HISTORY
While each element in the periodic table has its own unique properties, silver is truly exceptional. With a brilliant metallic shine, the name of the metal itself has become its own color. Its versatility is unmatched. Luxury jewelry brands like Tiffany & Co. offer dazzling creations using this precious metal, while NASA chose silver as the purifying agent in the first space shuttle program after testing 23 methods of purifying water.
Silver also has the highest electrical conductivity of all metals, even greater than copper. In fact, during WWII, the Treasury Department loaned the US military 14,700 tons of silver for a top-secret program called the Manhattan Project. In this case, silver was used not for its monetary value, but for its electrical properties in the creation of the atomic bomb.
Silver is found in the earth’s crust in its pure form but is typically found combined with other substances —such as gold, copper, and lead— from which it must be separated. With gold attracting so much worldwide attention, this report will focus on the diverse qualities of silver, outline a number of its commercial uses, and provide data as to where the price of this precious metal is likely headed as a versatile savings and investment option.
PRICE BACKGROUND:
2020 was a very good year for the price of silver, as the year ended with the closing price surpassing $25 per ounce for the first time in eight years. In 2024, Silver broke through the $31 mark for the first time in over a decade rising 35% from the prior year’s closing price.
History has shown as a general rule that silver prices may be more volatile in short term stretches, but it tends to perform consistently well over longer periods of time. Many of the most volatile periods of silver’s price history can be explained by various economic factors and geopolitical events, and this can be illustrated when analyzing three especially volatile years for silver: 1974, 1980, and 2011.
- 1974 saw the price of silver more than double due to the US government’s decision to remove silver from all the currency coins in circulation. This shortage of silver dollars caused market speculation on the future of silver, which drove volatility.
- 1980 represented the most volatile year for silver in history with the price dropping from an all-time high of $49.45 to a low of $10.89. This time period was marked by Silver Thursday, the biggest price crash in history that was advanced by a failed attempt of three billionaire brothers to corner the silver market.
- 2011 saw silver prices skyrocket. The US was coming off the heels of the mortgage crisis leading to the Great Recession, and investors still feared a possible global economic collapse as our government struggled with a debt ceiling crisis. Silver hit a high of $48.70 and ended the year $20 per ounce lower, marking one of the most volatile years that silver has seen.
While these examples show that silver prices can experience instability in any given time period, it should also be noted as to the unique circumstances propelling the volatility during each of those years. In present times, fluctuations in silver prices will more likely be due to factors commonly related to this precious metal, which is both a commodity and a safe-haven investment asset.
- The balance of supply and demand in industrial uses, mining production, and investor speculation will impact the price of silver.
- Countries of the world are lessening the use of the US dollar for trade. Currency movements as well as inflation will have an effect on the price of silver.
- With the rise of the BRICS coalition, the US is also experiencing geopolitical pressures, political instability, and the threat of de-dollarization like never before.
- Worrisome economic uncertainties, such as a weakening dollar and rising inflation, tend to act as powerful indicators that gravitate investors toward owning silver and gold, as they look for stability.
INDUSTRIAL USES:
Silver is an indispensable component in many industries, as its exceptional properties make it nearly impossible to substitute. While we regularly see silver used in higher valued tableware and jewelry, it may not be as commonly known that silver’s superior ability to conduct electricity makes it a vital part in wiring, switches, and circuit boards. Combined with its malleability, silver is ideal to be used in smartphones, computers, and televisions.
The leading source of green electricity utilizes photovoltaic cells (solar power) to convert sunlight into electricity. In this case, silver powder is turned into a paste that is then loaded onto a silicon wafer. When light strikes the silicon, electrons are set free, and silver carries the electricity for immediate use or to battery storage for later consumption.
Similarly, silver plays a key role in many operational processes in vehicle computers. Every electrical connection, whether to start the engine or to power the windows or seats, is activated with silver-coated contacts. The surge in popularity for electric vehicles has increased the usage and dependence on silver, as EV’s by their very nature have more electrical needs. It is interesting, however, that charging stations account for the largest portion of silver demand in this wide-ranging sector. A charging unit is typically composed of switches, transformers, relays, and connectors, for which most of the contacts in these parts are made of silver.
A number of niche technologies also exhibit the extensive utilizations of silver. Radio Frequency Identification Device (RFID) chips are replacing bar code technology for a number of uses and are used in many industries and hundreds of millions of products. They can be attached to automobiles during production to track the manufacturing process, tagged onto pharmaceuticals to be tracked through warehouses, and even implanted on livestock and pets. Walmart mandated its use in 2023 into its supply chain and for inventory tracking, as unlike a bar code, RFID tags do not need to be within the line of sight of a reader and may be embedded into a tracked object. This technology relies on silver-based inks to produce the RFID tag antennas.
