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Silver Trading

14 minutes
Intermediate
Cristian Cochintu
Cristian Cochintu
23 November 2023

Investors and traders may hold physical silver or other investments that are backed by the precious metal itself. Find out how to take a position on silver online with spot and futures prices, as well as silver stocks and ETFs.

Precious metals such as silver have long been an alternative to traditional investments such as stocks and bonds. When times get tough, or the economy faces severe inflationary pressures, some investors turn to silver to hedge their bets or to invest more defensively. Investors like silver for many reasons, but many see it as a store of value in uncertain times, while others see silver as protection against inflation. Traders like silver for its high volatility and price swings. 

How to Trade and Invest in Silver - Quick Guide 

  • Select a silver market to trade or invest in: Choose between spot and futures prices (XAGUSD) or a selection of silver stocks and ETFs. 
  • Make a trading and investing plan: Decide whether you would like to trade on silver short-term or invest in silver in long-term - and how you're going to manage your risk. 
  • Take your positionFill in our online form to create a CFD trading account or invest account and take your position. 

     

For a more comprehensive overview of how to trade and invest in Silver, follow our in-depth guide below. 

Ways to Trade and Invest in Silver 

Silver investing and trading are two methods of gaining exposure to the price of silver (XAGUSD). Investing in silver assets would give you ownership of the underlying, while trading silver is purely speculative. There are a variety of silver markets available to trade in, including: 

`1. Silver bullion 

Owning physical silver, either as coins or bullion, is a psychologically and emotionally satisfying way to invest in silver. You have possession of it and can use it, if necessary. And in some cases, it’s relatively easy to access. 

If the price of silver rises, you can make a profit on silver coins and bullion, but that’s the only way you’ll make money here, since the physical commodity does not produce cash flow, unlike a quality business. 

Risks: It can be easy to overpay for physical silver, so be sure to note the spot price to ensure that you’re getting a fair price. Similarly, if you need cash in a hurry, you may not be able to get the full value for your physical silver, especially if you need to go through a dealer. 

2. ETFs that own silver 

If you don’t want to own physical silver directly but also want a lower-risk method, you can buy an exchange-traded fund (ETF) that owns physical silver. You’ll have the potential reward for owning silver if the price rises, but fewer risks such as theft. An ETF that owns physical silver will deliver the return of silver prices minus the ETF’s expense ratio. 

ETFs offer another advantage, too. You’ll be able to sell your silver at the market price, and the funds are highly liquid. So, you’ll be able to sell your funds at what’s likely the best price, and you can do so on any day the stock market is open. 

The two main ETFs owning physical silver are iShares Silver Trust (SLV) and Aberdeen Standard Physical Silver Shares ETF (SIVR). Traders can also wager on the silver market via an ETF that owns futures contracts through ProShares Ultra Silver (AGQ), though it’s better as a short-term bet than a long-term hold, because of how the fund is structured. 

Risks: Like gold and other commodities, silver can be volatile, especially over short periods. But with an ETF you’ll be able to dodge some of the bigger risks of owning physical silver yourself, namely the risk of theft, the illiquidity and the poor pricing when it’s time to trade. 

3. Silver mining stocks 

You can also take advantage of a rising silver market by owning the stocks of companies that mine the metal. 

By owning a miner, you can benefit in two ways. First, if the price of silver rises, the company’s earnings should rise along with it. In fact, silver miners’ profits will rise faster than the price of silver, all else equal. Second, the miner can raise production over time, also increasing its profits. That’s an extra way to win with silver, over and above just betting on the price itself. 

Some of the most profitable silver-mining companies are even able to offer investors dividends, which may be appealing for those who are in it for the long haul. 

A dividend is especially attractive in the often-unstable mining sector because it gives investors a degree of security: if a company pays a dividend, it generally feels that it has the cash to do so and believes it will have the ongoing profits it needs to keep those payments coming. 

Risks: Any time you invest in an individual company, it’s important to do extensive analysis on it, to be sure that you’re buying a high-quality company that can succeed. Many miners are risky outfits, and some have yet to dig a hole in the ground, let alone mine silver from it. Plus, because their profits depend on the volatile price of silver, mining stocks can be volatile, too. 

 

4. ETFs that own silver miners 

If you’re not looking to do a lot of analysis on silver miners but still want the advantages of owning a mining company, you can turn to an ETF that owns silver miners. You’ll get diversified exposure to miners and lower risk than owning one or two individual mining stocks. 

Three ETFs are classified as silver miners, according to ETF Database: Global X Silver Miners ETF (SIL), iShares MSCI Global Silver Miners ETF (SLVP), and ETFMG Prime Junior Silver Miners ETF (SILJ). 

Risks: A sector ETF reduces the costs of any single miner doing poorly, but anything that hits the whole industry, such as a falling price of silver, will likely ding the fund significantly. And pay close attention to what’s in those funds, since they’re not all created equal. Some may offer more exposure to higher-quality companies, while others focus more on riskier junior miners. 

