Silver as an investment

Silver, like other precious metals, may be used as an investment and store of value. The circulating coins of most countries used to contain silver, but those days are now long gone as rising inflation caused the price of silver to exceed the coin's face value. Many of these coins were not melted down and can be bought today as an investment.

Millions of Canadian Silver Maple Leaf coins and American Silver Eagle coins are purchased as investments each year. The Silver Maple Leaf is legal tender at $5 per ounce, and there are many other silver coins with higher legal tender values, including $20 Canadian silver coins.

In recent years ecommerce growth in the physical bullion industry has seen premiums reduced for retail investors who purchase products online. Many online dealers provide international shipping and weekly discounts on a wide range of products.

Industrial demand

The use of silver in items such as electrical appliances and medical products has increased in recent years. New applications for silver are being explored in batteries, superconductors and microcircuits, which may further increase non-investment demand.

The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products has also contributed to a long-term rise in industrial usage. Even so, due to the advent of digital cameras the enormous reduction in the use of silver-based photographic film has tended to offset this.

Price Ratio

The price of silver is driven by speculation and supply and demand, like most commodities. The price of silver is notoriously volatile compared to that of gold because of the smaller market, lower market liquidity and demand fluctuations between industrial and store of value uses. At times, this can cause wide-ranging valuations in the market, creating volatility.

Silver often tracks the gold price due to store of value demands, although the ratio can vary. The gold/silver price ratio is often analyzed by traders and investors. In Roman times, the price ratio was set at 12 (or 12.5) to 1. In 1792, the gold/silver price ratio was fixed by law in the U.S. at 15:1, which meant that one troy ounce of gold was worth 15 troy ounces of silver; a ratio of 15.5:1 was enacted in France in 1803. The average gold/silver price ratio during the 20th century, however, was 47:1.

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