Investing in Silver

Silver, in comparison with Gold

Jim Rogers, the biggest commodities expert, said a few months ago that Silver is one of the very few safe refuges left for investment. Robert Kiyosaki, of Rich Dad Poor Dad fame, believes the same.

Today, Silver is trading at close to 40,000 per kilogram and Gold is at closer to 20,000 per 10 gram. If we look at the returns from Gold and Silver in last year, Silver gave returns of more than 40% while Gold gave over 25%. In fact in last 5 years, Silver has given CAGR of 27% while Gold has given CAGR of 23%. Here the quality of Silver taken for reference is 999.9 and quality of Gold is 99.50.

Gold and Silver rates

There is a useful ratio, used by Bullion trader & investors, between Gold and Silver prices. Today the ratio is 50. There is a general perception that this ratio is on the higher side and hence the scope of further appreciation in Silver prices may be limited. At the same time, few people point to the fact that this ratio has even gone to 20 in past and hence there is scope for appreciation.

Unlike Gold, which doesn't have much use, the major consumption of Silver is in industry and this is what makes Silver more attractive.


Avenues for investment

Investors can buy Silver coin and Silver bar from open market, bullion traders such as MMTC, or banks as they have been doing since long. Silver is cheaper and hence many people can invest in it. A 10 gm. coin can be bought for as little as Rs. 300-400. You have to be careful about the grading quality when you buy Silver. A few points of difference in grading can make huge differences in price. Usually anything above sterling grade (grade 925) is considered good.


Recently, because of increased interest in Silver as investment vehicle, the National Spot Exchange Limited (NSEL), an electronic spot market exchange for commodities, has introduced e-Silver as an investment avenue from 21st April, 2010. This facility allows investors to buy Silver in dematerialized form. The trading session is from 10:00 AM to 11:30 PM and hence investors can do it at their convenience. Investors can buy in the lot of 100 dematerialized units of e-Silver which is equivalent of 100 gm. of Silver.


The investors may choose to sell the e-Silver whenever they want and get the cash or may take delivery in physical form from any of the NSEL designated centres. Currently the centres are there in Mumbai, Delhi, and Ahmadabad and will soon be opened in major cities across India.

Pointers to keep in mind

Silver is not as stable an investment as Gold. The returns have been shown to be better than gold in long term but the risk is also high. The swing in price of Silver is much wider than the Gold.


The other point to keep in mind is current price of Silver. Silver has experienced a dream run in last few years. This has raised the expectation of investors. Don't go by the stories in media and keep your expectation reasonable. The returns may moderate in future.

When you buy Silver in physical form, buy from reliable jewellery or banks.


Lastly, Silver (or Gold) is, at the end of the day, an asset which does not produce earnings. You can make money only when you liquidate them. Unlike equity investment, where you can take the call on the stock price based on earnings, Silver (or Gold) do not provide this clarity. Invest for long term and possibly in a systematic way to maximize your returns.