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International Silver Prices Surge 56.8% in Two Months

Domestic Prices Also Rise 53.1% in Two Months

[Asia Economy Reporter Ko Hyung-kwang] The price of silver has been rising spectacularly this year. It has surged at twice the rate of the rapidly increasing gold prices. Although silver is called the 'common people's precious metal' because its price is only about 1/80th of gold, its upward trend rivals that of its elder counterpart, gold. Due to this movement, companies specializing in silver trading and financial institutions have seen a noticeable increase in customers inquiring about silver investments. However, investors should be cautious as silver prices tend to be more volatile than gold. Typically, silver's price fluctuations are more than twice as large as gold's. Just as it rises sharply, it can also fall quickly and steeply. This is why the investment industry refers to silver as the 'devil's metal.'

According to the Korea Exchange on the 2nd, the international silver price recorded $28.44 per troy ounce on the New York Commodity Exchange (COMEX) as of the 31st of last month. Compared to the year-end price of $17.83 last year, this is a 59.5% increase. This price rise is remarkable even when compared to gold, which is considered a representative safe asset in the market. International gold prices rose 29.9% from $1,519.50 to $1,974.60 per troy ounce since the end of last year. The silver price increase is about twice that of gold.

Economic Uncertainty Boosts Demand for Safe Asset 'Silver'

The value of silver has sharply increased over the past two months. Silver prices, which were $18.13 at the beginning of July, jumped 34.5% to $24.39 by early last month and soared to $28.44 by early this month, marking a 56.8% rise in two months. The domestic market shows a similar trend. At Korea Gold Exchange, the largest private metal trading company in Korea, the price of 1 don (3.75g) of silver rose 53.1% from 2,820 KRW on July 1 to 4,320 KRW the day before yesterday.

Trading volume has also surged. According to Korea Gold Exchange, silver sales increased from 8.78 tons in 2018 to 36.5 tons last year, and the cumulative sales volume reached 43 tons by July this year. The sales volume up to July this year has already surpassed the total sales volume of the previous year.

The sharp rise in silver prices is due to increased demand for safe assets amid growing economic uncertainty caused by COVID-19, similar to gold. As COVID-19 became a source of instability in global financial markets, major countries such as the United States, the European Union, and Japan have successively implemented additional quantitative easing policies. Furthermore, expectations that the U.S. Federal Reserve will delay raising interest rates have increased demand for gold and silver, which are classified as safe assets.

Another factor driving up silver prices is the increased industrial demand, such as from the solar power industry that uses silver as a material. The amount of silver used in solar panels increased from about 2,100 tons in 2011 to 3,100 tons last year, and it is expected that by 2025, five years from now, solar power capacity will double, requiring about 6,200 tons of silver. Securities firms and major specialized institutions also predict silver prices will rise in the future in this context.

Buying 'Silver Bars' or Joining Indirect Products Like 'Silver Accounts'

There are two main ways to invest in silver. The first is to buy silver in physical form directly. Silver bullion can be purchased at general precious metal stores, but it is better to buy from specialized dealers for quality assurance. Korea Gold Exchange, Samsung Gold Exchange, and SM Gold Exchange are representative dealers. Silver bars can also be purchased at commercial banks such as KB Kookmin, Shinhan, Woori, and NH Nonghyup. While there is a gold market on the Korea Exchange (KRX), there is currently no market for trading silver because silver trading is not as active as gold.

Recently, the price of a 1kg silver bar with 99.9% purity is approximately 1.1 million KRW (including VAT). Compared to the early part of this year when it was in the 700,000 KRW range, it has risen nearly 60%. The advantage of physical investment is that there is no tax when reselling. No matter how much capital gains you make, you do not have to pay any tax when selling. However, when buying physical silver bars, you must pay a 10% VAT, just like gold bars.

Another way to invest in silver is to join a silver account (Silver Banking) sold by banks. Silver Banking is a financial product where your returns are determined by changes in silver prices without directly buying or selling physical silver. Unlike physical investment, it is easy to convert to cash anytime. However, banks charge a small fee when buying or selling. Silver accounts record the weight of silver in the account by applying the international silver price to the KRW-USD exchange rate and converting it into Korean won. Since the investment is made in dollars, Silver Banking requires consideration of two variables: silver prices and exchange rate fluctuations.

When joining, the price is set at 1% above the silver price, and when withdrawing money later, the price is set at 1% below the market price to determine the silver weight. Unlike physical trading, if you make a capital gain, you must pay a 15.4% dividend income tax. Although gold and silver are safe assets, gold and silver accounts are not safe assets. Silver Banking products are labeled as accounts or banking but are derivative investment products, not deposits. Therefore, they are not protected by deposit insurance. This means you could incur losses if the market price falls below your purchase price. Researcher Hwang Byung-jin of NH Investment & Securities advised, "Silver may be more attractive than gold as a short-term investment destination," but cautioned, "Since silver prices are much more volatile than gold, you need to be aware that the price drop can accelerate rapidly if the market falls."

This content was produced with the assistance of AI translation services.