Investing in Silver

About the Author:

• Amit Bhandari is the Founder and CEO of tezbid.com, a leading Indian portal dealing in antique coins and banknotes

Can silver become more precious than gold? This was the question posed by Anil Agarwal, chairman of the Vedanta Group, in a tweet. While silver has tradtionally been used for jewellery, it is also being used in green-tech: it is needed in solar panels and electric vehicles, two of the most promising green industries. Gold and silver have long been held as hedges against inflation. For instance, silver price has gone up by over 30% in the past year, and by over 80% in the past five years – in dollar terms. In rupee terms, the increase is even higher, given how the rupee has weakened against the greenback. The emerging use as an industrial metal makes silver even more attractive for investors. 

Investing in Silver via Coins

While there are multiple ways to invest in silver – silver ETFs, hallmarked bars etc, the easiest way in the Indian context is old silver coins. Silver has historically been used as money - prior to the Second World War, almost all major currencies in the world were based on silver. The Indian rupee was a 1 tola (11.66 gram) silver coin. Likewise, the US Dollar, the British Pound and other major currencies were all silver coins. These coins were minted in huge quantities – for instance, British India silver coins were minted in billions and these were used not just in undivided India but also neighbouring countries. Silver coins of Indian kingdoms such as Kutch, Hyderabad and Udaipur are also popular with collectors and are available in large quantities. 

As a long time coin collector and now as the founder of tezbid.com, I now find an increasing interest in silver coins, not just from collectors, but also investors. Collectibles such as arts, antiques and old coins are an alternate asset class in developed countries and are fast becoming one in India as well. While I advise people against looking at antique coins purely as an investment, they do offer many characteristics of a sound financial investment, and have some advantages over alternatives such as art. The market for coins is larger and more liquid than the art market, and much more transparent in terms of prices. A collector can buy or sell a single coin - but cannot buy or sell a few square inches of a painting. 

They are a good store of long term value. For instance, a silver rupee from 1945 will have a bullion value of Rs 525 today – a return of over 8% per annum over nearly 80 years! The actual price of the coin will be higher than the bullion value, because of its historical significance. While the stock market offers better short term returns, few companies have lasted this long! For investors looking to park funds and forget about it, few avenues match bullion. 

India Growth Story

There is an additional factor working in favor of Indian coins (and other collectibles). In the year 2000, India’s economy was the thirteenth largest in the world – it is now the fifth largest. By 2030, many economists expect India to be the third largest economy in the world, after the US and China. As India grows, Indians will also get richer and spend more – including on hobbies and collections. 

As the Chinese economy boomed in the early 2000s, prices of Chinese antiques shot up as newly rich Chinese consumers started to snap them up. It is natural that newly prosperous Indians will have a greater interest in their own history – a factor which will provide an added boost to Indian collectibles. To some extent, this trend is already evident – older Indian coins and banknotes are more valuable than their counterparts from neighbouring countries such as Pakistan, Nepal and Sri Lanka. This trend is going to become more pronounced over time.