Investing in Silver - Definitive Guide [2021]

December 29, 2020 20:45 UTC

The price of silver rose by around 44% in 2020, mainly due to the fall in industrial demand and its nature as a safe haven. The volatility that this raw material has registered due to the effects of the coronavirus pandemic has left some opportunities for investing in silver. 

Have you been asking yourself, “Why invest in silver over gold?” or maybe you’ve been looking for the ultimate investing in gold and silver for dummies guide. Well, you’re in the right place. While I don’t cover gold in this article, there’s enough information here to understand the reasons for investing in silver. 

Let’s begin!

investing in silver

 

Investing in silver - what is silver trading?

I’m talking about an important raw material, like gold. We can invest in silver or speculate on the rise or fall of the price of silver. If silver is trading in real time at $17.50, one ounce of silver is equal to $17.50.

Silver trading - key points for beginners

Here are some tips to invest in silver that will come in handy if you’re a beginner trader:

1️⃣ Develop a detailed trading plan on when and how to trade silver.

2️⃣ Analyze the price of silver to know the trend of the raw material.

3️⃣ Test your strategy from different times in the past to discover its effectiveness.

4️⃣ Adopt good risk management to better preserve your capital.

5️⃣ Maintain discipline even if you add several losing positions in a row.

You should know that the price of silver tends to follow the movements of gold. We will learn about the reasons later in this article.

All these tips about silver will be very useful but, to start, I recommend practicing with a demo trading account to gain experience. If you want to open a demo trading account and start practicing now, you just have to click on the following banner:

Free Forex Demo Trading Account

5 advantages of trading silver with CFDs

Let's look at some advantages of investing in silver with CFDs:

1️⃣ You can trade silver 24 hours a day, 5 days a week, so you can choose the time and day.

2️⃣ Take advantage of the greater volatility in the price caused by the uncertainty in the markets as a result of the coronavirus pandemic.

3️⃣ Trade silver with high liquidity and orders executed at the best market prices with Admiral Markets.

4️⃣ Access 1:10 leverage if you are a retail customer.

5️⃣ You can use a leverage of 1: 500 if you are a professional client.

6️⃣ You have no limit to your Stop Loss or to other silver trading strategies!

Disadvantages of trading silver with CFDs

You are subject to Swap charges if you hold open positions with a CFD in Silver for several days.

To face this inconvenience, there are solutions, such as practicing intraday styles or scalping. These are styles of trading that we’ll look at later in this article!

Best times to trade silver

If you want to know how to buy silver, the first things to be aware of are the most favorable and volatile hours in the silver market:

  • From 9 in the morning until noon (CET). According to the schedule of the MetaTrader platform, it would be from 10:00am to 1:00pm.
  • From 3.30p.m. to 6.30p.m. That is, from 4:30p.m. to 7:30p.m., platform time.

The first period corresponds to the opening hours of the European markets, when the volume of exchange is highest.

The second tranche coincides with the first hours of trading in the US markets and the last hours of European trading. The volume of trades and transactions is even higher and allows for good volatility with many trading opportunities.

But that’s not all!

Like gold, economic news is also a source of significant movements in the silver market. Thanks to the Admiral Markets economic calendar, you can identify opportunities for your silver investment.

This is why many traders are very fond of trading based on the economic calendar. This allows them to trade the price of silver in the minutes prior to publication hours, when large movements are common.

So, what is the best way to invest in silver? When investing in silver, be it swing trading or scalping, timing is important. Getting in at the right time and at the right price is often the obsession of all novice traders.

Let's see an example of how a news item can generate great volatility in the price of silver by looking at a screenshot of an investing silver live chart:

Silver chart with MetaTrader reaction NFP

Source: Admiral Markets MetaTrader 5. Chart M15 Silver. Data range: June 4, 2020, to June 10, 2020. Prepared on November 4, 2020, at 2.30 p.m. Keep in mind that past returns do not guarantee future returns.

In the graph above we can see a clear example of how a publication can move the price of silver with intensity. In this case, the publication on June 5, 2020, of the NFP for the month of May caused great volatility. The price of this metal traded the previous day in a lateral range (highlighted by a black rectangle) and when the data becomes known, it falls sharply (blue rectangle) and then rallies again. 

