My Gold News | 21 February 2023

Investing in Silver in 2021: Good Timing?

News Featured Logo

If one didn’t know better, the argument could be easily made that February 2021 flagged the key return of silver as a viable investment, the “other” precious metal was finally committing to a bull run, and it was time to jump in. Of course, if the same person was paying attention to the financial news, particularly in the U.S., one would also understand that silver was now being caught up in the digital investment games going on between Wall Street heavy-hitter brokerages and the upstart populist group on, which started gaining attention at the end of 2020.

What in the World Is Happening with Silver?

In short, the Reddit investors by the thousands decided to act in coordination to pump up various investments to make institutional investors suffer on short positions and lose money. That Wall Street institution placed stock market bets that given company stocks would continue to lose money, thereby making investment profit off of that business' struggle. The bets were so heavy, they were noticed as a vulnerability by a number of individual investors chattering away on social media forums, most notably Reddit. Known as a "viral effect" on the Internet, the actions of a few snow-balled and became the individual investment actions of many. Due to the pumping, the same Reddit investors started to make incredible gains and quick profits from the combined behavior. That, in turn, drew more individual investors which grew exponentially. The big market players with the shorts, however, suddenly found themselves in bad situations with the very stocks they expected to drop rising astronomically. The company, Game Stop (GME), was the most vivid example but not the only one. Blackberry and others were also caught up in the activity, and by February 2021 silver seemed to become the latest stock-trading battleground. The Reddit community currently denies silver was on their radar, but the instability of American stock-trading activity essentially means anyone could be making moves with the apparent vulnerability to trading manipulation. By the first week of February 2021 silver rapidly moved up from $20 to $29.50, and for many settling into at least a 13 percent increase on silver futures as well. Whether the Reddit group or institutional traders are responsible, one thing is certain: the current 2021 rise in silver is absolutely associated with rapid speculation trading and has nothing to do with supply and demand for the precious metal. That makes entering silver right now extremely risky and volatile for new positions. On the other hand, for those with current positions, the rapid value rises could actually be quite profitable, assuming one can take advantage of the moment correctly and sell when the peaking is at a high point. Every day can rapidly be a fortune or a loss, depending on where one stands on the spectrum and price point for silver. However, when the Wall Street kerfuffle syndrome ends, it’s almost a sure thing that silver will again go back to its natural market position, probably by mid-2021 at the latest. 


The Long History

Put aside the Reddit fiasco, silver historically has troughed for a while. This was after a huge rise in 2011. The precious metal never really got its legs back up to a higher price point until well into 2020. In fact, it reached a low point of under $12 in March 2020 when the COVID panic first hit. However, towards the second half of the same year, silver picked up appeal again and moved well into the low to mid $20s again per troy ounce. And the current run has the silver metal back up to its high point in August 2020, unfortunately, due to the trading nonsense currently going on. However, even with the Reddit push take into account, silver is easily stationed in the mid $20s now as a floor for the rest of 2021. That means there’s a lot of up potential on the metal from many experts’ opinions examining the practical aspects of the metal in trading. On a daily basis, silver is a rollercoaster. If folks thought gold and palladium and other metals were volatile in terms of price changes, silver puts them all to shame. Silver moves so much, it's a day-trader’s perfect tool for profit changes on the minute and hour when it comes to precious metals. No surprise, the current rise in silver’s market price has a lot of speculator types jumping in, but that doesn’t mean the price is going to stay up the way that gold did in the last few years. Silver has an interesting habit of rocketing back down again and up. One look at its historical chart over the last 20 years and a viewer can see multiple spikes month after month, year after year. The silver metal’s volatility is rooted in its market size as well as the fact that it has a far greater play on the industrial side than other precious metals like gold. The metal can be mined, but a greater amount of it is produced as a byproduct from seeking other industrial metals that are regularly harvested. Add to that dynamic the amount of silver that has been turned into bullion, jewelry, silverware, and tools, and the supply is tremendous, a good reason why silver doesn’t command $1,000 per ounce.

Performance Analysis

Silver at a glance doesn’t look like the place where one could make good investment money. However, when one looks at the gain possible in silver every time there is a price rise, silver tends to outpace even gold. Unit to unit, silver doubles its value during a rise where gold may only have a percentage increase. Gold seems like it is worth more in gain because per unit it has a much higher price point. That big number makes the eyes water like Bitcoin is doing with the cryptocurrencies right now in the high $30,000s. But when silver rises, it practically doubles its worth. If one takes the same amount of money invested in silver versus that invested in gold, he or she would have an increase of 904% gain in silver from 2001 to 2011, and only a 636% gain in gold in the same 10 years. Do the math; which one puts more in the bank when sold and cashed out? However, as things go up, silver falls rapidly too, and with just as much of a loss as it has again. And that’s evident in the numbers. Silver historically also lost more in value than gold when it dropped. The bottom line for speculation then is that silver has to be handled more carefully. Short-term players can make a profit, but they can also lose their shirts too. On the other hand, long-term investors can sit, continue to buy with each trough, and then sell for an amazing return every time the metal rises again. The differences versus other precious metals and equities can be eye-opening.


