In May 2015, silver sold for about $17 an ounce, down from $31.50 in January. Silver prices are notorious for moving far and fast, but the precious metal has numerous industrial uses, particularly in electrical applications, that help keep its intrinsic worth, and demand, high.
Safety in Silver
Since approximately 2005, silver has been more volatile than the Dow Jones Industrial average, Standard & Poor's Index, crude oil prices and even gold. However, it's illegal for U.S. investors to keep significant reserves of gold, a traditional inflation hedge. To many investors, silver is the next best thing. You can buy securities that follow silver prices or purchase actual silver. If you buy the metal itself, remember that it is sold by the troy ounce, a measure for precious metals that's about 10 percent heavier than the familiar liquid ounce. Shady dealers may assume you don't know the difference.
If you are investing in silver in 2015, you've missed an historic spike by some five years -- $47.38 in 2011 -- and another by a quarter century -- $49.45, in inflation-adjusted dollars, in 1980. That peak occurred after the Dallas, TX-based Hunt family joined unsuccessfully with sheiks, Swiss bankers and commodities traders to try to corner the silver market. The 2011 spike is widely attributed to a flight to safety by individual investors after the housing bubble burst in 2008. "Silver prices are at the mercy of investment demand, safe-haven buying, inflation fears, momentum trading and price manipulation," Business Insider magazine noted.
You can play the silver market by investing in futures and options. Your choices are the New York Mercantile Exchange's COMEX (formerly Commodity Exchange), which is listed as COMEX: SI and trades 5,000-ounce contracts; the Chicago Board of Trade (CBOT), which trades 1,000-ounce "mini" futures under CBOT: YI; and electronically on eCBOT. You can check spot prices on many websites, such as the silver page on Kitco, a precious metal company. You can also make longer-term investments in securities that follow silver prices, such as mining stocks and exchange-traded funds.
Coins and More
Many investors want physical silver in bars, coins and bullion, meaning privately minted coins called "rounds." You can buy U.S. Treasury coins directly from the U.S. Mint or find a dealer through its website. There are many types of coins: proofs and cheaper, uncirculated coins -- but collectible coins are a very different type of investment from commodity silver. Private silver dealers are significantly cheaper than the U.S. Mint, and they offer a variety of silver products, including "silver bullets." Of all silver investments, second-hand, "generic" 100-ounce bars come closest to silver's spot price.
You can also invest in "junk" silver -- circulated coins minted before 1965. Old U.S. silver coins are typically 90 percent pure silver, rather than the 99.9 percent in bullion and bars. You can buy "silver bags" in bulk -- or, for fun, troll antique shops. When you sell, the dealer quotes you a multiple of the coin's face value. You can also auction junk silver -- even on eBay, where buyers in May 2015 paid about $15 per dollar in face value. With eBay and PayPal fees, the buyer took home roughly $13.25, less shipping.
- JM Bullion: What Is a Troy Ounce?
- Silver Price: Silver Price History
- Kitco: Live Spot Silver Price
- Los Angeles Times: Hunts Guilty of Scheme to Corner Silver; J. Michael Kennedy
- Business Insider: Five Reasons Why Silver Prices Move; Alix Steel
- "Commodities for Dummies"; Amine Bouchentouf; John Wiley & Sons (p. 247)
- MarketWatch.com: How to Play a Hot Silver Market and Not Get Burned; Myra P. Saefong
- JM Bullion: Should You Buy Bars, Rounds, or Coins?
- U.S. Mint Catalog: Locate a United States Mint Bullion Coin Seller
- JM Bullion: 100 oz Silver Bar