Silver Stocks vs Silver Bullion Performance?

Silver bulls often tussle over whether to buy silver bullion for the long term or to speculate in silver mining stocks for potential silver price outperformance.

Here we cover some of the key differences between the two as well close with data comparing silver mining stock performance vs silver bullion since the middle 1980s to today.

We will begin this content with a broad generalization.

You buy and own silver bullion as an inexpensive precious store of value for the long term.

Perhaps if you are a sophisticated trader, you might speculate in the short to medium term via trading derivatives (e.g. ETFs, futures, options, etc.) if you don’t mind stomaching the risks and carry costs associated (e.g. paying SLV ½% a year in annual fees).

Many silver investors often also buy and speculate in silver mining stocks for short, medium, and at times with the hope of long term profits as well. The thinking being that silver stocks offer leverage to a rising spot price for silver.

If the silver price is going to one day pass $50 oz USD, imagine what that will mean for silver mining share performances and valuations?

Trouble is, one asset class tends to out perform other at various times. One can and often does go to worthlessness, the other among human beings always maintains some semblance of value long term.

Here we will examine some past performances of silver bullion vs silver mining stocks as well as cover key risks and differences between the two silver asset classes. 


Silver Bullion vs Silver Mining Stocks in a Global Context

In the grand scope of total global financial assets, dwarfed are the combined values of both the total estimated above ground physical silver supply and all silver mining shares publicly traded.

If compared to total global real estate, private and public lands, private enterprises, non precious metal currencies, total listed stocks globally, and aggregate bond markets; silver and the companies which produce it are dwarfed. If you will, mere silver thimbles in haystacks of other investment classes.

And there is good reason for this.

We humans have used up that vast majority of all the silver we have ever mined.

The most low priced precious metal which results from silver producing star supernova, is still cheap when compared to other precious metals.

Currently selling at around -70% off its twice touched nominal price high of $50 oz USD (e.g. 1980 and 2011).

Over 2/3rd’s of newly mined silver ore is annually mined as a mere byproduct of other precious and base metal mining operations.



Few are the publicly traded silver mining companies who only mine for silver ore which often spreads in thin veins through the Earth’s crust making profitable silver-ore-only mining one of the most difficult businesses to be successful at.

Below is an in-depth, 2 part look into the primary silver mining process, documented by some of the men who do this difficult job for a living at Endeavour Silver Corp. (symbol EXK).


Silver Stocks vs Silver Bullion?

This is an ever enduring debate on which to choose, if you had to, one or the other. 

This ongoing discussion pitting one vs the other will likely rage onwards and will certainly not be settled here.

Here we will attempt to point out some key differences between these two relatively small distinct asset classes.

Also we will take a long term view of their relative performances versus one another from the middle 1980s up through the present day.

Barring the outlawing and or nationalizations of either assets (e.g. 1934 Silver nationalization in the USA, i.e. government silver mine nationalizations). Which might one reasonable expect to do well in the years and or even decades to come?


NOTE that:

Our Silver Bullion Bias is Inherent to Our Business Model at SD Bullion

We the author(s) of this article, we are obviously biased to silver bullion over most silver mining stocks, as we operate and maintain a high volume bullion dealership ourselves.

We buy and sell silver bullion inventory, while maintaining our business model through high dollar volume transactions, often making mere basis points (or fractional percentages) of profit when customers sell silver bullion to us and or they buy silver bullion from us.

We began this process in 2012, to offer the general investing public popular silver bullion products at often the lowest prices for real reasons and motives. We believe in owning physical bullion first as the foundation in any prudent precious metal allocation, especially today.

Yet over the years we have developed respect and relationships with various high quality silver mining analysts and successful silver mining investors (e.g. Eric Sprott, Dave Morgan, Christopher Aaron).

We fully understand the argument that silver mining stocks can ‘give you leverage’.

But of course ‘the rub’ is in such presumptions actually playing out as advertised.

One must be able to first pick both the right silver mining stocks and also be invested in quality undervalued silver miners ahead of the correct times to outperform silver bullion prices and values.

Perhaps prudence calls for a mix of both being best for silver bulls.

A core position of silver bullion for the long term, with a smaller speculative position in higher to lower sized silver mining stocks in which one could afford to lose if proven wrong. Such a limit the risk, increase the potential of reward, silver investment position could possibly give the best all around asymmetric risk reward potential overall.

