How to Decide If Silver is a Good Investment for Your Portfolio

Coins, bars, jewelry—anything made from silver has obvious value. For almost 4,000 years, silver, along with gold, has been used around the world as the equivalent of money. No surprise here! Silver is not only beautiful and has interesting properties, but it is also very rare in nature. Of course, the world’s silver reserves are about 5 times that of gold and 100 times that of platinum. However, this is still disastrously small!

Silver is an ideal investment instrument. Large funds and private investors are sure to have this precious metal in their portfolios. You are probably also asking yourself, “Is silver a good investment?” Let’s try to answer this question.

What is Silver and How is it Traded?

Precious metals are a group of rare and valuable resources that traditionally include gold, platinum and silver. Although gold holds leading positions among investors, silver remains an important tool for portfolio diversification. Its attractiveness is explained not only by its affordable price, but also by its wide range of industrial applications.

Silver is actively used in the production of jewelry, collectible coins, and for a long time played a key role in the photo industry. However, the greatest demand for this metal today comes from high-tech industries. Silver has the highest electrical conductivity among all metals, which makes it indispensable in the production of electronics, solar panels and medical equipment.

The main producers of silver are large mining companies that own mines and processing facilities. Notably, much of the world’s silver is produced as a by-product of mines focused on gold, copper and lead-zinc. In 2023, global silver production exceeded 25,800 tons, with Mexico, China and Peru leading production. The U.S. also contributed, providing nearly 1,000 tons.

For traders and investors, silver is available through various instruments in the commodity markets. The largest exchange venues where precious metals are traded are located in London, the US, Japan, and continental Europe. Investors can choose classic physical forms of silver, such as bars and coins, or favor more liquid financial instruments such as ETFs, mining stocks, and mutual funds, which allow them to invest in silver without having to store it physically.

Silver’s Historical Performance as an Investment

Over the centuries, gold and silver have remained among the most reliable investment instruments, with intrinsic value and the ability to retain purchasing power even during periods of economic instability. In recent decades, silver has shown significant growth. Since 2005, its price has more than doubled from $7 per ounce to the current $17. The average annual increase in the value of silver against most world currencies over the past 15 years has been more than 8%, making it an attractive asset for long-term investors.

Silver performs particularly well in times of market turbulence. For example, in 2011, against the backdrop of the European debt crisis, the price of the metal soared to a record $50 per ounce. Investors were looking for protection from a possible financial collapse in the euro zone, which led to a sharp increase in demand.

However, silver’s history includes not only ups but also serious corrections. In January 1980, the metal reached its highest historical maximum in U.S. dollars—$49.45 per ounce. This was the result of the Hunt brothers’ attempt to artificially buy up the silver market by buying up futures and physical metal. Subsequently, their strategy failed, and in just a few months, the price collapsed more than 60%, falling below $15 per ounce.

To better understand silver’s investment history, let’s take a look at the price trends over the last few decades. The graph below highlights key moments, including the 2011 surge during the European debt crisis, and more recent fluctuations:

This further emphasizes a key feature of silver—its high volatility—for traders and investors. On the one hand, this opens up opportunities for speculative trades and active trading. On the other hand, it requires a cautious approach to long-term investments.

Factors That Influence Silver Prices

The price of silver, like any other commodity, is influenced by dozens of factors. Politics, economy, industry, trader sentiment – changes in these aspects are bound to affect the chart. We have compiled a few factors to pay attention to.

Supply and Demand Dynamics

Silver continues to be a scarce resource in the global market, and 2025 will be the fifth consecutive year of shortages. According to Metals Focus, there will be a supply shortfall of 149 million ounces, 19% less than in 2024, but still above the historical average. The main driver of the shortage remains robust industrial demand, which is forecast to reach a new record in 2025.

Demand side

Total global silver demand in 2025 is expected to be 1.20 billion ounces. Industrial use continues to grow – expected to increase by 3% to 700 million ounces. One driver remains the development of the green economy: despite political shifts in the U.S., the global solar panel market continues to grow, and electrification of transportation, although slowing, still requires silver for batteries and conductors. In addition, the expansion of consumer electronics, including artificial intelligence devices, is fueling consumption of the metal.

Investment demand for physical silver is also showing a positive trend, with a 3% increase forecast due to increased interest in Europe and the US. Investors are gradually getting used to current price levels, which reduces profit taking and supports demand. However, in India, where silver prices remain high, a slight reduction in investment interest is likely.

The jewelry segment, on the other hand, is under pressure. Demand is expected to decline by 6% in 2025 due to high prices and weaker consumer spending in China and India. Silverware is also experiencing a downturn, especially in India, where demand will decline by 16%.

