The nascent silver market

In the last days of 2024, Mr. Duc Tam, an investor in Doi Can (Hanoi) said he had just "purchased" a few dozen taels of silver and expected to earn a profit from this exploratory investment deal.

Like many people, Mr. Tam was very excited about this new investment channel after learning about the investment of thousands of tons of silver by legendary investor Warren Buffet with profits of up to thousands of percent after a few years.

In 2024, investors witnessed the emergence of a new trend: investing in silver bars and silver jewelry and collectibles. This is a familiar asset class, but along with the gold fever, the price of silver on the international market increased sharply and transactions were much more active than in previous years.

Before that, Mr. Tam had a long period of time during the year struggling to find a good profitable channel for his savings, in the context of low interest rates on bank deposits, high inflation, while investing in stocks, stocks were sluggish all year, real estate was quiet, only locally feverish and liquidity was difficult. The price of gold had increased, buying and selling was not easy when supply was scarce.

“Business is difficult because consumer demand is low, and there are few attractive investment channels,” said Mr. Tam, sharing about the type of assets he is interested in: silver products and silver bars.

Recently, on social networks, groups for buying and selling silver products have been quite active. Many groups have been opened with the number of members increasing rapidly. Some groups have up to 80,000 members. Some businesses have stepped up the production of silver jewelry products and silver bars, ingots of 1 tael, 5 taels, 10 taels and even kilograms to serve the storage needs.

Along with that, the communication activities of businesses trading in silver products are also very strong.

In the groups, there are many silver products for sale, from silver bars, silver rings, silver bracelets, silver paintings, silver pens, silver boats... to silver coins. Many offers are for silver products from famous corporations from Switzerland, Japan, Mexico... made of pure silver, packaged and sealed in testing cards. Buyers place orders and receive delivery before Lunar New Year.

Also on forums, many accounts said that the silver price has been adjusted down for the past 2 months, although there is no sign of an increase again, but it is predicted to break out in 2025 and will bring profits to buyers holding silver products. The price of these products will increase according to the price of silver on the international market.

In 2024, the world silver price increased impressively, from below 22 USD/ounce at times to nearly 35 USD at the end of October, equivalent to an increase of about 58%. By December 30, the silver price was at 29 USD/ounce, also increasing by about 32%, higher than the increase of nearly 26% of gold for the whole year and the increase of about 13% of VN-Index.

Each tael of silver was bought at around 1.09 million VND/tael, while the selling price was over 1.12 million VND/tael. The price of 1kg 999 silver bar (equivalent to about 266.7 chi) was bought at around 29 million VND and sold at over 29.9 million VND.

The price of each tael of silver is only about 1 million VND, or even a kilogram of silver is less than 30 million VND, making it easy to trade. Buying and storing monthly is also convenient.

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Silver prices fluctuate much more unpredictably than gold. Source: TC

Many potential risks

Also a precious metal and widely used in many industries, silver has long been of great interest and investment to investors around the world. However, in Vietnam, this metal has only recently become more popular as gold trading has become more difficult and gold prices have also increased. Silver's profitability is also quite impressive according to recent price developments.

However, there are many potential risks to this investment channel.

First of all, there is the very strong price volatility of this asset class in the past.

In 1980, silver had a feverish rally that rose above $35 an ounce from $4 just three years earlier. Two years later, silver fell back to $5.50 an ounce. In 1992, silver fell to $3.30 and by early 2006, it was still hovering below $10 an ounce. Silver reached a historic high of nearly $50 an ounce in 2011, then fell back below $14 in 2015, before rising to its current level of around $30.

It can be seen that the price of silver fluctuates much more erratically than gold. With its position as the world's leading reserve asset, the price of gold has fluctuated in an upward direction over the past half century, from about $50 in 1970 to the current $2,600/ounce. Each adjustment is not much, usually only about 5-7%, the highest is only 2-3 times in the past 50 years and also at a rate of only about 30%.

While the price of silver increases and decreases sharply according to the demand for this metal in the industrial sector, according to the demand of major economies in the world, including China. The decrease can be up to 70-80%/period.

Besides, investing in silver also has liquidity risks. In the world, gold investment and trading activities are often carried out on the floor, through accounts. But in Vietnam, silver trading is mainly jewelry and collectible products. Recently, silver bars have appeared for investment and storage needs.

However, there are very few businesses in the market that buy and sell this item. Liquidity is not high and this is also the reason why groups appear on social networks to buy and sell and exchange.

Another thing that worries many people is the quality of silver . Even for gold, except for SJC gold bars, gold bars and jewelry products of other gold trading enterprises are only announced by that enterprise and guaranteed by the reputation of the enterprise.

As for silver, only the business knows the quality of the silver.

Silver also has the disadvantage of being more difficult to store because it is susceptible to oxidation, thereby reducing the value of the asset, which can be bought back at a lower price. Silver also cannot be used as collateral for loans.

The spread for silver products is much higher than the spread for gold. The spread for gold is around 2%, while the spread for silver bullion is over 3% and many other products (such as silver coins) can be as high as 18-20%.

However, with gold prices high and liquidity low, silver is seen as an option. Some forecasts suggest that silver will remain one of the brightest investment items for 2025. On Kitco, many major organizations predict that silver could increase by 25% in 2025 to $40/ounce.

However, silver prices could face significant headwinds if the global economy slows. China’s economy remains vulnerable to a slow recovery, while trade wars between multiple countries could flare up during Donald Trump’s second term as US president. Weak industrial demand could cause silver to fall sharply.

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