Silver As An Investment
Silver may be used as an investment like other precious metals. It has been regarded as a form of money and store of value for more than 4,000 years, although it lost its role as legal tender in developed countries when the use of the silver standard came to a final end in 1935. Some countries mint bullion and collector coins, however, such as the American Silver Eagle with nominal face values. In 2009, the main demand for silver was for industrial applications , jewellery, bullion coins, and exchange-traded products. In 2011, the global silver reserves amounted to 530,000 tonnes.
Collectors of silver and other precious metals who collect for the purpose of investment are commonly nicknamed stackers, with their collections dubbed as stacks. The motivations for stacking silver varies between collectors.
Bitcoin Millionaire Predicts Silver Will Be Worth More Than Gold
DavinciJ was one of the popular silver and gold bulls on You Tube back in 2010 and 2011. And then he discovered Bitcoin. he researched it, bought it and suggested others do the same. Under a Buck, but precious few listened. Now Davinci is a multi millionaire, but hes still a silver and gold bug and he predicts that one day silver will be worth more than gold.
What Is The Gold / Silver Ratio
The Gold/Silver ratio measures the relative strength of gold versus silver prices. It shows how many ounces of silver it takes to purchase one ounce of gold.
This gives you the Gold/Silver Ratio, a simple way to check which of the two major precious metals is gaining value relative to the other.
When the Gold/Silver Ratio rises, it means that gold has become more expensive compared to silver, and the cheaper metal might offer better value. It hit a new all-time high above 125 in March 2020 when the Covid Crisis saw gold investing jump but crushed the silver price, along with most other industrial commodities, as world economies went into lockdown.
When the ratio falls, it means gold has become less costly relative to silver. It fell dramatically from that 2020 spike in the second-half of the year, even as gold set new all-time highs in Dollar, UK Pound and Euro terms, dropping below 70 ounces of silver per 1 ounce of gold as global industry re-opened in early 2021.
Some analysts, traders and investors look to “trade the ratio”, buying silver when the Gold/Silver Ratio is high and switching to gold when it falls. This is easy, quick and low-cost using BullionVault.
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Silver’s Industrial Uses Make Gold The Hedge Of Choice
Gold and silver prices tend to move in the same direction, but gold is a better recession hedge.
More than half of the demand for silver is driven by its countless industrial uses. It’s widely used in electronics, automobiles, solar panels, medicine and manufacturing, to name a few.
Because it’s so vital to industrial activity, demand for silver tends to rise and fall with the overall economy. When production picks up, silver prices are likely to increase. If it slows, silver often tumbles.
Gold usually surges when stocks are down. From December 2007 to May 2009 — aka, the Great Recession — the S& P 500 fell 37%, but the price of gold rose by 24%.
Not only do investors drive up gold prices in a bear market, but the yellow metal is relatively insulated from slowdown in economic activity because industrial uses are so limited. In the long term, though, S& P 500 returns have historically crushed returns on gold.
What Is The ‘right’ Gold/silver Ratio
Geologists today believe silver is around 19 times more abundant than gold in the earth’s crust, but modern silver mine output worldwide is only 8 times greater than gold’s by weight each year.
So why is the Gold/Silver Ratio so much more higher than that? The raw numbers don’t explain it.
Gold has traditionally been viewed as a “safe haven” by investors, especially at times when currency markets and shares are experiencing high rates of volatility. Silver on the other hand has considerably more industrial uses, so its demand depends on the health of the global economy.
Unlike most other commodities however, gold isn’t consumed when it is used, and because of its high value people rarely throw gold away or try to destroy it. So most of the gold ever mined in history still exists in someone’s hands somewhere.
One estimate in the early 2000s said the above-ground stockpile of gold could meet more than 6,600 days of demand. For silver that number was below 260, more in line with coffee, cocoa and other consumed commodities.
As it is, the Gold/Silver ratio has become wildly volatile since the United States demonetized first silver and then abandoned the Gold Standard in the early 1970s, rising from 16:1 to peak at almost 100 in the early 1990s.
During the global banking crisis of 2007-2009, the gold price then held firm as silver sank, and the ratio peaked above 80 as Lehman Brothers collapsed.
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Has There Ever Been A Time When Silver Was Worth More Than Gold
Has silver ever been worth more or even the same as gold? Put another way, has the gold to silver ratio ever even reached 1:1?
The silver to gold ratio averaged around 15 all the way up until the late 1800s when silver was demonetised.
But through much of this time there was a bimetallic standard. Where the government set the silver to gold ratio between the two metals. So this is perhaps why the ratio held around the 15 level for long periods.
The average for the ratio was then much higher during the past century. At a glance you could say its been closer to around 40.
This data never shows the gold to silver ratio reaching 1. However it is the average daily ratio over the course of each year. So this dataset would not show any spikes down that may have occurred during the course of a given year.
Prefer a visual summary? Heres a short video with a visual representation of how the Gold to Silver Ratio has tracked from 1883 to modern day:
Gold Is A Better Hedge Than Silver
Since silver is an industrial metal, it’s more vulnerable to recession and pressures affecting manufacturing companies. Such factors can affect gold, which also has its industrial uses, but overall, gold is more driven by investor sentiment. So gold acts as a better, purer hedge against the economy and stock market.
