Why Silver: A Precious Commodity with Global Significance
Industrial and Investment Demand:
- Unlike gold, which primarily serves as a store of value, silver enjoys a dual demand: industrial and investment.
Industrial Applications:
- Approximately 29% of silver finds its way into electrical and electronic devices.
- It also plays a vital role in photography (8%) and is used in coins and medals (25%).
- The versatility of silver extends to jewelry and silverware (7%).
- The remaining 31% serves various other purposes.
Investment Avenues:
- Investors can acquire silver in various forms: bars, coins, and bullion.
- Speculating on the spot price of silver (XAG) is another avenue.
- The live silver price acts as an economic health indicator, influencing other financial markets such as commodities, currency pairs, and stocks.
Silver’s True Value
- There’s approximately 15 times more silver on the Earth than gold. Historically, the silver-to-gold price ratio averaged 15:1.
- Today, the ratio stands at 79:1, indicating that silver is undervalued. A return to historical norms could push silver above $100/oz.
Historical Journey:
- Silver’s history as an asset class dates back thousands of years.
- Mining operations, spanning the globe, have contributed to its widespread use and value.
- In the late 19th century, annual production reached a staggering 120 million troy ounces.
- The live silver price was officially recorded in the 1970s, starting at $1.80 per troy ounce.
- Silver experienced highs and lows, reaching $36 in the early 1980s and later settling below $10 for over two decades.
- During the 2008 financial crisis, silver surged to nearly $20 but retreated shortly after.
- Its peak historical price touched almost $50 per ounce in 2011.
Factors Influencing Silver Prices
Supply and Demand
- Approximately 27,000 tons of silver are mined globally each year.
- Leading producers include China, Mexico, and Peru.
- Importing nations like the US, UK, and India drive substantial demand.
- Any perceived shifts in supply or demand dynamics impact silver markets.
Global Economics
- Economic outlooks directly affect silver prices.
- As an industrial and investment metal, silver’s value responds to broader economic trends.
Gold-Silver Ratio
- The relative value of gold to silver plays a role in determining silver prices.
Market Benchmarks
- The London bullion market (LBMA) sets the daily spot price at 12:00 pm GMT in US dollars.
- COMEX Futures, transparent and available 24/7, contribute to price discovery.
ETFs and Physical Silver
- The ETFs Physical Silver (ETPMAG) is the sole ASX-listed ETF tracking the physical silver price.
In summary, silver’s dual demand, historical significance, and sensitivity to economic shifts make it a fascinating commodity to watch. Whether you’re an investor or simply intrigued by its allure, silver remains a valuable part of our global economy.