What to Expect in 2021

The same issues driving silver up in 2020 still exist. High demand for economic safety and investment diversity woke up a sleeping giant, and silver supplies have not yet matched demand. Given the slim prospects for silver supply becoming available anytime soon, many experts continue to project the only direction silver can go in is upward, at least for the rest of 2021. Coupled with the supply shortage is the continued question of what is happening with the economy moving forward and the fear that overall markets being at the top of a bubble waiting to pop. Add to the inherent economic instability risk recent changeovers in global political leadership in major powers. All of these factors are pushing for an increase in safe harbors from the spiraling of markets everyone saw in March 2020. Some still even remember the bubble of 2009 and how painful that crash was too only 11 years ago.

Silver Offers a Different Diverse Play on Metals

Precious metals have different drivers amongst themselves. Where gold, for example, is driven by demand for a true safe value haven, silver has that but also industrial demand as well. So, silver moves with some noticeable variations. It will still rise when gold goes up, but it also has a lot more change within those periods, allowing far more entry windows for investors at much lower price points. That kind of diversity allows investors to play precious metals more when the economy is up versus just abandoning gold entirely. Doing so still keeps value in a safe haven when the regular market is rising and gold is heading downward. Unfortunately, because silver is used by businesses and industries far more in manufacturing, its demand and supply price changes are linked far more with the general economy than gold if the two were compared with public markets. So, silver does tend to be a "tweener" from the full isolation of gold versus the stock markets.

There is a Downside to Silver Investment: Storage

If one is going to invest in silver bullion, storage has to be a consideration. Because silver has a lower cost, there’s going to be more of it for the same amount invested. For example, what would produce one troy ounce coin of gold, the same investor could end up with over 60 coins of 1-ounce troy silver. And that takes up a lot of space for the same weight and size of a coin. Additionally, more coins and bars mean a greater possibility of security issues, which also means an owner is going to need a bigger size secure container to keep everything from growing legs and walking away. Safes are a very practical option. At first, most folks work with a deposit box at a bank’s vault. Extremely secure, deposit boxes can hold at least two dozen coins before running out of space. Once a bullion investment gets bigger, however, then one will need a personal safe. Many investors have personal safes at home for smaller amounts. They come in different sizes and can be installed in multiple locations. However, the same problem begins to occur when a sizable holding of silver builds up. At this point, an investor either needs to think about converting the silver to another security form, like gold or renting space with a secure storage provider. All of these options will begin to increase one’s investment costs with silver. In addition, one will eventually need to take out an insurance policy as a safety net just in case something happens to the silver holdings. Even with all the above protections, accidents can still happen. Home and business fires, for example, can wipe out a silver holding very quickly, literally melting it into slag even if kept inside a safe or vault

Silver products.jpg

A Key Attraction of Silver for Investing

Just like folks who feel they missed the Bitcoin train are realizing there’s optional value in alternative cryptocurrencies like Ethereum and Litecoin, silver also makes a great stepping stone for those who want to start their precious metal position in affordable bullion and eventually move up to gold. This solves two problems: First, as one builds a sizable collection of silver units, it’s possible to then convert that holding into gold, reducing the physical storage issue that one needs to eventually address, trading one precious metal asset for another of like value. The second benefit is that silver continues to give people a separate safe haven in a current financial market that seems to have tremendous risk otherwise. If you are ready to buy silver don’t get so caught up in the current silver price NZ value. Due to the volatility that makes silver so unique, there will be plenty of opportunities for it to gain, drop and gain again. What does matter beyond the silver price is how the “other” precious metal can provide you a graduated investment opportunity to build a safe haven protection ladder, similar to how one builds additional greater and greater savings with bank certificates of deposit. And to buy Silver NZ bullion MyGold can help with a large inventory always available to select from. Further, we can provide you various options for silver bullion types as well as safes for storage and storage services for larger investment lots. We can also assist you in keeping track of what’s going on with the rest of the silver market as well as other precious metals. So, if you think right now might be too late to get into silver, it’s not. You’re right on target with what looks like silver’s next long run going into 2021 if not longer.