Gold vs Silver Prices – Is It Worth Investing in Silver?

People are always yapping about how valuable gold is, but they often overlook the yellow metal’s less flashy cousin, silver. The recent years have been quite underwhelming for the two precious metals, but in general, they’re still regarded as great long-term investments.

It’s no secret that gold prices have been rising steadily, while silver has been relatively range-bound. But don’t strike it off your list just yet – as an investment vehicle, silver mirrors many qualities of gold, but at a fraction (1% to 2%) of the price.

Interested? Let’s dive into how you can get started investing in silver.

Contents

1. How to invest in silver in Singapore 
2. Why you should consider investing in silver
3. Silver vs gold prices
4. Things to note before investing in silver

How to invest in silver in Singapore

There are three main ways you can get your hands on silver in Singapore:

1. Buy physical silver bars and bullion coins

This is the most “duh” way – just buy silver bars or coins and stash them at home (or in a safety deposit box at the bank).

There are many dealers in Singapore, most of which deal with precious metals in general (so not exclusively silver). The bars typically contain 0.999 or 0.9999 silver.

I ran a quick Google search and the following popular ones came up:

• BullionStar
• SilverBullion 
• GoldSilver Central 
• SilverAg

Do note that you usually have a pay a premium to buy physical silver, which means you won’t be paying the spot price. It’s kind of like changing money – you never get to buy currency at the true exchange rate because the moneychanger needs to take a cut.

2. Get a Silver Savings Account with UOB

Now, aside from physically holding onto silver, you can set up a Silver Savings Account with UOB. It’s exactly as its name suggests – a savings account, but in silver.

You can buy and sell silver with the account, and the minimum quantity per transaction is 10 ounces. There is a monthly service charge of 0.375% p.a. of the highest silver balance each month, subject to a monthly minimum charge of 0.2 ounces of silver.

At the time of writing, UOB sells silver at S$18.34 per oz, and buys it at S$17.59 per oz (20 Mar 2020). For the latest rates, check the UOB website.

Note: You can buy gold bars, bullion coins and certificates from UOB, but not silver.

3. Invest in silver exchange-traded funds (ETFs)

Another easy way to invest in silver is to through a silver ETF. There are no silver ETFs on the Singapore Exchange, but you can look at the New York Stock Exchange or Hong Kong Exchange.

Both ETFs and the silver savings account are great ways to retain liquidity but without the logistical nightmare of you know, carting around physical silver bars and coins, à la the goblins at Gringotts.

Now that you know how to do it, it’s time to ask – should you bother investing in silver?

Back to top

Why you should invest in silver

Often compared to gold, there are many reasons why silver is an attractive investment vehicle. Here are 5 benefits of silver:

1.  Silver is cheaper than gold

I know, I am very “lor sor”. But yes – silver’s main appeal is that it’s a lot cheaper than gold. Because it costs so much less, it is great for beginners and young investors with limited capital.

Like gold, silver is a relatively liquid asset that can easily be sold for cash whenever you want. Of course, you may not always get to sell it for a good price and make money, but you can end your position anytime if you need to and it will retain most of its value.

Silver’s cheap price also means it’s easier to buy and sell, and you can convert it to cash in smaller denominations.

2. Silver is a safe haven during times of economic uncertainty

If you scrutinise the prices of silver (and all precious metals, actually), you’ll notice that they start to go up during economic crises. That’s because when a crash happens, investors will want to move their money out of the stock market. Pronto.

In fact, prices hit a market high in 2011 (3 years after the 2008 crisis) and it was ka-ching for a lot of people.

Precious metals make up this safe haven for investors, as they are expected to retain (or even increase) in value during turbulent times. Silver is negatively correlated to stocks and bonds, which means a market crisis can be a huge payday opportunity for those willing to sell.

3. Silver is great hedge against inflation

So now that we’ve established that when times are bad, the value of silver goes up… it makes sense that silver is regarded as a good inflation hedge.