Of course there are various camps that also simply choose one over the other for various reasons.

In whatever one chooses, knowing key some key differences between silver bullion or silver mining stocks is important.

Next section we will list a critical few.


Silver Mining Stock Risks 📈📉

Silver mining stock exploration risks include finding no silver or not enough high grade silver ore to be profitable over the short, medium, or long term.

Silver mining stock feasibility risks include silver mining companies which may or may have not yet discovered silver, yet even if identified some silver in the ground may not be profitable at current silver spot prices to mine profitably given the costs associated.

Silver mining stock management risks include any silver mining company as they often face large upfront costs to employ directors, explorers, and silver miners. As well there are the ongoing operating costs to mine silver. Often poor silver mining stock company management can destroy what might otherwise be a viable asset under better stewards and leadership.

Silver stocks have ongoing silver pricing risks as silver prices move up and down in historically volatile price patterns. Individual silver mining companies can either remain flat, experience positive leverage-to-price increases, or go out of business if silver prices fall too low.

Silver mining stocks have geopolitical risks as government regimes and political situations can make silver mining unstable, lead to unreasonable demands from governments, even a potential confiscation and or nationalization of silver mine assets are not without historic precedent. As well, ever increasing silver mine royalty fees from a host nation can hurt silver mining stock profitability in time.

Silver mining equities can face financing risks during bear markets and even bull markets, as banks often refuse to finance operations for various reasons. If share prices of silver mining companies are too low, raising additional equity becomes extremely dilutive to existing silver mining stock shareholders (they basically have their mining share values debased).

Silver mining share environmental risks are multi variant as silver mining companies often work in remote areas that are ecologically sensitive (e.g. mountains of Peru and or drug cartel lands of Mexico). As well, silver mining dam and leaching pool failures can and do happen, resulting in serious environmental degradation, possible exorbitant fines, and lawsuit litigation costs eating into potential profits.

Silver mining shares often have extreme price volatility with even bigger moves up or down when compared to general stock market volatility. As well, most US traded stocks and silver mining shares often do not correlate in price direction either. Over the last 5 years the S&P 500 stock index has increased substantially while silver mining stocks have simultaneously fallen and gone to all time low price points.

Silver mining stocks have limited liquidity as they are only traded during market trading hours, as well smaller silver mining stocks can be both difficult to buy or sell during open market trading hours. Small silver mining stocks can at times also be impossible to sell when there are not substantial bidders for the shares you are selling.

Publicly traded silver mining stocks and their companies often face efficiency troubles with silver mine engineering problems such as mine collapses, mill and silver ore process problems, local silver miner labour strikes, increased energy costs or inputs, and political backlashes with new government political regime changes.

Silver mining companies often shortsightedly lock in poor silver price agreements that can end up destroying silver stock shareholder value if and when major changes in silver mining operating costs related to silver bullion prices occur.

Unlike silver bullion, silver mines cannot be easily moved and thus silver stocks face locational risks from local uprisings, potential wars, political upheavals, and natural disasters which are all common problems that silver mining companies face as they work in limited nations in which recovering silver ore from the Earth is still extracted economically.


Silver Bullion Risks ▂▃▅

The risk of having one’s silver bullion stolen outright is real even if one’s silver bullion is hidden with prudence.

This risk of silver theft remains real whether or not one chooses to take direct discreet delivery, buy locally, and or have one’s silver bullion professionally vaulted in various locations (often the theft is done by one’s supposed circle of loved ones, service acquaintances, or even strangers who have inside information one way or another).

The value of silver bullion vs fiat currencies actively used and still valued by human beings today is an ongoing ever changing phenomenon. Major government and monetary fiscal policies are a major contributor to the fluctuation in fiat currency values and hence silver bullion values simultaneously. Historically speaking, there have been times in when silver bullion rockets in value higher as monetary systems and their issued fiat currencies come under severe question.

Of course, physical silver supply demand fundamentals affect the price and availability of silver bullion around the world. It is highly possible in the future that physical silver bullion demand drives so high that acquiring reasonably priced amounts of silver bullion becomes difficult again for the average person.

As silver mining outputs continue dropping and silver ore grades are getting lower and lower year after year (e.g. see page 27), the liquid supply of available physical silver bullion to buy possibly becomes less and less.

To find a trustworthy counter party to buy silver bullion from is not a given. Many would be silver bullion buyers have fallen prey to various bad silver industry practices over the years.

