Silver beats gold, S&P 500, and JSE Top 40 in 2024

The price of silver has soared year-to-date, increasing from around $23 per ounce at the start of January 2024 to over $32 per ounce on Monday, 21 May, 2024.

Silver’s 31% rally in 2024 means that it has outperformed gold (16.14%), the S&P 500 in rand terms (11.33%), and the JSE Top 40 index (7.05%) year-to-date.

Some reports suggest that the demand for silver has spiked in China, creating an arbitrage opportunity between the Chinese and US markets.

This caused many investors to buy silver in the US and sell it in the Chinese market for a risk-free profit.

Many South Africans may consider silver an affordable alternative to gold that can produce good returns amidst uncertainty.

However, although the recent price returns look attractive, there are significant drawbacks to investing in physical silver metal in South Africa.

Silver dealers in South Africa charge big premiums on silver bullion bars. This means investors are paying much more for their silver than the spot price in the market.

The spot price reflects the price that mints, dealers, and very large investors pay for their bullion silver.

Physical precious metals will always trade at a premium to the spot price for smaller investors because dealers profit from those sales.

Dealers incur costs related to trading in metals like gold and silver. These costs include security, storage, and transport.

Buying silver at a premium to the spot price means that the price of silver will need to increase by the value of the premium before the investor breaks even.

Daily Investor looked at some bullion silver bars on the South African market to determine what premiums investors pay for their silver.

The spot price for 100g of silver is R1845.91. In South Africa, the retail price for a 99.99% pure 100g silver bar ranges between R2,349 and R4,200.

This means South African investors pay a premium ranging from 27% to 127% on their silver investment.

This means that the entire year-to-date price rally would only let the investor break even if the investor bought the silver at the beginning of the year.

2024 year-to-date return on a silver investment