   

5. Silver derivatives 

Silver derivatives are a popular way to wager on the rising or falling spot and futures prices of silver without any of the hassles of owning physical silver. Derivatives are a form of a contract between a trader and a broker aimed at profiting from the price difference between when the position is opened and when it closes. 

Silver derivatives are an attractive way to play the silver market because of the high amount of leverage available.  

In other words, you must put up relatively little capital to own a relatively large position in the metal. If the silver price moves in the right direction, you’ll make a lot of money very quickly, though you can lose it just as quickly if you’re wrong. 

Risks: The leverage in trading works both ways, meaning it magnifies your gains and your losses. If the market moves against you, you’ll have to put up more money to hold the position. And if you can’t, the broker will close out the position and you’ll be stuck with a loss. 

Trading Silver (XAGUSD)

When you trade Silver through derivatives like derivatives (XAGUSD), you’re entering a contract, which is an agreement to exchange the difference between the opening and closing price of your position. 

Derivatives can be advantageous if you’re a trader with a short-term outlook. This is because CFD trades enable you to speculate on the price of an asset by going long (buying) or going short (selling). 

One of the main benefits of leveraged trading is the ability to use leverage, giving you full market exposure while only having to commit a deposit to open your position (known as a margin). But trading with leverage carries risk. While it can amplify your profits, it can also magnify your losses. 

You might want to trade silver if: 

How to trade silver?

How is silver traded using contracts for difference? Derivatives are flexible instruments that allow traders to speculate on various silver price fluctuations, whether it’s an upward or a downward movement. Derivatives are considered more suitable for taking a short-term position on the XAGUSD price, due to overnight fees.  

To start silver trading online, rather than buying physical metal you could sign up for an account with a broker like CAPEX.com. Rather than requiring a specific silver trade app, you can trade silver derivatives along with other commodities, stocks and ETFs. 

If you would like to start trading CFDs on silver with CAPEX.com follow these steps: 

  1. Create a trading account 
  2. Choose the underlying silver product you want to trade 
  3. Use your trading strategy to identify potential trading opportunities 
  4. Open your first position 
  5. Monitor your trade using technical and fundamental analysis  
  6. Close your position based on your trading strategy 

 

Pros and cons of trading silver  

Commodity prices can be highly volatile, experiencing wild price swings. Trading silver derivatives is a way to try to profit from drastic silver price fluctuations, though the chance of making large profits goes hand in hand with the risk of large losses. 

Trading silver saves you the cost of paying for silver storage. It also gives you the opportunity to trade silver in both directions. Whether you have a positive or negative view of the XAGUSD price, you can take a long or short position to try to profit from the price movement. 

Moreover, trading silver through derivatives is often commission-free, with brokers making a profit from the spread and traders trying to speculate on the overall change in price. 

The 10% margin offered by CAPEX.com means that you need only 10% of the value of the trade you want to open, and the rest is covered by your trading provider. For example, if you wanted to open a 100-ounce trade on Silver, you’d put down a margin (10% with CAPEX.com) to trade the movement of silver price – an initial sum of $200 if Silver trades at $20 per ounce. 

However, you should be aware that trading also carries risks as they are leveraged products that multiply the size of losses if the price moves against your position, as well as maximizing gains if the price moves in the same direction. That’s because any profit or loss is calculated using the full size of the position, rather than your margin amount. So, with our XAGUSD trading example, your profit or loss would be calculated on the full $2.000, not your $200 margin. 

It is important to do your own research and understand how leverage works before you start trading. 

You should consider using the educational resources we offer like  CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader. 

Our demo account is a great place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how leveraged trading works – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading. 

Investing in Siver 

When you invest, you’re taking direct ownership of shares in a company or ETF. Because of this, investing might be preferable if you have a positive long-term outlook on that share or ETF because you’ll stand to benefit from any price increases. You could also receive dividends and voting rights if available to shareholders. 

Leverage isn’t available when you’re investing directly, so you’ll have to commit the full value of the position upfront. But this also means that your maximum risk is capped at the total cost of your investment. For example, if you bought $2.000 worth of silver mining shares, the maximum you could lose is $2.000 – if the share price falls all the way to zero. 

Remember that, when you invest, you can only profit when share prices or the value of an ETF rises above the price that you opened your investment. 

You might want to invest in silver if: 

How to invest in silver?  

How to invest in silver using stocks? A stock is a security that represents an ownership share in a company. When you purchase a company's stock, you're purchasing a small piece of that company, called a share.  

To invest in stocks online, rather than trade on silver prices or funds for speculation or hedging, you could sign up for an account with an investing provider like CAPEX.com. You will gain access to 10 global markets and +5.000 stocks. 