Critical to know how to perform silver bullion buying due diligence, whether or not one is buying silver bullion locally or from various online silver bullion dealers.

As savvy silver bullion buyers likely know, silver futures contracts pervert the silver bullion price. Large financial institutions such as government partnered central banks, hedge funds, and large commercial banks can adversely affect the spot price of silver.

For many decades now, there have been way more silver proxy derivatives traded than physical silver bullion on a notional basis. Although there have been (e.g. silver bullion prices in the fall of 2008) and likely will again be eras when the physical silver bullion market, makes and or drives the ongoing price of silver.

For now, and in general, the ongoing spot price of silver is a reflection of mostly silver derivative trading on silver futures contract exchanges (e.g. COMEX, LBMA). There are time in which silver bullion vs silver spot price divergences have and do occur.

In the short video clip below, you can see the general long term influence that New York silver trading hours have had on silver spot prices throughout the full fiat currency era 1970 – 2018.

How long could this higher silver price in the east vs lower silver price in the west divergence and trend continue?


Silver Stocks vs Silver Bullion Performances

Of course and in general, there is supposedly a positive mirroring relationship or price correlation between silver bullion and silver mining stocks.

The close relationship between the silver spot price and the companies that mine silver may be stronger in the short-run than in the long-run because silver mine producers are often affected by many other risk reward factors than merely the price of the most shiny white metal (we mentioned many of the risks in the prior section on silver mining stocks).

In this section we are going to host and embed various price charts which convey large amounts of price data over large swaths of time. In doing so we hope to illustrate how silver mining stocks and their respective silver mining stock prices have performed vs silver bullion prices over long spans of time.

Know too, unlike gold mining stocks, there are not handy silver only mining indexes highlighted in mainstream financial markets. Because of this we will have to use GoldChartRUs’ silver 7 sentiment index and charting to garner an idea of silver mining stock performance vs silver bullion over time.


Silver Mining Share Index vs Silver Bullion

Each of the silver mining share indices 7 components are arithmetically averaged giving them an equal weighting  This is used to show the current sentiment towards silver.

In general and since the data begins in 1985, silver bullion has outperformed the 7 averaged components of this index.

They following silver chart includes the following inputs:



Silver Spot Price


When the Silver 7 Index / Silver Spot Price ratio is falling (the blue line below), silver bullion is then outperforming the 7 major silver mining stock inputs.

The opposite is true when the ratio rises in the chart below (e.g. 2001, 2003, early 2016). It is during those brief times in the 21st Century that silver mining shares have actually outperformed silver bullion. 

See for yourself…


Silver Bullion vs Silver Mining Stock Conclusion

When considering the asymmetric risk and reward of overall silver mining share indexes in the 21st Century, the winning asset class here has been mixed.

The large 7 silver mining stock indexes we highlighted above performed well before the 2008 financial crisis, but since then silver bullion has outperformed silver mining stocks broadly speaking.

In total summation, expertly selected silver mining stocks could possibly make up a small but yet possible outperforming portion of a sophisticated investor’s equity portfolio.

However, hard facts over the long term reflect that silver mining shares are not a prudent long-term strategic investment for most individuals reading this piece.

In even shorter parlance, don’t ever go all in on anything, especially highly speculative silver mining shares.

Physical silver bullion has a long history and a near 6,000 years of proven lasting value.

In our opinion, prudent silver bullion allocations could make up an intelligent portion of investor asset allocations.

The downside of silver bullion values versus their potential upsides in the coming decade make the trade of some fiat currency for silver bullion a rather easy one for us. Especially when all contributing silver value factors are considered for the long term.

There is good proven reason that many of the world’s wealthiest families have always held bullion to help protect their wealth and estates over long spans of time.

Globally, the financial problems we face as a collective species are nearing another crescendo.

In the coming years, we believe investment portfolios without physical precious metal bullion allocations to offset losses in both financial assets and fiat currencies will suffer in value.

Especially versus those who had the wisdom to position themselves prudently with some bullion allocations especially at today’s late 2018 historic silver price levels.

We for now heavily favor the ones you can physically hold in your hands long term.





About the Author

James Anderson has a BA in finance from Loyola University New Orleans. He has both invested in silver mining stocks and physical silver bullion markets prior to the 2008 global financial crisis.

James’ twitter is @JamesHenryAnd and he has authored SD Bullion’s complementary 21st Century Gold Rush Book.