Mining
The Silver Series: Making The Case For Silver (Part 4 of 4)
2015 Silver Series Part 4: Making The Case For Silver
In the previous parts of The Silver Series, we’ve shown that silver has a rich and multi-faceted history with applications in money, health, and technology. We’ve covered the metal’s supply and geological origins, as well as the growing demand stemming from industry, investment, and other areas.
However, the real question for investors boils down to this: is it worth it to hold silver bullion or equities in a portfolio?
Silver and Gold
The two major precious metals are alike in many ways. They’ve both been used as money for thousands of years, and both are considered a store of wealth today. However, to understand the nuances of silver as an asset, it is important to keep in mind a couple of key differences that it holds from the yellow metal.
The most obvious difference is that silver is used much more widespread in industry than gold. Approximately 50% of all demand stems from technological applications like photovoltaics, automobiles, batteries, and other such uses. This gives silver a potentially wider range of demand triggers.
The other major difference is that in comparison to the gold market, silver trades thinly and with much higher volatility. In 2014, there was $20.4 billion of demand for physical silver and $159.7 billion demand for physical gold. Even more interesting, these physical markets are less than 1% the size of the total markets when factoring paper trades like derivatives, futures contracts, and options.
Silver typically hits higher highs and lower lows than gold. To the savvy investor, this creates great opportunity.
Why Own Silver?
The reasons an investor should consider exposure to silver can be summed up with three key points.
1. Diversification.
Silver has little or no correlation with most asset classes such as bonds, stocks, or real estate. This is because silver prices move based on supply and demand, but also because of other factors such as the global economic environment, futures market speculators, currency markets, the level of inflation or deflation, and central bank policy decisions. Even though silver itself is more volatile than many other asset classes, it does help reduce the overall risk of a portfolio by having less correlation to other asset classes. Over the last eight years, silver’s correlation to treasuries and bonds have been basically zero (-0.07 and 0.08 respectively). It has slightly higher correlation with US equities (0.23) and real estate (0.13).
2. Safe Haven
When the times get tough, silver is your friend. Even in the most challenging environments it holds its value or bucks the negative global trends.
How did silver do in the four years surrounding the Financial Crisis? Over a period where US equities, emerging markets, and REITs were down, silver more than doubled in value from 2007-2011.
3. Fundamentals and Value
The fundamental numbers around silver make it quite clear that silver could provide extreme value as an investment. Here are some key numbers:
- In the earth’s crust, there is 1 gram of silver for every 12.5 tonnes of rock.
- For centuries since ancient times, the gold-to-silver ratio was 15 to 1. That means 1 oz of gold could buy 15 oz of silver.
- In the earth’s crust, there is 19x more silver than gold by mass.
- The “modern” gold-to-silver ratio is closer to 50 to 1.
- Yet, in mid-2015 the ratio is 75 to 1, which means silver could be very undervalued relative to gold.
- The silver price, in terms of USD, is also at its lowest point in five years.
- Silver miners are even cheaper, trading at their lowest valuation in years.
Silver, the metal itself, continues to have the same impressive properties, supply and demand fundamentals, and a rich history as money. What has changed is what people are willing to pay for it at a given time.
Right now it seems that silver is being sold for half price.
That’s the end of our Silver Series. Thanks for reading!
Technology
Visualizing the Critical Metals in a Smartphone
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Mining
Silver Through the Ages: The Uses of Silver Over Time
The uses of silver span various industries, from renewable energy to jewelry. See how the uses of silver have evolved in this infographic.
Silver is one of the most versatile metals on Earth, with a unique combination of uses both as a precious and industrial metal.
Today, silver’s uses span many modern technologies, including solar panels, electric vehicles, and 5G devices. However, the uses of silver in currency, medicine, art, and jewelry have helped advance civilization, trade, and technology for thousands of years.
The Uses of Silver Over Time
The below infographic from Blackrock Silver takes us on a journey of silver’s uses through time, from the past to the future.
3,000 BC – The Middle Ages
The earliest accounts of silver can be traced to 3,000 BC in modern-day Turkey, where its mining spurred trade in the ancient Aegean and Mediterranean seas. Traders and merchants would use hacksilver—rough-cut pieces of silver—as a medium of exchange for goods and services.
Around 1,200 BC, the Ancient Greeks began refining and minting silver coins from the rich deposits found in the mines of Laurion just outside Athens. By 100 BC, modern-day Spain became the center of silver mining for the Roman Empire while silver bullion traveled along the Asian spice trade routes. By the late 1400s, Spain brought its affinity for silver to the New World where it uncovered the largest deposits of silver in history in the dusty hills of Bolivia.
Besides the uses of silver in commerce, people also recognized silver’s ability to fight bacteria. For instance, wine and food containers were often made out of silver to prevent spoilage. In addition, during breakouts of the Bubonic plague in medieval and renaissance Europe, people ate and drank with silver utensils to protect themselves from disease.
The 1800s – 2000s
New medicinal uses of silver came to light in the 19th and 20th centuries. Surgeons stitched post-operative wounds with silver sutures to reduce inflammation. In the early 1900s, doctors prescribed silver nitrate eyedrops to prevent conjunctivitis in newborn babies. Furthermore, in the 1960s, NASA developed a water purifier that dispensed silver ions to kill bacteria and purify water on its spacecraft.
The Industrial Revolution drove the onset of silver’s industrial applications. Thanks to its high light sensitivity and reflectivity, it became a key ingredient in photographic films, windows, and mirrors. Even today, skyscraper windows are often coated with silver to reflect sunlight and keep interior spaces cool.
The 2000s – Present
The uses of silver have come a long way since hacksilver and utensils, evolving with time and technology.
Silver is the most electrically conductive metal, making it a natural choice for electronic devices. Almost every electronic device with a switch or button contains silver, from smartphones to electric vehicles. Solar panels also utilize silver as a conductive layer in photovoltaic cells to transport and store electricity efficiently.
In addition, it has several medicinal applications that range from treating burn wounds and ulcers to eliminating bacteria in air conditioning systems and clothes.
Silver for the Future
Silver has always been useful to industries and technologies due to its unique properties, from its antibacterial nature to high electrical conductivity. Today, silver is critical for the next generation of renewable energy technologies.
For every age, silver proves its value.
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