photo of two gold colored and silver colored coins standing on floor

Silver, a profitable opportunity in a volatile market

shiny silver deer christmas figure decor

Get to know “Silver”, a high-yielding asset. Helps to diversify investment portfolios well just like gold. Therefore, it is used for investments either in the form of financial instruments such as Exchange Traded Products or Silver Futures.

Amid volatile market conditions in 2020, precious metals are the asset class that many investors are interested in. Precious metals lead to excellent investment returns, such as gold, which is an important commodity in this group. In early August, gold reached a record high of $2,061.50 per troy ounce, before gold declined slightly. Despite this, the year-to-date return is a high of 28.5%.

Along with gold, silver is another attractive and high-yielding asset. This year, the price of silver rose to an eight-year high of $28.33 per ounce, representing a year-to-date return of 51.6%. Thus, silver, along with gold, is an investment with a higher return than comparative commodities in the same category.

Source: jewelry made of silver

Basically, silver is a raw material used in many industries, such as the jewelry and gemstone industry, in the production of cell phones or electronic devices, and in the manufacture of medical equipment.

However, silver is also used for investment purposes, and there are many ways to invest in silver. Be it in physical form or in the form of financial instruments that are exchange-traded products (ETPs), such as silver ETFs and silver futures forward contracts.

Silver investment in ETPs has grown exponentially, with growth this year expected to be around 47% year-on-year (data from Metal Focus, a research and publication company specializing in precious metals). Which can be attributed to the changing investment behavior of investors. High costs and the difficulty of holding physical silver included.

Another factor that has recently drawn attention to silver is the fact that silver can help to diversify the investment portfolio well. This is because the movements of the price of silver have little correlation with stocks. Compared to the SET50 index, which has a correlation of only 6.7%. It usually moves in line with the gold price. Especially since 2017, silver prices are strongly correlated with gold prices, with a correlation of 77.19%.

Therefore, those who invest in gold often also invest in silver. Whereby investors can use the ratio between the gold price and the silver price (gold-silver ratio) to make trading decisions. The gold-silver ratio is calculated by dividing the gold price by the silver price.

The ratio reflects the relative price strength of the two metals or is a signal to buy or sell precious metal.

Another point is the popularity of investing in silver. Since the price of silver is far below the price of gold, investors can already profit with a lower investment.
Silver also has the tendency to be more volatile than gold. In 2019, gold volatility was about 11.8%, while silver volatility was 18.5%. Silver is another option for those who like short-term profitable trading.

Making a profit from the current silver price Most of them are in the form Most profit from the price of silver in the form of ETFs and futures. Silver ETFs are very popular among investors because it is easy to trade them on the stock market. Investors can hold real money without storage. The first silver ETF to trade was the iShares Silver Trust in 2006. Silver ETFs have combined silver holdings of about 620 million/ounce about $9,936 million.

Futures are traded on a number of derivatives markets, including the Chicago Mercantile Exchange (CME) in the U.S., the Shanghai Futures Exchange (SHFE) in China, the Multi Commodity Exchange (MCX) in India, and the Tokyo Commodity Exchange (TOCOM) in Japan. The SHFE and CME markets are the largest silver futures markets. Trading volumes in 2019 were approximately 68.877 million ounces of silver and 122.5 billion ounces, respectively, with combined volumes up 240% compared to 2018. Other markets are trending toward growth as well.


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