Silver as an Investment

IG Index Head of Research Anthony Grech offers in-depth analysis into a range of topics so you can improve your knowledge of the financial markets. These free topical reports, accessible to account-holders only, track the historic performance of various markets.

Here's a taste of our latest report on the price of silver. You can access the full version in the TradeSense Databank found in the PureDeal platform. See other research articles by Anthony Grech.

Silver as an Investment

Currency wars, quantitative easing and global economic uncertainty all pose risks to investors. To protect themselves, many have sought the safety of gold, but in the rush investors have overlooked its cheaper cousin, silver.

This report looks at silver as an alternative investment to gold, examining its application in industry as well as its historical relationship with gold, and concludes that silver has the potential to continue outperforming its higher-valued peer.

Why silver?

Silver has the enviable characteristics of an asset that both stores value and has practical use. A recovery in demand for silver in industry and medicine, and its rising popularity amongst investors, suggest the metal will continue its current upward trend.

The report examines the relationship between gold and silver, as well as silver’s correlation with the MSCI Emerging Markets Index.  Price seasonality, trends in the futures market and ways to gain exposure to the metal are also explored. 

Silver's relationship with gold

The price of silver has tended to be closely correlated with that of gold, and the ratio of gold to silver (ie how much silver can be bought for one ounce of gold) is a closely-watched measurement among investors. The higher the ratio, the more expensive gold is compared to silver.

Historically, the gold-to-silver ratio varies depending on the period over which prices are compared. Over the period 1980-present the average ratio stands at 62.73 times, and from 1995 onwards the gold-to-silver ratio has fluctuated by one standard deviation (σ) above and below the 1980-present historical average. Assuming this pattern holds true, then the gold-to-silver ratio could continue its downward streak in the months ahead.

Follow your views

Whether you think silver's value is underrated against gold, or prefer to put your faith in the more traditional commodity, IG Index gives you the opportunity to support your opinion with a wide range of spread betting markets. You can take a position on commodities, on individual companies involved in silver production, or on a variety of sectors such as mining.

To read the full report, open an account and get set up in minutes. For details of the markets available through an IG Index spread betting account, please see our Range of Markets pages.

The above comments do not constitute investment advice and IG Index accepts no responsibility for any use that may be made of them.