If you’re looking for a safe-harbor investment that can outperform in a growth economy yet serve as a hedge during inflation, look no further. Investing in precious metals is a simple but effective way to diversify your portfolio and insulate yourself from the rapid shifts in traditional paper markets.
Silver is one of the more accessible precious metals, offering an easy, low-risk entry point into precious metals investments. Silver is growing in demand for its many industrial uses, making it a top-choice asset for wise investors. Typically, when investors purchase silver, they purchase it by the “troy ounce”, but many people don’t know what a troy ounce of silver is. Understanding the standard terms and conventions of buying silver will help you make informed decisions that could yield long-term benefits.
When Was Silver First Discovered?
Archaeological evidence from Greece and Turkey shows that civilizations were mining silver as early as 3000 BCE. By 600 BCE, the Lydians were the first to mint coins using a mix of gold and silver. Silver mines also funded the rise of Athens, and Spanish silver supplied the Roman Empire and became an essential source of income for European royalty in the Middle Ages.
Spain continued to dominate the silver trade after Spanish conquistadors discovered silver in the Americas. During European colonization of the New World from the 16th to 19th centuries, 85% of the silver mined globally came from Bolivia, Peru, and Mexico.
Technological innovation and the discovery of rich silver lodes in the United States, Canada, Australia, Africa, Mexico, Chile, and Japan contributed to a massive rise in silver production throughout the following centuries.
Where Is Silver Found?
More than half the world’s silver comes from Central America, primarily Mexico, Peru, and Chile. China accounts for 15% of the world’s total production, while Australia, Russia, Poland, and the United States contribute between 5% and 10% each.
How Is Silver Mined?
The two most common silver mining methods are open-pit and underground mining.
Open-pit mining is the preferred method for deposits near the earth’s surface, while underground mining uses deep shafts to access underground veins. According to The Silver Institute, only 27% of silver comes from dedicated silver mining operations, while the remaining 73% arises as a trace metal by-product of mining other base metals.
What Are Silver’s Uses?
While pure silver is primarily decorative, its other forms are useful in various industries.
Photography and x-ray technology: Silver nitrate turns black in the presence of light, making it an essential part of the traditional photographic process. Similarly, silver halide has played an important role as an exposing agent in X-rays.
Medical usage: Positively-charged silver ions have anti-microbial properties, leading to the development of silver-infused wound dressings and antimicrobial creams.
Mirrors: Silver is a key component in high-end mirrors as an excellent light reflector.
Electronics technology: Circuit manufacturers use silver paints to manufacture printed circuits and electronics.
What Is a Troy Ounce of Silver?
Novice precious metals buyers are often surprised to find that metals have their unique measurement system: Troy ounces. This standardized measurement for precious metals makes them slightly heavier than avoirdupois ounces, so you’ll pay more for a troy ounce of silver than you would for a standard ounce.
How Much Does a Troy Ounce Weigh?
One troy ounce weighs 1.097 avoirdupois ounces or 31.103 grams.
History of the Troy Ounce
The current consensus is that the Troy ounce originated in the French market of Troyes during the Middle Ages as a standardized weight measurement that could be applied in international trade.
The troy ounce developed independently from the standard avoirdupois ounce. The standard ounce was predominantly used to weigh non-precious metals, such as grains and other trade goods, although, confusingly, some markets also used it for precious metals, too.
England adopted the troy ounce in its coinage system by the 15th century. The United States continued the tradition by formally adopting the troy ounce as a precious metals measurement in 1828.
Buying Silver
While gold remains the most popular metal among precious metals investors, silver has several qualities that make it a solid starter choice. Silver is more affordable, and its ties to several industries make it easier to predict market fluctuations based on those industry markets and global needs.
What Is the Spot Price of Silver?
The spot price of any commodity refers to its current value at any moment if a trader wants instant delivery. In the case of silver, this is the price for one troy ounce of pure silver. This price fluctuates and changes by the moment during trading hours.
The spot price for silver remains the same globally. However, smaller exchanges in local markets may convert the spot price to their local currency instead of using U.S. dollars. Doing so requires you to consider the current exchange rate as well as the spot price of your chosen commodity.
How Is the Spot Price Calculated?
Traders use futures exchanges to determine gold and silver spot prices. Futures exchanges occur 24 hours per day in various exchanges during their trading hours.
