If you are thinking of investing in silver, this article looks at how the quality of silver is assessed and graded; how price is determined; how to invest in silver and regulation of the silver market.
Silver assay – what is silver fineness and purity?
Traditionally silver is assayed using chemical analysis, but today more advanced techniques such as x-ray fluorescence are usually used.
Pure silver is at least 99.9% pure, and its purity is usually expressed as its millesimal fineness (parts per thousand). Common silver millesimal fineness includes:
- 999 silver: this is pure silver and is used in bullion bars for trading commodities. It is too pure for most practical applications.
- 958 silver: this is an alloy of 95.8% silver plus copper and other metals. It is known as Britannia silver and was used to discourage the clipping and melting of sterling coinage into copper plate.
- 950 silver: the French first alloy standard
- 925 silver: sterling silver is an alloy with copper and other elements to reduce tarnishing. It is used for tableware, decorative items, and surgical instruments.
What is silver hallmarking?
Silver items sold commercially should carry silver hallmarks. This ensures that the silver content meets the required standard. Hallmarking has been used since the 4th Century although international standards are relatively recent.
Traditionally, hallmarks have been applied using mechanical stamping, but today laser hallmarking is becoming a common practice. Hallmarks are added by the assay office and include:
- The assayer’s mark which indicates the silver purity
- A date mark showing the year of manufacture
- A city mark indicating where the item was assayed
- A maker’s mark indicating the producer
What factors influence the price of silver?
Silver prices are controlled by the usual forces of supply and demand alongside speculation in the commodity markets.
Its price is usually more volatile than gold due to the smaller size of the silver market and changing industrial demand. The main price drivers are:
- Investors and traders: the investing in silver market is quite small, so even a single dealer can influence the price by bulk buying or selling.
- Speculation: speculation in futures markets also influences silver prices.
- Industrial and consumer demand: as is shown above, silver has many industrial uses, although its application in photography has declined substantially. However, new markets for the metal such as for biocides are expanding.
How to invest in silver?
There are several ways to invest in silver. These include:
1. Investing in silver metal
You can invest in silver by purchasing silver bullion bars and coins. Typically, bars bought from a dealer will carry a premium of around 20%, while the mark-up on silver coins is usually substantially higher.
Alternatively, silver rounds of 999 silver are available. Typically, these weigh one troy ounce. While you can invest in jewellery by using retailers, prices usually have a mark–up of over 100%.
2. Certificates
These are essentially certificates of ownership and are far more convenient than moving physical silver around. The silver remains at the mint or storage facility.
3. Exchange-traded products
Several of these, such as Exchange-Traded Funds (ETFs); Exchange-Traded Notes (ETNs); and Closed-End Funds (CEFs), that track the price of silver; are all available for trading on London and New York stock exchanges.
4. Derivatives
Silver futures and options are traded in stock exchanges across the world.
5. Silver producers
While you can invest in the shares of listed silver mining companies, share prices are not usually heavily influenced by silver prices.
Most miners produce a range of metal commodities as well as silver, and their share price is subject to a wide range of other operational factors.
What is the role of the Silver Institute?
The Silver Institute is an international organisation that represents all stakeholders of the silver industry including miners, suppliers, manufacturers, and silver investment products.
Its goals include encouraging research and development in new applications for silver; developing silver markets; providing information on silver markets and uses for anyone thinking of investing in silver; and the welfare of the silver industry.
Mining for silver
If you want to learn more about the history of silver as a commodity and how it is used, then please click here.
