Silver has many characteristics that make it a useful precious metal for the industry sector.
Half of silver’s world demand comes from a range of industrial uses like medical equipment, electronics, batteries, solar panels, silverware and semiconductors, to name a few.
Silver is a commodity, but like gold, it’s also an investment and a store of value. It’s seen as a hedge against inflation and a safe haven in times of uncertainty and instability.
You’ve likely noticed that silver prices are much lower than gold prices per ounce. That’s because gold is scarcer than silver.
Silver prices can be volatile, though.
Between 1920 and 1960, the price of silver stayed quite stable, below US$1 an ounce. But then it started to climb. In 1975, the price had reached more than US$4 an ounce. In 1980, the price for an ounce of silver would set you back around US$50.
Some of the price action came from the fact that there was high inflation in the 1970s. But also because Herbert and Nelson Hunt, two billionaire brothers, had started accumulating silver because they were concerned that inflation would decimate their fortune. They bought so much that at one point; it’s estimated the Hunt brothers held about one-third of the entire privately owned supply of silver, which caused a shortage.
Silver prices ballooned and then crashed on 27 March 1980, when the brothers started to sell off their silver.
By 1990, the price of an ounce of silver hovered around US$5 an ounce and stayed there until 2003 when the price of silver started to rise again. It took silver till 2011 to regain the same price levels as in 1980.
What drove silver prices up in 2011?
One was the fear of inflation. The global economy was in the aftermath of the 2008 crisis, and central banks had lowered interest rates to record lows and started quantitative easing, which drove fear of inflation. This, along with the fact that demand for silver also increased from an uptake in solar panels and drove demand in 2011.
After silver prices were around US$50 an ounce in 2011, silver prices trended down for the next few years between US$15 and US$20 an ounce. Since the pandemic hit, silver prices have been steadily climbing.
Investing in silver
There are plenty of ways to invest in silver. Just a word of caution, silver can be volatile.
You can invest in silver by buying physical silver like bars or coins. It all depends on how much silver you want to buy.
Bars come in different sizes, and they can be either minted or cast. Cast bars are produced by pouring silver into a mould and are cheaper, while mint bars have a higher finish and premium.
You can also invest in silver coins, which are easier to trade and carry around. In Australia, some silver coins are still considered legal tender and can be a good asset to have for bartering if push came to shove.
Alternatively, you can also invest in silver through silver stocks.
You can consider a silver Exchange Traded Fund (ETF) that follows the price of silver. Or, you could always buy silver mining stocks.
Silver mining stocks can outperform silver price rises because higher silver prices mean better profits for miners. Of course, these have more risks too. When you are investing in miners, you are not only getting exposure to the silver price, but you are also investing in a mining company and its management teams, which are subject to the same market forces and risks as any stock.
If you want to learn more about silver and investing in silver, then this section on silver is a must-read.