Why? The May NFP was much better than analysts expected, causing safe-haven assets such as gold and, to some extent, silver to fall. In fact, by contrast, equity markets reacted higher at that time, especially the Wall Street indices.

As you can see, silver follows gold in many cases. It’s difficult to answer the question of what to invest in, gold or silver. However, I'll give you all you need to know in this guide to investing in silver.

Fundamental analysis with silver

In order to make fundamental analysis to invest in silver we must look at the following factors:

1️⃣ The supply and demand for money.

2️⃣ The influence of gold.

3️⃣ The economic context.

4️⃣ Central banks.

Supply and demand

Like all raw materials, silver is subject to the law of supply and demand. This law is simple:

  • If supply exceeds demand, the price of silver goes down.
  • If demand exceeds supply, the price of silver increases.

Factors determining supply

Most of the new silver brought to market comes directly from mining. This type of offer depends essentially on logistical factors. In the case of logistical problems, for example, the price of silver can be affected very quickly.

You should know that this metal is not only found in silver mining. Gold, lead, zinc and copper mining also provide silver. The level of silver supply is highly dependent on the global demand for these different metals.

Another aspect entails, in particular, the recycling of silver-containing products. This other type of supply becomes increasingly important when taking into account the decrease in reserves over the years.

Factors on the demand for silver

The technology sector is the main factor in the demand for this raw material. You may not know it, but silver has one of the best electrical conductivities among metals. Therefore, it is used in electronic products, especially for the manufacture of laptops, tablets, digital cameras and many others.

The jewellery sector is another great applicant. Jewellery making is, of course, another sector and a very important factor in the demand for silver around the world.

The industrial sector also plays an essential role in the demand for silver. It’s used in the chemical industries, not forgetting the medical and textile industries.

Finally, the investment sector, which occupies the last position. Banks store money in the form of bullion for speculative purposes, as silver is considered a safe haven asset in times of crisis, as is gold.

Influence of gold

The normal thing is that the price of gold and silver move in a similar way:

If gold falls, silver falls; if gold goes up, silver goes up

Gold and silver charts

Source: Admiral Markets MetaTrader 5. Gold and Silver daily chart. Data range: from December 17, 2019, to November 4, 2020. Prepared on November 4, 2020, at 3:00 p.m. Keep in mind that past returns do not guarantee future returns.

As you can see, the price of silver (upper graph) and gold (lower graph) move very similarly.

Economic situation

As we have just seen, silver is used in different fields, such as technology and jewelry. These two are cyclical sectors and sensitive to economic conditions. In addition, silver has a safe haven status, more than ever in times of economic crisis, as precious metals retain their intrinsic value, while other assets depreciate sharply during periods of uncertainty. This is a key reason for investing in silver.

Central banks

Central banks, through their policies and interest rates, naturally influence the price of silver. Like gold, the price of silver is affected by changes in the interest rates of the main central banks.

At low rates, silver is more likely to appreciate. We must also remember that central banks store significant amounts of silver.

Therefore, the price of silver is closely linked to interest rates. This means that as interest rates rise, the price of silver, which does not earn interest, tends to fall and vice versa. That is why central banks can influence the price of silver through decisions related to monetary policy and, in particular, interest rates.

Correlations

Let's see with which instruments silver is most correlated. We can do so with the Correlation Matrix tool of MetaTrader 5 Supreme Edition:

correlation matrix admiral markets silver

Source: Admiral Markets MetaTrader 5 Supreme Edition. Silver graphic. Accessed November 4, 2020. Past performance does not guarantee future performance.

In the last 200 days, the correlation matrix shows us that the price of silver has a similar and strong correlation to gold with the SP500 and DAX30.

Silver traders should note that there is typically a stronger correlation with gold than with any other financial instrument. You can see this tool by downloading the Supreme Edition plugin for MetaTrader 5, by clicking on the following banner:

MetaTrader 5 Supreme Edition

Silver technical analysis

Technical analysis is used to make investment decisions. This type of analysis is based on price action when faced with psychological price levels, such as $20.00 or $25.00 per ounce. These technical levels are also called supports and resistances:

  • If the price of silver is below the psychological level, it is resistance.
  • If the price of silver is above the psychological level, it is support.

