It's been quite the ride for silver in 2016. After dipping below $14 per ounce early this year and touching a low that hadn't been seen since the Great Recession, physical silver prices were, at one point, briefly up more than 50% by midyear. Since July, physical silver has lost about a quarter of its value.

Silver's main drivers in 2017

What might 2017 have in store for the lustrous metal? A lot is going to depend on the Federal Reserve, as well as the success of President-elect Donald Trump in implementing a number of his campaign promises.

Bar of silver

Image source: Getty Images.

Silver is reliant on low opportunity costs to drive investment. Opportunity cost is the potential return on one asset that's given up for the opportunity to make a larger gain with a different asset. In the case of silver and gold, we're talking about investors passing up the opportunity to buy interest-bearing assets such as a bank CD or Treasury bond. If the yields on these assets with near-guaranteed returns remain low, then buying in precious metals should remain fairly steady, if not strong.

As for Trump, he remains the X factor -- and uncertainty is often what drives gold and silver higher. Though Republicans have a clear majority in the legislative branch, Trump alienated a number of congressional Republicans during his campaign, which could come back to haunt him when he's trying to pass legislation. There are also serious concerns about the level of GDP growth that Trump's tax, trade, and infrastructure policies will bring to the table. If there's even the slightest hiccup with Trump at the helm, silver could thrive.

Mining for silver

Image source: Getty Images.

The top silver stocks for 2017

However, regardless of what the silver industry as a whole does, there are three players within it that should be poised to outperform their peers. Here are the three top silver stocks to consider buying in 2017.

1. Silver Wheaton (NYSE:WPM)
The smartest way to play the silver industry should once again be through royalty company Silver Wheaton.

Unlike traditional mining companies, Silver Wheaton doesn't handle the day-to-day rigors of mining silver and other precious metals. It merely hands over large sums of cash to mining companies that are looking to develop a new mine or expand an existing one. In exchange for large sums of capital, Silver Wheaton receives a long-term life-of-mine contract that guarantees the delivery of a percentage of the mined metal(s) at a very advantageous price. Just how advantageous? During the third quarter, Silver Wheaton reported average cash costs of just $4.51 per silver ounce and $390 per gold ounce. That works out to a more than $11-per-ounce buffer compared to the current price of silver, and well over $700 per ounce in margin buffer to gold's current spot price.

Silver Wheaton also has excellent diversity. The company isn't tied to just a single mine or two, nor just one or two producers. The advantage of having so many deals set up is obvious: A mining disruption in a single mine won't ruin Silver Wheaton's year. Furthermore, remaining diverse de-risks Silver Wheaton if silver prices were to decline further. While the production of some of its producers could slow, it's unlikely that it would affect all of Silver Wheaton's producers, which have a varying degree of all-in sustaining costs (AISC).

As the icing on the cake, Silver Wheaton also pays out a silver-price-dependent dividend that currently works out to a 1.4% yield. You won't find many silver stocks that reward their shareholders with a dividend.

A silver mine

Image source: Getty Images.

2. Silver Standard Resources (NASDAQ: SSRI)
Another silver stock that I believe should be high up on the buy list (of course, that's also because I own it) is Silver Standard Resources.

Silver Standard has been aggressive on the mergers and acquisitions (M&A) front recently, and it's really beginning to pay off in the form of a more diversified precious metals portfolio. At the end of May, Silver Standard completed its acquisition of Canadian-based Claude Resources, which added the profitable Seabee mine to its portfolio. In particular, Claude benefited in a big way in 2015 from the earlier-than-expected commercial mining expansion of the Santoy Gap within its Seabee project, which wound up adding about 20,000 ounces of extra gold production per year. Purchasing Claude gives Silver Standard Resources access to about $20 million in annual free cash flow from Seabee, as well as multiple expansion opportunities within the Santoy Gap and the adjacent Fisher property.

At the same time, Silver Standard Resources is beginning to wind down open-pit mining at its Pirquitas silver mine. The end-of-life cycle is expected of all mines, and while it does mean the potential for reduced production on the horizon, it also means exceptionally low costs for perhaps a year or two. Silver Standard Resources has cut its cash costs at both Pirquitas and its gold-producing Marigold mine three times in 2016. While I wouldn't bet on another three cuts to its cash cost guidance in 2017, I would expect its efficiency to be among the best in the silver-mining industry.

Valued at less than six times 2017's free cash flow per share, Silver Standard remains one of my favorite long-term holdings.

Heavy machinery in a silver mine

Image source: Getty Images.

3. Great Panther Silver (NYSEMKT:GPL)
On the other end of the spectrum, the mighty mouse of the silver mining industry with a $270 million market cap, Great Panther Silver, looks intriguing.

On one hand, Great Panther really mucked up a good year by completing a $29.9 million deal in July where it sold nearly 18.7 million shares, each with accompanying warrants that are exercisable at $2.25 per share. Dilution is never the friend of shareholders, but small-cap companies like Great Panther Silver simply don't have easy access to capital like the giants in its industry. Thus, it is possible there's a near-term cap on Great Panther's valuation because of these aforementioned warrants.

Over the much longer term, Great Panther Silver could bring a lot to the table. Annual production on a silver-equivalent-ounce basis has nearly doubled between 2011 and 2016, mainly a result of improved production at the Guanajuato mine complex (GMC), which contributed to 79% of its production in the third quarter. In particular, organic growth from Guanajuato, a well-known mining region in Mexico, is coming from the San Ignacio mine within the GMC. Currently producing at a rate of 550 tonnes per day, San Ignacio should be producing at 700 tonnes per day any time now.

Great Panther Silver is also thriving because of its prudent spending on only its top-tier projects. It wound up lowering its AISC forecast this year by $1 per silver ounce at the midpoint despite its exploratory efforts, remains completely free of debt, and owns 100% of its production -- no royalty streams here. Of all the silver miners, Great Panther would be my bet to lower its silver all-in sustaining costs by the greatest percentage by 2020. For that reason, I believe it's a top silver stock to consider buying in 2017.