one of the most sought-after trading markets. But let's start with the basics.
All of these reasons combined make silver a less desirable investment than gold or even platinum. While it may be wise to have some silver in your investment portfolio, don't put all your eggs in one basket! Be sure to diversify with other metals and assets to help offset the risks.
There are a few reasons why silver might not be the best investment choice. Firstly, the price of silver is often more volatile than other investment options, such as stocks or bonds. This means that its value can go up or down quickly and unpredictably, which could lead to losses if you're not careful.
Additionally, the price of silver can be quite unpredictable. It doesn't always follow the same patterns as other investments, so it can be difficult to predict whether its value will go up or down in the future. This makes it a risky choice for those who want a stable return on their investment.
Finally, silver is a lot harder to trade than some other options. It's not always easy to find buyers when you want to sell, which can lead to losses if you're not able to sell at the right time. For these reasons, silver may not be the best investment option for everyone. Talk to a financial advisor to see what might be the best choice for you.
Do you have any questions about why silver is a bad investment? Let me know in the comments below!