Whether the price of silver reaches or crosses this type of level, many traders and technical analysts will interpret the price movement to better trade the CFD for silver.

10 Year Silver Chart

Let's see below the graph with the evolution of the price of silver over the last few years.

long term silver chart admiral markets

Source: Admiral Markets MetaTrader 5 Supreme Edition. Silver monthly chart. Data range: from May 1, 2009, to November 4, 2020. Prepared on November 4, 2020, at 3.30 p.m. Keep in mind that past returns do not guarantee future returns.

Keys:

  • Price rise for three years to peak in April 2011.

Silver technical analysis from early 2009 reflects a very significant uptrend from $8.43 per ounce to the peak of $49.81.

  • Price drop for 4 years to approach the levels of the first years.

The monthly time scale shows us in detail the fall in prices over 4 years. But this decline does not return to the lowest points and stops around $14.00 an ounce.

  • Consolidation over the last five years

More experienced silver traders notice that the silver CFD has moved in a range since the beginning of 2016. The price of silver is between the resistance at 19.00 and the support at 14.00. At the beginning of 2020, with the arrival of uncertainty in the markets, the price breaks the resistance and, after touching 30 dollars in August, falls back to around 23 dollars in early November.

2020 Chart

Silver chart in 2020 with MetaTrader 5

Source: Admiral Markets MetaTrader 5 Supreme Edition. Silver daily chart. Data range: August 20, 2019, to November 4, 2020. Prepared on November 4, 2020, at 4:00 p.m. Keep in mind that past returns do not guarantee future returns.

Is it profitable to invest in silver? The technical analysis of silver in 2020 shows the following:

  • Beginning of the year in a range between 18.50 and 17.40, approximately.
  • Price crash in March from $17 per ounce to $12 due to the global crash in financial markets from the coronavirus pandemic.
  • Gradual rebound in the following months that continued until the beginning of August, when it was close to 30 dollars. In mid-September, it suffered another collapse to $21, probably due to the fall in demand.

In early November it managed to rebound slightly to around $23.

Silver - Trading Styles

With Admiral Markets you can invest in silver with different strategies and styles:

  • Scalping
  • Day trading
  • Swing trading

Scalping

Scalping with silver is the riskiest style. It consists of trading in very small units of time, opening and closing CFD positions in Silver within the same day.

These buy and sell positions are often closed with small points of difference so that the success rate is higher. If you buy a CFD contract on silver with scalping, you have to close it shortly after.

Be careful, you can open and close many positions, but this doesn’t mean more profit, it all depends on the money market conditions and your trading strategy.

Day trading

Like scalping, day trading with silver also aims to profit from price changes throughout a single day. Closing all positions before the end of the day is the other similar element between the two approaches.

The main point that differentiates day trading and scalping is mainly the number of positions and the units of time that it operates. A silver trader who practices day trading will not use charts of less than 5 minutes like scalpers do, but will instead opt for charts of 15 minutes and even 30 minutes.

Swing trading

If you don't have a lot of time to dedicate to trading because you already have a full-time job, the solution may be investing in silver for the longer term, with swing trading. This is a way to trade over several days without having to spend a lot of time in front of the screen.

Buying silver is also possible in daily or weekly time units, in which there are better quality signals!

Indicators

  • Awesome Oscillator
  • Stochastic

Awesome oscillator

Find the trend with the Awesome Oscillator, one of the indicators created by Bill Williams that shows the trend:

  • If the oscillator crosses the 0 level upwards, it is likely that the price of an ounce of silver will rise.
  • If the oscillator falls below the 0 level, the price of an ounce of silver is likely to fall.

Stochastic indicator

The stochastic indicator shows two lines at the bottom of the trading platform. Let's see how to interpret the lines of this indicator:

  • If the blue line crosses the red line upwards, the indicator produces a buy signal.
  • If the blue line crosses the red line downwards, the indicator produces a sell signal.

Now let's look at the two indicators together on the chart:

Silver chart with stochastic indicator and awesome oscillator

Source: Admiral Markets MetaTrader 5. Chart M15 silver. Data range: from October 29, 2020, to November 4, 2020. Prepared on November 4, 2020, at 4:00 p.m. Keep in mind that past returns do not guarantee future returns.

In this example you can see various trading signals with the two indicators explained above. Combine them and you can see the signals more clearly!

