It is a known fact that gold is a popular investment option for market players seeking a safe haven. Still, silver also has the potential to protect you against volatility and economic turmoil, on top of providing a hedge against high inflation.

Here are a few things you need to know about investing in silver, including what affects its price and the benefits of holding this precious metal.

Factors Influencing the Price of Silver

Like other precious metals, the price of silver is mainly affected by supply and demand.

Silver has several industrial uses, from electronic devices to solar panels to electric vehicle (EV) components to medical equipment.

Both gold and silver have limited supply, but research has shown that there are more than 1.7 million metric tons of silver around the globe. That’s compared to the 244,000 tons of gold found worldwide.

Due to silver having more supply than gold, this particular precious metal has been unable to hit $50 per ounce, compared to gold’s peak of more than $2,000 per ounce.

Setting the Price of Silver

Regarding setting the price, the London Bullion Market Association (LBMA) determines the silver’s benchmark price. The fixed price is set every day when the group’s members decide on a price, usually for big orders, that aligns buyers with the sellers.

The metal’s spot price is set in real-time and represents the buying and selling of silver bullion.

Silver also has an inverse relationship with the US dollar since it is denominated in that currency. So if the greenback declines against other peers, silver becomes more affordable, which could increase demand and raise its price.

Reasons to Invest in Silver

Here are some reasons investors would consider putting their money into silver.

To Safeguard Real Value

With inflation at an all-time high, you need to figure out a way to preserve the real value of your wealth. That’s because inflation can gradually reduce the real value of money over the long run, making your $50 incapable of purchasing as much as it could years ago.

Investing in silver is one way to protect your wealth’s real value from the impact of inflation. While consumer prices are high or increasing, the demand and prices of precious metals, including silver, tend to go up.

However, silver is not known to be a consistent hedge against inflation. Moreover, if high inflation meets economic recession, lower production could point to a complete decline in the demand for this precious metal.

Safe Haven

While interest rates and money supply drive a currency’s value, silver’s value is more supply- and demand-related. That makes silver another popular safe-haven asset for investors during geopolitical and economic volatility in the financial markets.

In the three months through August 31, 2020, silver prices rose 140% as investors turned to safe-haven assets for protection against the COVID-driven impact on global stock markets. The precious metal also gained 10% two weeks after Russia’s attack on Ukraine.


Silver also has diversification benefits similar to shares, real estate, bonds, and cash. In investing, diversification is vital to keeping you safe from severe risks and detrimental losses when one type of asset, such as shares in your portfolio, declines.

However, note that compared to gold, silver has yet to show the inverse relationship that stock markets have with the yellow metal. That means the price of silver doesn’t regularly increase when the stock markets are down.