Because of its potential for high returns, investing in silver is seen as an appealing investment for investors. What's more, price shifts in recent years have shown that to invest in silver can yield returns that greatly surpass even the performance of investing in gold. That said, "safe haven" investing in silver as an alternative to gold requires a separate and subtly different approach, since silver cannot be fully viewed as only a precious metal.
Silver as an Investment: Industrial Demand
Demand for silver is divided into the demand for silver as an investment and as a safe haven for industrial demand.
Some 85% of silver is used for industrial purposes. However, considering the role of silver as an industrial metal does not explain the tenfold silver price increase from 4$ /oz to 43$/oz in the past 10 years. Investing in silver has hugely surpassed investments in other raw materials (such as copper, for example) that have a purely industrial application.
Investing in Silver as a Safe Haven
Thanks to the strong growth of the gold price driven by worldwide economic unrest, the split role of silver is becoming significantly more noticeable. Investors are looking for suitable and affordable alternative safe havens; silver's shift from industrial material to monetary precious metal is thus also responsible for a large part of the price increase of recent years.
Despite the value correlation between gold and silver as precious metals, investing in silver has to be viewed separately from gold. Most significantly, the scope of the silver market is about sixty times smaller than that of the gold market. As a result, transactions on the silver market are noticeable faster and the silver market is more sensitive to market fluctuations.
Investing in Silver: More Speculative?
A smaller market, in combination with the two roles of silver as a monetary precious metal on one hand and as an industrial metal on the other, makes investing in silver more speculative and the price volatility of silver greater than that of gold.