It protects investors from the a falling currency because when the value of fiat currency goes down, you are compensated for the inflation with the rising price of silver.

Also, unlike legal tender, precious metals are a finite resource. You can always print more notes, but you can’t conjure more silver from thin air.

4. Silver is immune to the typical risks of stocks, funds, etc

It’s wise to consider diversifying your investment portfolio instead of simply putting all your funds into financial/digital products.

Take silver for example. With silver, it’s just you and the market – that’s it. You buy, keep and cash out whenever you want to.

There are no counter-party and default risks, no hacking or cybercrime risks. You don’t have to depend on a bank or any other institution to hold up their end of the deal.

5. Silver is tax-free (i.e. no GST)

As of 1 Oct 2012, investment-grade precious metals (gold, silver and platinum) are exempted from the good ol’ goods and service tax (GST) in Singapore.

This is meant to encourage the bullion market, which is why the exemption is for investment-grade metals only. That means your gold and silver bling don’t count, so don’t try your luck with your jeweller.

You can read up more about what is eligible for tax exemption on SilverBullion.com.sg.

Back to top

Silver prices vs gold prices

So why silver and not gold?

As mentioned, gold is a lot more expensive than silver because gold is simply rarer. The difference in price mostly reflects the demand-supply imbalance. Gold’s value in the jewellery industry also drives its price further upwards.

In contrast, silver costs just 1% to 2% the price of gold. At the time of writing (20 Mar 2020), the price of gold is S$2,277.59 (converted from US$1,570.70) per ounce, while silver is only S$18.34 per ounce (indicative pricing at UOB).

Here’s an overview of the two metals’ performance over the years:

Silver prices over the past 10 years

There was a huge (but short-lived) spike in 2011 when it hit a high of S$59.37, but other than that, the prices remained relatively low at around S$20+ per ounce.

Gold prices over the past 10 years

The same 2011 to 2012 spike was seen with gold, but in general, gold performed better than silver in the last 10 years. It has gone up from ~ S$1,300+ in 2009 to S$2,200+ today.

But there’s a reason these metals are for popular long-term investments. If you look at the 30-year performance, you may be surprised to find that silver’s actually doing quite well.

Silver prices over the past 30 years

In total, the prices of silver has doubled from S$10+ to S$20+.

Gold prices over the past 30 years

Since 1989, the price of gold has gone up over 3X, from S$700+ to about S$2,200 today. 

Compared to gold, the price of silver is very much more volatile. It is most driven by demand and supply (and speculation), and thanks to its high industrial demand, it is also more exposed to economic cycles than gold, which is most used for ornamental jewellery.

Back to top

Things to take note of when investing in silver

But before you chiong to convert your life savings into silver bars… it’s not all sunshine and roses. Investing in silver is not without its risks – here are some points to bear in mind so you can manage your expectations.

1. You may see poor returns

Silver may be a safe haven for protection and to hedge against inflation, but it is unlikely to perform as well as other investments like stocks and/or real estate.

You should not expect the same kind of returns.

2. Silver is super volatile, so don’t overdo it

Silver may be a worthy investment vehicle, but because of how volatile it is, it’s wise to be careful about how much you buy – it can potentially swing your entire portfolio, and it may not always be for the better.

3. If you literally hold on to the silver, you risk theft

As with any physical item you own, you run the risk of having your silver bullions stolen. Most people keep their silver bars or coins at home, in safety deposit boxes, which means that if your home gets broken into, you’ll probably lose it all.

4. Silver promises liquidity, but it has its limitations too

Silver is considered a liquid investment, but as you probably know, you can’t waltz to a store and pay in silver ingots. This is 2020, not an ancient period drama.

Your silver will not be immediately liquid; you will need to sell it to convert it into legal tender before you can spend it.

Will you consider investing in Silver in Singapore? Tell us your thoughts in the comments below.