Want a ‘safe-haven’ asset? Forget gold and buy silver

Precious metal prices have risen in 2019 but investors turning to gold could be backing the wrong one amid signs that silver offers better value.

The difference between silver and gold prices reached a 27-year high earlier this year. Silver is now trading at $18.50 (£15.20) an ounce, up from $15.50 at the start of 2019.

There are subtle differences between the two metals from an investment point of view. The price of silver is not as resilient as that of gold in times of economic weakness as 50pc of extracted silver is used in industry, compared with only 10pc of gold.

But the latter’s price is more affected by investor demand and it can become very expensive very quickly in times of economic distress. Investors could therefore consider owning silver – a considerably cheaper but still viable option – for safety. Here are three ways to buy it.

Investors buy a share in a fund that is traded on a stock exchange, and the fund tracks the price of silver.

The largest is the iShares Silver Trust, which has assets of $5.6bn. ETFS Physical Silver is the only other fund running more than $1bn of investors’ money. Both ETFs track the silver spot price and charge around 0.5pc a year. A handful of British miners specialise in silver. Profits (and share prices) of miners tend to increase whenever the silver price does. Fresnillo is the world’s largest silver miner while Hochschild has a silver mine in Peru. Owning miners is more risky than simply tracking the silver price. Share prices are subject to other factors such as the risk of company failure or corporate misdeeds. Miners’ share prices tend to rise faster than the commodity price but fall much more quickly too. Rise in the silver price in 2019. But it still lags behind gold as a preferred safe-haven investment

Bullion coins can be bought through exchanges such as Royal Mint or BullionVault. Investors can buy jewellery, antiques or anything made from silver. However, there are high transaction costs when doing this. Investors will often end up paying more than the spot price when they buy and usually sell below the spot price. This “spread” will eat away at returns.