Should ASX investors look to silver as an investment in 2020?

Should ASX investors look to the precious metal silver as an investment in 2020 alongside gold? There are good arguments on both sides.

Miner holding a silver nugget

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is silver a good investment in 2020?

In the department of precious metals, it's normally gold that gets the attention as an attractive asset class to invest in. Gold has been the foundation of the world's monetary system practically until the 1970s. So it makes sense that investors are still attracted to its use as a store of value.

In 2020 so far, gold has indeed attracted a lot of attention, helped of course by surging demand. Over the course of the year to date, the gold price has appreciated from US$1,520 an ounce to a high of US$2,061 an ounce that we saw back in early August. This broke the previous all-time high of US$1,921 an ounce that was set back in 2011. Today, gold has cooled somewhat at the current price of US$,1898. But it's still a popular choice for portfolio diversification and hedging against economic, monetary and geopolitical uncertainty.

Silver as an investment

But what has been less prevalent (or at least obvious) in 2020 is the fortune of another precious metal: silver. Although not as conspicuous as gold, silver also has a history of monetary use. Coins used to be minted in silver after all, and there have been instances in history where it was also used as a monetary foundation for currencies. Silver functions a little differently to gold in reality though. Unlike its yellow cousin, silver has a myriad of industrial uses. Perhaps the most pertinent in our modern age is silver's status as a key ingredient in rechargeable batteries and solar panels. This tends to translate into a more volatile price for silver. As an example, in 2020 so far, silver has fluctuated between US$12 and US$29 an ounce.

But what of silver as an investment?

It's certainly offered and available today as such a vehicle. Physical silver bullion is always an option. And alongside gold, there are exchange-traded funds (ETFs) on the ASX that allow access to silver. A primary example is the ETFS Physical Silver ETF (ASX: ETPMAG). So the question now is not 'can you buy silver as an investment?' but 'why should you?'

Is silver a good idea for an ASX portfolio?

Many of the reasons that attract investors to gold as an investment can also be applied to silver. It is a scarce and precious metal with intrinsic value. In this way, it demonstrates some of the similar perceived 'inflation/deflation' protections that gold offers. And unlike currencies these days, silver cannot be 'printed' on-demand, which is another factor that some investors appreciate.

However, as I mentioned earlier, silver is also far more volatile than gold, which provokes some scepticism for its use as an effective store of wealth. I think ordinary investors will probably find little use for silver as an investment because of this. There is nothing that silver can offer against gold as a better alternative apart from the more potential upside fuelled by its volatility, in my view.

Foolish takeaway

If you are interested in pursuing silver as an investment, I would recommend using a 'rebalancing strategy' for a small and predetermined allocation in your portfolio, say 5%. This strategy might have the potential to lend some diversification from an asset not correlated with your ASX shares. But otherwise, I think silver is set to remain a fringe option for most ASX investors. Thus, I wouldn't bother with silver as an investment unless you really want to.

Motley Fool contributor Sebastian Bowen owns shares of ETFS Physical Silver ETF. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ⏸️ Alternative Assets

a close up picture of a man's face with an expression of dumbfounded surprise as he holds his hand to his chin as if thinking further about what has just been revealed to him.

Why ASX investors should pay attention to bond markets

You might think bonds are boring, but here's why you're wrong.

Read more »

A couple sits in their lounge room with a large piggy bank on the coffee table. They smile while the male partner feeds some money into the slot while the female partner looks on with an iPad style device in her hands as though they are budgeting.

Why I prefer investing in ASX shares over bonds

When it comes to shares versus bonds, shares offer what bonds just can't.

Read more »

Group of thoughtful business people with eyeglasses reading documents in the office.

Are bonds a 'safer' investment than buying ASX shares?

Let's discuss the pros and cons of buying bonds.

Read more »

Young woman using computer laptop with hand on chin thinking about question, pensive expression.

Does Telstra sell bonds to ASX retail investors?

With rising interest rates, bonds are becoming more attractive again.

Read more »

a smiling woman looks towards the camera as she tends to the engine under the lifted bonnet of her car.

BetaShares just launched a new ASX ETF. Here's what's under the hood…

The ASX has a brand new ETF to welcome today...

Read more »

An older woman wearing a party hat is giving a thumbs up, but she's not happy about it.
Share Market News

2 interest rate hikes by the end of 2022? Seriously?

Inflation leads to rate rises, which are a party pooper for the share market. Now there could be 2 coming…

Read more »

A businessman holding a world globe in one hand, representing global investment.
⏸️ Alternative Assets

Here's a fantastic ETF that ASX investors need to know about

Here's why ASX investors should get better acquainted with the BetaShares Asia Technology Tigers ETF (ASX:ASIA)...

Read more »

A businessman holding a world globe in one hand, representing global investment.
⏸️ Alternative Assets

2 outstanding ASX ETFs to buy

BetaShares Asia Technology Tigers ETF (ASX:ASIA) and this ASX ETF could be ones to buy right now. Here's why...

Read more »