While various exchanges may play a role in determining the spot price, the most influential market is the U.S.-based COMEX exchange. A quote for an immediate settlement on this exchange will become the spot market price.
COMEX
The Commodity Exchange, Inc. (COMEX) is the premier exchange for commodities such as precious metals, aluminum, and copper. COMEX is the central clearinghouse for gold, silver, and copper. It also trades in steel, platinum, and palladium.
Standard COMEX contracts are for 100 troy ounces of gold or 5,000 troy ounces of silver, though the exchange occasionally offers micro- or mini-versions of these contracts.
What Causes Silver Price Fluctuations?
Silver’s price constantly changes and often dramatically due to its volatile nature. In general, low-value investments are inherently more volatile than more expensive options such as gold or platinum.
However, because of silver’s industrial importance, the metal more closely aligns with paper markets and industrial performance than gold. Also, since most silver is a by-product of other mining operations, it’s less sensitive to supply concerns than other metals.
What Are Silver Futures?
Futures are contracts in which a buyer agrees to purchase a fixed amount of a particular commodity at a fixed price at a specified future date. For instance, a silver futures contract may involve a buyer purchasing a standard 5,000-troy-ounce contract of silver at $21 per troy ounce in six months.
The seller or buyer will benefit from the deal depending on silver’s performance during this period. If the price of silver goes up, the buyer will have bought their investment for a cheaper amount. If it goes down, the seller will have sold their silver for a higher price than had they sold it in the current market, making a profit.
Large dealers often use futures to hedge their physical positions and lessen the effect of spot price movements on their performance. In general, if you just want to buy silver to own it or start investing, buying it at the spot price is a more affordable and less complex option.
Silver as an Investment
Investing in silver is a safe way to diversify your portfolio. From physical investments to digital options, your portfolio can only benefit from venturing into silver.
Types of Investing Options
Silver Bullion
Silver bullion refers to tangible pieces you can handle and store. Bullion includes:
- Silver Coins
- Bars
- Jewelry or grain
Coins and bars are the preferred investment option due to their predictability and tax-efficient nature.
Paper Silver
Paper silver refers to any silver-related purchases that don’t involve the physical material, such as:
- Futures contracts
- Silver mining stocks
- Exchange-traded funds
ETFs or Certificates
Exchange-traded funds, or ETFs, allow users to participate in buying and selling physical silver without handling the material themselves. Instead, a financial institution holds the silver and provides a certificate stating its value, which can be traded on the ETF market.
Silver for Your IRA
Buying silver in an IRA is an excellent way of diversifying your retirement portfolio but restricts you to buying only IRA-approved bullion and storing it in an IRS-approved facility.
IRA-Eligible Coins
These coins must meet specific criteria, such as having a minimum fineness of .999. Examples of eligible coins include:
- American Silver Eagle coins
- Australian Silver Kangaroo coins
- Canadian Silver Maple Leaf coins
- Mexican Silver Libertad coins
IRA-Eligible Bars
As with coins, IRA-eligible bars must come from a specific mint and have a minimum fineness of .999. Examples include:
- 100-oz. Johnson Matthey Silver Bars
- 1-oz. Sunshine Mint Silver Bars
- 1-oz. Johnson Matthey Silver Bars
The Benefits of Investing in Precious Metals
The main benefit of investing in precious metals is that it diversifies your portfolio. As precious metals tend to gain in value when paper investments falter, and vice versa, having a portion of your investments in gold will ensure that your investments keep earning, no matter the market conditions.
What Are the Contribution Limits for Your Precious Metal IRA?
Silver IRA contributions do count towards your annual IRA limit. These limits are set at $6,000 per year for individuals younger than 50 and $7,000 for individuals over 50.
Start Your Silver Investment Journey Today
As with any investment, the sooner you start, the better your long-term gains. Whether you’re a retiree, beginner investor, or seasoned expert trying to secure a stable financial future, precious metals are an excellent way to build your investment portfolio. Diversification is the key to taking your vehicles and making them work for you instead of against you.
With inflation on the rise and at its all-time high, it’s time to begin securing your finances for your future. At Noble Gold Investments, we help individuals invest in precious metals investments like gold and silver as well as platinum, palladium, and rare coins. Our experts are here to help get you started on creating an account, funding your gold and silver IRA, and beginning your retirement savings journey. Get started by clicking here to create an account or contacting us today at (877) 646-5347!