Supply side

Now, let’s talk about Silver supply

Total silver supply will grow by 3% to 1.05 billion ounces in 2025, reaching an 11-year high. The main contributors to growth will be:

• Silver mine production: Projected to grow 2% to 844 million ounces. Production is expected to increase in China, Canada, Chile and Morocco, where new and expanding projects (e.g. Aya Gold and Silver’s Zgounder mine) are contributing to production growth.
• Silver processing: Forecast to grow by 5% for the first time since 2012 to exceed 200 million ounces. Industrial scrap, including the processing of ethylene oxide catalysts, will be the main contributor.

Despite the overall increase in supply, demand continues to outstrip supply, supporting a tight silver market. This sets the long-term stage for a sustained rise in metal prices, especially in the face of increasing industrial utilization and investor interest.

For traders and investors, the current situation signals a continuation of the long-term uptrend, but requires attention to geopolitical risks and fluctuations in industrial demand.

Economic Growth and Industrial Use

Silver has long been valued for its unique physical properties, including its antimicrobial properties and high conductivity. These qualities have made it indispensable in a multitude of industries, from medicine and astronautics to renewable energy and the automotive industry.

As early as the 19th century, American settlers used silver coins to prolong the freshness of milk, and today NASA astronauts purify drinking water aboard spacecraft with ionized silver. Russian cosmonauts also use this method on the ISS, and in developing countries, silver filters help provide clean drinking water.

However, the main factor influencing industrial demand for silver is its high electrical conductivity, which makes it indispensable in electronics and renewable energy applications.

In solar panels, silver plays a key role by converting the sun’s rays into electricity. The average residential panel contains up to 20 grams of silver, and overall demand for the metal in this segment has grown significantly in recent years. In 2021, the use of silver in photovoltaic panels increased by 13% to reach 3,200 tons. According to the Silver Institute, solar power now accounts for 24% of global industrial demand for the metal, almost double the amount from a decade ago.

The automotive industry also remains an important consumer of silver. As technology becomes more sophisticated and the shift towards electrified vehicles, demand for the metal is increasing. Internal combustion engine vehicles account for 15-28 grams of silver, hybrids are higher at 18-34 grams, and electric vehicles (BEVs) require up to 50 grams of silver per vehicle.

This trend makes silver an attractive asset for investors as its industrial use continues to expand and demand from key technology sectors remains robust even in the face of macroeconomic instability.

Inflation and Interest Rates

Like gold, silver has historically been viewed as a hedge against inflation. During periods when real interest rates (the difference between the nominal rate and the inflation rate) turn negative, the value of silver tends to rise. This is because traditional bank savings are depreciating and investors are looking for a hard currency that will preserve the purchasing power of their capital.

An example is the 1970s, when inflation in the United States reached double digits and real interest rates went into deep negative territory. During this period, silver prices rose sharply, reaching record highs by 1980. A similar situation was observed in the 2000s, when low Fed Funds rates along with stock market volatility triggered demand for precious metals.

Silver traditionally follows gold, with a long-term correlation of 0.63 (where 1.0 is perfect synchronization). However, it should be noted that silver is more volatile: for every 1% change in the price of gold, silver usually reacts with a movement of 3%. This makes it an attractive asset for traders who can use price fluctuations in their favor.

Another important factor is the growth of the money supply. When central banks print money to stimulate the economy (as happened during the COVID-19 pandemic), the purchasing power of traditional currencies decreases. In this environment, investors start buying silver, which drives up prices.

Silver remains an interesting inflation hedge in 2025, especially if central bank policy continues to shift towards low real interest rates.

Geopolitical Events and Uncertainty

Today’s economic reality is far from stable. Despite periods of market boom, experienced investors realize that global financial systems remain vulnerable to crises. Silver, along with gold, has long-established itself as an instrument of capital protection in times of uncertainty.

Financial crises, trade wars and political instability are becoming the new normal rather than the exception. In recent decades, the global economy has faced a series of shocks ranging from the collapse of Lehman Brothers in 2008 to trade wars between the US and China and rising geopolitical tensions in Europe and the Middle East. All of this has undermined confidence in traditional assets and made precious metals particularly valuable as a risk hedge.

Systemic risks, including congested debt markets, overheated stock markets, escalating international conflicts, and the prospect of a global economic downturn, provide additional incentives for investors to invest in silver.

Factors that could affect the price of silver in 2025:

1. Federal Reserve and European Central Bank economic policies
2. Escalating military conflicts in Europe, Asia and the Middle East
3. The growing influence of the BRICS on global trade
4. Prospects for a new financial crisis
5. Declining confidence in fiat currencies and growing interest in safe haven assets
6. Global sanctions wars and their impact on commodity markets
7. Supply chain disruptions due to new trade restrictions
8. China’s growing influence in the global economy and possible changes in monetary policy

Of course, this covers the main factors, but there’s more to consider.