If you would like to start investing in silver stocks with CAPEX.com follow these steps: 

  1. Create an investing account 
  2. Choose the silver mining stocks you want to invest in 
  3. Use your investing strategy to identify potential opportunities 
  4. Open your first position 
  5. Monitor your position using technical and fundamental analysis  
  6. Close your position based on your investing strategy 

Pros and cons of investing in Silver 

There are several key reasons for investors to hold silver in their investment portfolios: 

Hedging against market volatility. Silver is seen as a safe-haven asset that could hold its value during times of uncertainty when stocks and bonds tend to fall in price. High liquidity. Silver is an actively traded commodity that offers tight bid-ask spreads which means it is highly liquid, including various silver-linked instruments from physical silver bullion to silver CFDs, silver mining stocks, and silver ETFs. 
Long-term demand trends. Silver’s use in growing technologies including electric vehicles (EVs), solar panels and 5G telecom equipment could increase demand in the coming years. Declining mining supply. Production from silver mines is expected to drop in the long term due to lower recovery rates from ore in the ground and a lack of new mining projects. 

On the other hand, having silver exposure also has its disadvantages: 

Storage costs. Holding physical silver is a direct way to gain exposure to the precious metal, but investors must arrange a safe place to store the metal and pay storage and insurance costs. Therefore, silver traders and investors might explore other options of silver trading, from silver mining stocks and ETFs to silver CFDs (XAGUSD). Market volatility. The silver market is volatile, this creates opportunities for speculation but also raises the risk of losses. Changing monetary policy. Changes to central bank policies on interest rates can reduce the attractiveness of silver relative to other assets. Higher interest rates could make silver less favourable than interest-bearing savings accounts and other financial instruments. 

What moves the price of silver 

Silver, like any market, is driven by supply and demand. However, Unlike gold, the price of silver swings between its perceived role as a store of value and its role as an industrial metal. For this reason, price fluctuations in this market are more volatile than in the market for gold. While silver roughly trades in line with gold as an item to be hoarded, the industrial supply/demand equation for the metal exerts an equally strong influence on its price. 

Use in industry 

The properties of silver make it uniquely positioned for use in industry – it’s highly conductive, anti-bacterial, malleable, and ductile. As such, silver is used in batteries, LED chips, dentistry, water purification, and medicine. All of this creates a steady demand for the metal that isn’t dependent on investment. 

According to the World Silver Survey 2022 by the Silver Institute: “Silver demand is forecast to post steady gains in the next few years to successive record highs. Industrial demand for instance is expected to see initial gains as economies continue to recover from the pandemic and through structural change.” 

The US Dollar 

Silver is denominated in US dollars, which means that the two generally have an inverse relationship. So, if the dollar weakens, silver becomes cheaper to purchase, which can lead to increased demand and higher prices. Alternatively, if the dollar strengthens, silver becomes more expensive, and demand is likely to fall. 

Euro/Dollar Forecast & Price PredictionsPound/Dollar Forecast & Price PredictionsDollar/Turkish Lira Forecast & Price Predictions

Global economics 

Sentiment surrounding the health of the global economy is an important driver for silver. Periods of economic expansion reduce interest in the metal as a store of value, with investors opting for other assets in a risk-on environment. Conversely, during recessions and periods of uncertainty, investors tend to increase their exposure to silver. In times of high inflation, traders often consider silver a trustworthy store of value, as fiat currencies lose their purchasing power. 

Mining production 

The availability of silver supply from mining also affects the market, as tight supply supports higher prices. The closure of silver mines in major producing countries like Mexico and South Africa during the COVID-19 pandemic provided support to the market as demand outpaced supply. 

Gold prices 

Given the strong investment demand for silver, its price tends to follow the direction of gold, which is the primary precious metal market. Silver is viewed as a more affordable alternative to gold for investors with smaller portfolios, as silver trades at much lower prices than the yellow metal. The gold-silver ratio refers to the number of ounces of silver needed to buy one ounce of gold. Traders look at the gold-silver ratio to gauge the performance of silver relative to gold. 

Why Trade Silver with CAPEX.com?

Speculate on silver futures 
Open a short-term position or focus on long-term price trends with futures contracts
Take your capital further 
Get full market exposure for just a small initial deposit – known as margin
Get some of the best silver prices 
Keep your silver trading costs low with spreads from just two points
Consider silver stocks or ETFs 
These can be silver mining companies around the world or buckets of assets that give you exposure to the silver market
Manage your silver risk 
Protect your capital with negative balance protection
Trade silver wherever you are 
Trade on the move with our natively designed, award-winning trading apps for iOS and Android

     

Silver Trading and Investing - FAQs

The information presented herein is prepared by capex.com/ae and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only.Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience, or current financial situation. 

Key Way Markets Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance and forecasts are not reliable indicators of future results.

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Cristian Cochintu
Cristian Cochintu
Financial Writer

Cristian Cochintu writes about trading and investing for CAPEX.com. Cristian has more than 15 years of brokerage, freelance, and in-house experience writing for financial institutions and coaching financial writers.