While not an exhaustive list, these examples highlight a variety of the many dynamic uses and functions of silver. The fact that silver has the highest thermal and electrical conductivity of any metal while also having had widespread availability puts this metal in high demand, which is very likely to increase.
GOLD TO SILVER RATIO:
The gold/silver ratio is the oldest continuously tracked exchange rate in history and expresses the price relationship between gold and silver in terms of the number of ounces of silver it takes to equal one ounce of gold. Although the government used to set this ratio for monetary stability, it now fluctuates with the market.
President Roosevelt set the price of gold at $35 an ounce in 1934, and four years later, the ratio climbed to a high of 98:1. After the Bretton Woods Agreement was established following World War II, foreign exchange rates were pegged to the price of gold, and the ratio started to decline. However, over time, the gold standard was abandoned, and through the 1980’s, the ratio rose back to the 1930 levels. Up to 2000, the ratio was 47:1 and now typically ranges between 50:1 and 70:1.
For virtually the entirety of the 20th century, the average gold-silver ratio was 47:1, and during the onset of the pandemic in 2020, the price of gold outpaced silver by 125:1.
SO WHAT SHOULD THE RATIO BE?
Silver investors believe the ratio should be approximately 16:1 because there is 16 times more silver in the earth’s crust than gold, although only 9 times more silver is being mined globally than gold, providing an argument the ratio could fall further.
There are a number of factors taking place at any given time that set the price for both gold and silver. Many investors feel that when the ratio approaches 80, it is time to buy silver, and when the ratio falls to around 50, it may be a good time to consider buying gold. In conjunction with analyzing the ratio at any given time, investors need to consider a variety of factors when making an investing decision, such as trends in the marketplace, commercial demand, amounts being mined, inflation, which way the value of the dollar may be headed, and what central banks around the world are doing.
AN ALTERNATIVE INFLATION HEDGE:
It is widely known that precious metals, such as silver, have been a strong hedge against inflation. The US dollar continues to be devalued because of excessive printing, and the American people are reaping the consequences of bad monetary policy in the form of skyrocketing prices. It is no surprise that the prices of gold and silver continue to go up and offset the weakening value of the dollar.
Many are familiar that the most widely used measure of inflation is the Consumer Price Index, which measures changes in the prices of goods and services. When the CPI shows inflation cooling, or if employment numbers are weakening in the job market, precious metals such as silver typically rise. Additionally, a key factor of inflation occurs when the money supply exceeds the increase in wealth output of an economic system. Some academic research has concluded that measures such as the CPI do not accurately measure the true rate of price inflation, and instead, look to changes in the money supply. Similar to the conclusions that can be drawn from CPI figures and where the prices of metals are headed, inferences have been drawn that the price of gold has been strongly linked to changes in the money supply, and both gold and silver proved to be an effective hedge against inflation.
Historically, real estate has been considered a hedge against inflation as has purchasing Treasury Inflation Protection Securities (government issued bonds). Still, experience over long periods of time points to gold and silver being the most effective way to protect your income and wealth against inflation. Both are monetary metals, but the industrial uses of silver continue to place it in increasing demand while the much lower price point will continue to make it broadly attractive to retail buyers.
SILVER DEMAND AND SHORTAGE:
Considering the vast and diverse uses of silver and its increasing demand, an assessment should be made as to the supply of silver and the possibilities of a physical shortage of the metal.
2022 set a record for silver demand. Price sensitivity in sectors such as jewelry and silverware contributed to a decline in 2023; however, industrial demand hit another record high, as the electrical and electronics segments grew 20 percent. Silver’s crucial role in material in solar and photovoltaic (PV) panels continues to contribute to that industry’s record growth.
Even with concerns of a slowing Chinese economy, global silver demand is forecasted to reach 1.2 billion ounces in 2024. This would be the second highest level recorded.
CONTRIBUTING TO THIS DEMAND ARE THE FOLLOWING:
- Continued strength in green applications and global PV installations, which exceeded initial market expectations.
- Greater use of electronic components in the automobile industry as well as in battery charging infrastructure
- A recovery from a bumpy 2023 in consumer electronics including new AI-related applications
- India’s returning jewelry demand, as consumers get used to higher rupe silver prices
On the production side, 2021 saw strong growth of nearly 6 percent, as mines recovered from pandemic- related disruptions. The following year, production fell marginally, and 2023’s production from primary silver mines was basically flat, with Mexico, China, and Peru being the top three producing countries.