In an environment of increasing uncertainty, silver remains an asset that can play an important role in capital protection. Its affordability, versatility and historically proven ability to preserve value make it an important part of a diversified investment portfolio.

The Gold-Silver Ratio

The Gold-to-Silver Ratio (GSR) is one of the key indicators used by investors to assess the relative value of these two precious metals. Historically, silver has always been significantly cheaper than gold, but in recent decades the gap between the two has widened to record levels.
In 1700-1900 the average ratio was 15:1, and in 1792 in the United States it was even legislated at 15 ounces of silver for 1 ounce of gold. Today, however, the situation has changed dramatically: in 2025, the ratio exceeds 88:1, making silver one of the most undervalued assets in the precious metals market.
Why is this important for investors?

1. Silver is rarely recycled: Unlike gold, which is actively melted down and recycled back into circulation, silver is more likely to go into industrial production. Televisions, medical devices, smartphones and other devices contain small amounts of silver, but it is not economically feasible to recycle it. This means that much of the silver mined is actually lost, creating a long-term shortage.
2. Rapid growth potential: During periods of bull markets in precious metals, silver often shows higher returns than gold. For example, in the 1970s, silver appreciated by 3,800% while gold appreciated by “only” 2,500%. This makes silver a more promising asset for speculative investors looking to capitalize on sharp price fluctuations.

Given the current price ratio, silver remains an undervalued asset, especially if historical trends repeat.

The Pros of Investing in Silver

There was a lot of different information in this article. Now, let’s try to clean the mess and make some structure based on the above-written. Here’s the list of advantages you need to consider before investing in silver.

Safe Haven Asset

Silver has traditionally been considered a safe haven asset, especially in times of economic and political instability. Investors often turn to precious metals for protection against inflation, financial crises and geopolitical risks. For example, in times of high inflation and uncertainty in global markets, physical silver and gold have shown strong growth, making them an excellent tool for portfolio diversification.

“What you can know with absolute certainty is that good money – physical gold, physical silver at your disposal – is the safest thing you can do to protect yourself from all of these issues, and many others,” Lynette Zang of ITM Trading told Investing News Network.

Hedge Against Inflation

Unlike paper money, stocks or bonds, which are digital or paper obligations, silver is a physical asset. It is not at risk of default, depreciation due to money printing, or the collapse of financial markets.

Bullion bars, coins, and even silver jewelry have real value that does not depend on the decisions of governments and central banks. This makes silver a safe store of capital even in times of global economic instability.

Silver is More Flexible than Gold

One of the main advantages of silver over gold is its affordable price. Investors can enter the precious metals market with smaller investments, gradually building up positions. In addition, silver is easier to sell in installments than gold. If an investor wants to liquidate a portion of his or her portfolio, selling multiple silver coins or bars is much easier than splitting a single gold bar. This makes silver a more convenient tool for active traders and investors who need flexibility.

Silver Offers Higher Yields

Although gold and silver prices often move in sync, silver has a higher volatility. This means that in times of bull markets, silver prices rise faster than gold.

For example, during periods of rapid growth in precious metals, silver can increase in value by 2-3% while gold rises by only 1%. This gives investors the opportunity to capitalize on stronger price movements by using silver as a speculative trading tool or for long-term capital accumulation.

History is With Silver

Silver has been used as a means of payment for thousands of years and this factor gives it a strong investment basis. Unlike fiat currencies, which can depreciate due to inflation or political decisions, silver retains its value.

In addition, the increasing use of silver in industries ranging from electronics to solar panels only strengthens its fundamental position. This makes silver not only a savings tool, but also an asset with high long-term growth potential.

The Cons of Investing in Silver

In order to maintain objectivity, we’d also like to share the disadvantages of investing in silver. Only possessing complete information can safeguard one from making rash decisions.

Storage Costs

Unlike digital assets, stocks or bonds, physical silver is at risk of theft. Owning bars, coins or silver jewelry requires secure storage. The more assets stored at home, the more likely they are to be lost to a burglary.

Investors can use safe deposit boxes or safes for protection, but this incurs additional costs that can significantly reduce the returns on silver investments over time.

Lower Returns Compared to Alternatives

Although silver has investment value, its returns can be inferior to other assets such as stocks, real estate or even gold.

Some investors prefer shares of mining companies, especially those that pay dividends, or royalty companies that receive income from mining without direct production costs. Exchange-traded funds (ETFs), silver futures and other derivatives can also offer better opportunities for short-term investors.

