Silver futures are standardized, exchange-traded contracts in which the contract buyer promises to acquire a particular quantity of silver from the seller at a predetermined price on a future delivery date. Though its usage as the nation’s coinage was phased out in 1965, silver gained a new economic function at the turn of the century: that of an industrial raw commodity. Silver futures are viewed as an intriguing investment that can be traded nearly 24 hours a day, six days a week. The photographic, jewelry, and electronic sectors are the main uses of silver. The COMEX Division of the New York Mercantile Exchange offers silver futures for trade (NYMEX).
Is it wise to invest in silver futures?
After gold, silver is the most heavily invested precious metal. Many traders consider it an excellent futures investment due to its adaptability and wide range of industrial applications. The Chicago Mercantile Exchange initially trading silver futures on July 5, 1933. (CME). A silver contract is a legally enforceable agreement that covers the future delivery of Silver at a predetermined price. The time, quality, quantity, and location of delivery are all standardized by a futures exchange, but the price remains flexible.
We’ll go over everything from how Silver futures trading works to why you should consider investing in it in the sections below.
What is the silver content of a futures contract?
A gold futures contract is a contract for the purchase or selling of 100 troy ounces of.995 pure gold. A silver futures contract allows you to buy or sell 5000 troy ounces of.999 percent pure silver. With gold currently pricing at $1,303 per ounce, a gold futures contract would be worth around $130,300 at today’s prices. With silver currently pricing at $20.63 per ounce, a silver futures contract would be worth $103,150. The entire contract value will, of course, change as gold and silver prices rise and fall.
Why should you invest in silver futures?
- Trading product standardization (like the size designations of full, E-mini or micro silver contracts)
- Future date listing for 60-month ahead dates, allowing for the creation of a forward price curve and, as a result, effective price discovery.
- Speculation and arbitrage opportunities that do not require the trader to have physical silver but allow them to profit from price differentials.
- Trading hours are sufficient (up to 22 hours for silver futures), providing significant trading opportunities.
When is the ideal time to buy silver and sell it?
The greatest time to trade silver is usually when there is a lot of liquidity (how easily an asset can be converted into cash). This is frequently tied to market volatility, or the degree to which the price of an asset changes over time.
Is now a good time to invest in silver in 2021?
Silver is still inexpensive when compared to other commodities that reached new highs in 2021.
At the time of writing, the price of silver is around half of its 2011 high. Even when other assets such as bonds and shares are taken into account, this makes silver the world’s most undervalued asset.
Silver’s drop in the second half of 2021 was perplexing, given its wide range of industrial applications and future possibilities in solar and electric vehicles. The US dollar, on the other hand, has made significant gains in the last year. The dollar’s strength acted as a drag on the silver market.
Silver was also pulled down by the stock market’s sustained growth in the United States. All asset types compete for a finite pool of investment funds. Silver investments faced outflows of money as long as stock prices were robust. In the approaching year, I believe this tendency will gradually reverse.
Coins or bullion
Physical silver, whether in the form of coins or bullion, is a psychologically and emotionally rewarding method to invest. You have it in your possession and can use it if necessary. In some circumstances, it’s even relatively simple to obtain. For example, pre-1964 U.S. coins contain approximately 90% silver and can be purchased at the silver content’s value.
You can benefit from silver coins and bullion if the price of silver rises, but that’s the only way you’ll make money here because the actual commodity, unlike a quality firm, does not provide cash flow.
Silver can be purchased via local merchants and pawn shops, as well as internet dealers like APMEX and JM Bullion. You can buy complete bars rather than just coins from more specialist vendors.
Risks: It’s easy to overspend for actual silver, so keep track of the current spot price to make sure you’re receiving a good deal. Similarly, if you require cash quickly, you may not be able to obtain the full value for your actual silver, particularly if you must go through a dealer.
If you’re buying collector coins, keep in mind that you’ll almost certainly pay more for the coin’s collectibility, which means you’ll be overpaying for the silver content. Finally, silver, like other physical things, is vulnerable to theft, so you’ll need to keep it safe and possibly insure it.
Silver futures
Silver futures are a simple way to bet on the price of silver growing or falling without the difficulties of owning physical silver. You could even take physical delivery of the silver, though this isn’t the most common motive for futures traders.
Is it possible for you to get silver in person?
Interactive Brokers offers trading on a variety of COMEX precious metal futures, as well as physical delivery of COMEX silver and gold futures to qualifying clients.
Each full size or E-micro futures contract receives physical delivery in the form of a registered warrant or an automated certificate of exchange (ACE). Please consult the COMEX Rulebook for more information on the specifics of what a warrant means for that symbol.
What is the silver content of the Comex?
To give you an example, on April 28, 2021, the COMEX reported total silver inventories in its bonded warehouses of 117,932,837.29 ounces of registered and 242,687,267.093 ounces of eligible silver. Registered inventory have agreed to be available to deliver against a contract that has reached its expiration date. Eligible stocks are only held in COMEX warehouses and are not committed to fulfill delivery on a maturing contract unless and until the owner chooses to reclassify the silver to the registered category.
The COMEX held open interest of 172,470 silver contracts, each representing 5,000 ounces of silver, as of the latest report on April 27, 2021. If every holder of a long position demanded delivery, that equals a possible liability of 862,350,000 ounces of silver. In practice, COMEX reported silver stockpiles cover only about 14% of outstanding contracts. Even if all qualifying inventories are included, less than 42% of available positions are covered. These percentages of coverage are roughly average for the COMEX.
How do I go about trading silver?
Whenever you trade silver, you’ll be employing derivative products to bet on the underlying market price, rather than buying the physical metal. Silver can be purchased in a variety of ways, including futures and spot pricing.
Silver futures
Silver is mostly traded through futures contracts. A futures contract is an agreement to purchase or sell silver at a predetermined price on a specific date in the future. While you can use futures contracts to obtain physical possession of the commodity, you don’t have to; futures contracts can also be paid in cash.
Traders that leave their silver positions open until the expiration date will either close them or roll them over to the following delivery.
Silver futures are traded on exchanges all over the world, the most prominent of which is the COMEX in the United States. Futures contracts are standardized in terms of quality and quantity; for example, a standard contract for silver is worth 5000 troy ounces.
What is the best way to sell my physical silver?
You can sell silver in a variety of ways, just like you can sell gold or platinum. Bringing your silver to a local pawn shop, a silver exchange, a consignment shop, a local jeweler, or via an internet service is the most popular option.
Check the markings on your silver to understand its quality.
However, before selling your silver to anyone, make sure you know what the current market price is for the metal so you don’t get taken advantage of. You’ll almost never get the exact spot price (the buyer must be able to profit from reselling it), but you can shop around to find a bidder who is ready to give you the most money for your metal.
More information about silver marks can be found here. It’s worth noting that most silver buyers only purchase 925 sterling silver, not plated silver. Below is further information on this.