How to buy silver in trading

The process regarding how to invest in silver online through the MetaTrader trading platform is as follows:

1️⃣ Log in to your trading account on the platform (MT4, MT5, Webtrader, app, etc)

2️⃣ Go to the 'Market Watch' tab

3️⃣ Look for the ‘Silver’ symbol

4️⃣ Click the right mouse button on the symbol and click on 'Chart Window'.

5️⃣ On the chart, click on the right mouse button and in 'Operations' select 'New order'

6️⃣ Choose the number of lots and choose 'Buy at market'

Remember that if you choose to buy, it is because you think the price of silver will rise.

How to sell silver in trading

The process of selling silver is similar to buying, but in this case, we can only do it through CFDs:

1️⃣ Log in with your Admiral Markets trading account, on the MT4 or MT5 platform from your computer, from Webtrader or in the browser with Webtrader.

2️⃣ Go to the 'Market Watch' window.

3️⃣ Look for the 'Silver' symbol

4️⃣ Click on the symbol and choose 'Chart window'.

5️⃣ When the chart has appeared, choose the number of lots

6️⃣ Click on 'Sell to market'

Remember that the sale of CFD Silver means that you think the trading price of silver is going to fall.

If you want to delve into all the concepts we’ve seen so far, you can consult our free webinars and register for the ones that interest you most, by clicking on the following banner:

Free Trading Webinars

CFD silver trading example

Let's see an example of investing in silver:

  • You buy 0.1 lots of silver at 17.50 with a close of $0.5 per ounce (500 points) higher at 18.00. Remember that 0.1 lots corresponds to a value of one point in silver, which is 0.4554 euros (in this example). This long position would generate a profit of 500 x 0.4554 EUR = 227.68 EUR.
  • You sell 0.1 lots of silver at 17.00 with a close of 250 points below, at 16.75. In the same way, since 0.1 lots equals one point and this is equal to 0.4554 EUR (in this example), this short position generates a profit of 250 x 0.4554 EUR = 113.84 EUR.

The calculation is exactly the same in the case of losing positions. Let's look at the example of a losing position:

  • Buying a 0.1 lot at 17.00 with a close of 200 points down at 16.80 gives a loss of 200 x 0.4554 EUR = - 91.072 EUR. These examples are done with 1:10 leverage.

To do your own calculations you can use the Admiral Markets trading calculator to check the value of one point of silver. You can also calculate your profits or losses according to a certain leverage!

So, the question remains, "Is investing in silver a good investment?" Investing in silver bullion or investing in silver coins can be good for both day traders and those wondering if silver is a good investment for the future. These two commodities are often closely linked. It is important to note that all long-term strategies for investing in silver imply that short-term price fluctuations can affect results if you’re not patient enough to accept that after investing in silver, you can be in the negative for long periods of time. Finally, manage risks well to avoid very large losses.

Why invest with Admiral Markets?

Investing with Admiral Markets UK Ltd has several advantages:

✅ Broker regulated by the FCA (Financial Conduct Authority)

✅ Protection against volatility

✅ Peace of mind because your funds are kept in segregated accounts at Barclays bank.

✅ Access to leverage of up to 1:10 for retail clients and up to 1: 500 for professional clients.

✅ A typical spread of 0.021 for silver.

✅ Speculate with the price of silver both up and down using CFDs.

✅ Operate 24 hours a day, 5 days a week, even at night!

✅ Free deposits and withdrawals

If you want to start trading silver now, don’t hesitate to surround yourself with the best partners, starting with the right broker!

You can open a real account with Admiral Markets by clicking on the following banner:

Trade Forex & CFDs

Open a real trading account with Admiral Markets

Other articles that may interest you:

About Admiral Markets

We are a broker with a global presence and regulated by the highest financial authorities. We provide access to the most innovative trading platforms. We trade CFDs, stocks and ETFs.

Good Trading!

 

Admiral Markets

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

1.This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

2.Any investment decision is made by each client alone whereas Admiral Markets UK Ltd (Admiral Markets) shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.

3.With a view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.

4.The Analysis is prepared by an independent analyst (hereinafter "Author") based on personal estimations.

5.Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.

6.Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.

7.Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.

Avatar-Admirals
Admirals
An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.