Increasing supply, however, is not a straightforward endeavor. There is a limited availability of primary mines, and the majority of silver is a by-product of other metals, such as lead, zinc, copper, and gold. This strain on supply is cause for concern, with some researches calling for solar cell makers to reduce the use of silver in their products. A study from the University of New South Wales suggests that the solar sector alone may require over 20 percent of the current annual silver supply by 2027 and could deplete 85-95% of global silver reserves by 2050. An additional concern raised by some scientists is whether the most accessible silver resources have already been mined.
The Silver Institute estimates that a cumulative deficit of 474 million ounces (14,743 tonnes) has occurred from 2021-2023, and forecasts suggest that the supply- demand imbalance should continue, as silver becomes an essentially important element in a variety of industrial applications. Rising silver prices are reflecting this shortage in the marketplace.
PEAK SILVER PRICING:
Forecasting the price of silver will naturally incorporate many of the integral factors discussed in this report: supply and demand, industrial uses, and the gold to silver ratio. Of course, there are other marketplace variables that inevitably impact the price. Interest rates, bond yields, the inflationary environment, and the strength of the dollar are just four price influencers that have bearing at any given period of time. Additionally, current geopolitical tensions in the Middle East and Europe have only created more uncertainty, which has reasonably played a role in gold and silver prices rising. And there are others.
InvestingHaven pointed out in recent research that when analyzing a price chart of silver over the past 50 years, there is a strong bullish pattern in development where they expect the price of silver to continue to rise. They ventured to say that if resistance to silver cleared $30/ ounce that the next target would be $34.70, and perhaps continuing upward to $50 over the next ensuing year.
Additionally, Keith Neumeyer, CEO of First Majestic Silver, a New York Stock Exchange company owning three producing mines, was even more bullish on his silver price projection citing a potential triple-digit price over time.
Others who have varying expertise in the space also believe silver will continue to perform strongly, although they differ as to where they see the price over the next few years. Since silver and yields are inversely correlated, and yields are perceived to have topped, that would point to an increase in the price. An extreme silver shortage would also drive prices up, especially when coupled with rate cuts and if hyperinflation occurs.
CONCLUSION:
Our primary intent for the creation of this report is to provide those interested in silver with a better understanding of the history, current uses, and potential upside pricing of this precious metal. And while most prospective investors attempt to quantify silver in terms of the likelihood and timing of price appreciation, Swiss America’s forty-plus years of experience has given it a much broader breadth of perspective.
As much as purchasing a precious metal such as gold or silver can be considered an investment, it is additionally a material alternative to holding cash with significantly more benefits. Savings accounts have basically become a thing of the past due to the associated low returns; however, we all understand that holding some amount of fiat currency is still a necessity. Purchasing and holding a metal such as silver may be an alternative to cash, which continues to be worth less and less. At the same time, silver acts as wealth insurance, a store of value, and provides an effective hedge against the falling purchasing power of the dollar and the mismanagement of government.
The evidence suggested in this report that takes into consideration the industrial uses of silver, demand outpacing supply, and a variety of economic and geopolitical instabilities indicates rising prices are likely on the horizon. Swiss America makes it a straightforward process to purchase silver and advocates its clients to hold for the long-term whenever possible. Due to silver’s affordable price point, small quantities may be accumulated incrementally and held in physical form, providing a solid sense of ownership and control while providing diversification to traditional asset classes.
Interested individuals are also encouraged to read additional reports from Swiss America pertaining to the ownership of precious metals, as the US debt reaches monumental levels and countries of the world move closer to the deployment of Central Bank Digital Currencies. Tangible assets such as gold and silver have been used as a form of money throughout history and can offer reliability, as the US economy continues to exhibit monetary instability.
IMPORTANT INFORMATION: 1. Swiss America Trading Corporation, its principals and representatives, in no way guarantee a profit or guarantee against a loss on any coin purchased. 2. The rare coin market is volatile and thinly capitalized. Significant price swings in a short period of time are possible. 3. Certification by PCGS or NGC does not guarantee protection against the normal risks associated with potentially volatile markets. 4. The degree of liquidity for certified coins will vary according to the general market conditions and the particular coin involved. For some coins, there may be no active market at all, at certain points in time. 5. Population report information is provided for information purposes only. Population figures should not be the sole reason for purchasing a coin. Population figures are constantly changing as services grade coins on a daily basis.