High Premiums When Buying

The price of physical silver is usually higher than its spot market value because of the premiums that sellers charge.

During periods of high demand, premiums on popular silver investment coins such as the American Silver Eagle can rise significantly, making buying silver bullion less attractive. This is especially noticeable during recessionary periods, when investors are actively buying up precious metals.

Difficulties with Quick Liquidity

Unlike stocks or bonds, which can be sold instantly, silver bars and coins take time to liquidate.

Since silver is not legal tender, it cannot be used for everyday purchases. If an investor needs money immediately, it can take time to find a buyer, especially if the market is inactive.

Selling silver in jewelry stores or pawn stores is often less profitable, as these establishments offer below-market prices. This makes silver a less liquid asset, especially when compared to gold, which is easier to sell to large investors and banks.

How to Invest in Silver

Investments in silver can be realized in different ways, and each of them has its pros and cons. Let’s take a look at the most popular options below.

Physical Silver Jewelry

Although silver jewelry, antique objects and flatware have aesthetic and cultural value, they should not be considered as an investment asset. Due to the high mark-up on manufacturing and design work, the value of such items far exceeds the price of the silver they contain.

In most countries, including the UK, silverware is subject to VAT (20%), which increases the price to the buyer. When sold, the value will be valued at the silver content rather than the original purchase price, which reduces liquidity and investment appeal. Thus, silver jewelry and flatware are not suitable for active investment, but rather are collectibles or inheritance items.

Physical Silver Bars and Coins

Many investors prefer investment silver coins and small bars, but this approach has its own nuances.

1. All silver coins and bars start as bulk 1,000 oz (31.1 kg) bars, which are then melted down and refined into small pieces. This process adds manufacturing costs.
2. In some countries, coins and bars are subject to VAT (20%, in the UK, for example), making them less profitable to buy. To make a profit, the price of silver must rise by more than 20%, or the investor will be left with a loss.
3. The trading spread at dealers (the difference between the buying and selling price) also eats up some of the profit, especially if the investor wants to sell the asset quickly.

Despite these disadvantages, silver coins remain a popular option among long-term investors, especially in countries where there is no VAT on investment metals.

Silver ETFs and Mutual Funds

Exchange-traded funds (ETFs) and commodities (ETCs) are suitable for those who want to invest in silver without buying the physical metal. ETFs and ETCs track the price of silver, giving investors access to the wholesale market without having to hold the metal. These funds have small annual fees (0.5-1%) that cover the cost of managing and storing silver. There is no risk of loss or theft, making this option convenient for institutional and retail investors.

However, investors cannot receive physical delivery of silver, as they only own a share of the fund, not the metal itself. ETFs and ETCs are suitable for traders and short-term investors who want to speculate on silver price movements without incurring unnecessary storage costs.

Silver Mining Stocks

Another way to invest in silver is to buy shares of mining companies that explore and mine the precious metal.

Major silver mining companies such as Fresnillo (LSE:FRES), Pan American Silver (NASDAQ:PAAS), and First Majestic Silver (NYSE:AG) generate revenue from mining and selling silver. Shares of these companies can pay dividends, which makes them an interesting option for long-term investors.

However, the stock price can be more volatile than silver itself, as the companies are subject to risks related to operating costs, geopolitics, and natural disasters. This option is suitable for those who want to invest in the silver industry but are willing to tolerate stock market price fluctuations.

Is Silver a Good Investment for You?

Investing in silver can be a smart decision, but as with any asset, it’s important to consider your financial goals, risk level and diversification strategy. This metal appeals to long-term investors and traders alike, but its high volatility makes it less predictable than gold.

Before buying silver, it is worth evaluating your investment objectives. If your primary objective is to preserve capital and protect against inflation, silver can play the role of an insurance asset, as its value has historically risen during periods of economic instability. Unlike gold, silver has a broad industrial application, which makes it less dependent on purely speculative demand. However, this same property makes its price sensitive to fluctuations in the global economy.

For those who are ready for more aggressive investments, silver can provide an opportunity to capitalize on short-term price movements. Its value often rises more rapidly than the price of gold, but its decline can be just as sharp. Conservative investors should keep these characteristics in mind, as silver can add uncertainty to a portfolio.

With the right approach, silver can take its rightful place in a diversified portfolio. It has historically served as a protection against inflation and helps to reduce risks in volatile stock markets. During crises, its price often rises, which makes it a useful hedging tool. However, experts recommend not to make silver the main asset, but to consider it in combination with stocks, bonds and gold. This approach helps minimize risks and use the advantages of the precious metal in a long-term strategy.