Does it make sense to invest in Silver?

It doesn’t happen often but once in a while, There’s lot of interest among the market participants to invest in silver.

And rightfully so this time around as this precious metal is slowly getting back up and is strikingly close to its 9 month highs.

Let’s check some of the factors associated with silver and try to figure out if it makes sense to invest in silver.

What are the factors to consider while investing in Silver?

Historical Performance

Source : Motilal Oswal

Annual Returns

Year Annual Returns (%)
2012 13.4
2013 -23.5
2014 -15.9
2015 -9.7
2016 19.6
2017 -2.8
2018 -0.2
2019 21.8
2020 44.4
2021 -8.2
2022 -6.93

As per this Morgan Stanley piece,

  • Silver is more tied to the Global Economy: Half of all silver is used in heavy industry and high technology, including smartphones, tablets, automobile electrical systems, solar-panel cells and many other products and applications. As a result, silver is more sensitive to economic changes than gold, which has limited uses beyond jewelry and investment purposes. When economies take off, demand tends to grow for silver.
  • Silver can be considered a decent portfolio diversifier with moderately weak positive correlation to stocks, bonds and commodities.However, gold is considered a more powerful diversifier as Unlike silver and industrial base metals, gold is less affected by economic declines because its industrial uses are fairly limited.

  • Per ounce, silver tends to be cheaper than gold, making it more accessible to small retail investors who wish to own the precious metals as physical assets.

What drives Silver?

Demand and Supply analysis of Silver

As we can see from the past couple of years, Demand seems to be more when compared to supply mainly due to pent up demand after the pandemic.

As per World Silver Survey 2022, Among silver’s physical demand segments, special mention is due to physical investment, which rose by 36% in weight terms and even more so in value terms.

Comparison versus Gold

As we can see in the below data, In the last 15 years, Gold has outperformed Silver in all the time frames be it 1 yr, 3 yr, 5, 10 or 15 yrs.

Not only returns but the annualized volatility is much higher compared to Gold. So far, It is like taking higher risk to get lower returns consistently.

Silver is prone to extreme Volatility

Source: Motilal Oswal

Something to ponder

Is silver really a helpful hedging tool that we always talk about or is it a proxy to Global economy that tends to have a mildly positive correlation with stocks and bonds ? One thing is for sure, so far, it has been the more volatile commodity when compared to Gold and has also generated lower returns. Or maybe it’s sensible to have a combination of both Gold and Silver with more exposure to Gold during turbulent times. Please do share your thoughts on this topic.


Silver and Gold are nice trending instruments to trade :laughing:

Do you trade them?

Yes silver only.

How are the volatility and liquidity compared to options?

Silver futures have enough liquidity. Options not much liquidity. Gold and silver are relatively less volatile compared to other commodities like crude oil and hence ideal for trend trading.

1 Like

I think Silver is quite volatile. May be not so much like NG but still much more volatile than base metals.