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Projection: Silver Will Be Worth More Than Gold
Its shiny, its fairly rare, and it has been the worlds de facto reserve currency anytime the S has hit the fan historically. Though it has been prized by civilizations since before recorded history, its no secret that there is really no meaningful use for the precious metal gold in comparison to the widespread use of many other metals. Once it is mined it is essentially fabricated into gold bars, coins, jewelry or, at times, sprinkled onto exquisitely expensive desserts in five star Manhattan restaurants. Gold, it seems, is another faith based unit of exchange. There is, of course, much more faith in golds ability to retain value than, say, a fiat paper currency printed out of thin air in the trillions, but in the end, there is no real purpose for it other than to store value based on the belief of others who either have it or want to acquire it.
Silver, on the other hand, is a completely different animal. As explained in the latest mini-documentary from Future Money Trends, silver has a long history of use in practical application. From health and medical related benefits to current uses in industrial application, silver is by far a more useful precious metal than its rarer counterpart.
Some interesting and critical things to understand about silver, and why it may very well become more valuable than gold in the near future are discussed in the video and summarized below:
12:45AM 12/31/10 Please below for golds various uses in industrial applications.
What May Be Worth More Than Gold In An Emergency
The pitchmen filling the TV airwaves with claims that gold is vital to financial independence and survival are leaving out an important piece of the story. Recent history demonstrates that it is entirely possible for any precious metal, including gold, to lose all or most of its value.
Gold is not immune to the market as the TV pitchmen keep claiming. In fact, it is possible for gold to sink to a very low value and stay at that low price for long periods of time. Thats exactly what happened between 1980 and 2004. The thirty-year gold chart below shows what the markets can do to precious metals.
Gold, as you can see, rose to its highest price in 1980 at around $680 an ounce it did not return to that price again until 2005, around 25 years later. Instead of retaining value, gold actually dramatically lost more than half of its value by 1984 and dropped to even lower prices between 1998 and 2002.
This ugly picture gets worse when you figure in the rate of inflation over that time. The combined rate of inflation for the years between 1980 and 2001 was 114.8%. That means gold was worth even less because the price reported in 2001 when gold prices hit their lowest was calculated in 2001 dollars. The price of gold in 2001 when it was around $300 an ounce was $139.66 in 1980 dollars. Those who dont believe me should take a look at the inflation calculator.
Not a Good Strategy for Economic Survival
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You Should Invest In Silver If
You might prefer silver if youre the kind of investor who wants exposure to safe assets in your portfolio, but you also want the ability to realize larger gains on these assets and are willing to accept a slightly higher level of risk. The best candidates for silver investments:
- Have a Total Portfolio Value of Under $35,000. Silver comes with a much lower price per once and is therefore more accessible than gold. Those just starting out with relatively small investment portfolios will likely be better served choosing silver over gold.
- Want Larger Gains. Although there are times when gold will increase in value faster than silver, theres a strong historical argument that silvers value has room to run in the future. If youre looking for stronger growth in your safer assets, silver is likely the way to go.
- Are Risk Tolerant. Silver is a safer asset than equities, but there are risks involved. Silver is more volatile than other safe assets like gold, Treasury bills, and many bonds. This volatility increases risk.
- Are Willing to Put Time In. Because price swings happen in silver faster than they do in gold, its important that you pay close attention to market movement, economic reports, Federal Reserve statements, and industrial demand for clues as to when to buy and sell.
Industrial Commercial And Consumer Demand
The traditional use of silver in photographic development has been dropping since 2000 due to the decline of film photography. However, silver is also used in electrical appliances , , RoHS compliant solder, clothing and medical uses . Other new applications for silver include RFID tags, wood preservatives, water purification and food hygiene. The Silver Institute have seen a noticeable increase in silver-based biocide products coming onto the market, as they explain:
Currently weâre seeing a surge of applications for silver-based biocides in all areas: industrial, commercial and consumer. New products are being introduced almost daily. Established companies are incorporating silver based products in current lines – clothing, refrigerators, mobile phones, computers, washing machines, vacuum cleaners, keyboards, countertops, furniture handles and more. The newest trend is the use of nano-silver particles to deliver silver ions.
Data from 2010 reveals that a majority of silver is being used for industry , jewelry , and investments .
The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products may also contribute to a long-term rise in industrial and jewelry usage.
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Could Silver Be Worth More Than Gold Due To Increasing Photovoltaic Demand
In terms of industrial demand the last few years dont really show a massive increase in industrial demand in silver recently.
But perhaps the 59% jump in photovoltaic demand over the past 2 years could be the start of a longer term rise in demand?
With the likes of Elon Musk now producing solar panels that actually replace roofing tiles, and potentially for the same or maybe even less cost than a normal tile, the demand for these panels is likely to grow significantly in the future.
Perhaps this could be enough to really increase the price of silver dramatically?
How Much Gold And Silver Should I Own
That said, many so-called experts recommend investing in stocks, having a 30-40% investment in precious metals. Generally, 10-20% of that is said should be in gold and silver each, though thats up to you. This allocation can get a little more confusing when considering platinum, palladium, and other metals, too.
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Why Buy Silver Now That Biden Is President
When people think of precious metals investing, usually an image of gold bars or coins comes to mind. However, this initial idea does not begin to scratch the surface of precious metals investing. This type of thinking overlooks the fact that many buy silver or other metals like platinum, palladium, and rhodium. Not every bullion investor buys silver because it is a smaller market and does not carry the same value as gold. So, you might be wondering why buy silver now if gold is more precious? What is there to gain from investing in silver? For starters, it is important to know how the market works and why Bidens presidency spells a higher silver price in the near future.
Silver In The Future: Why Us$130
Theres a significant distance for the silver price to go before it reaches the success Neumeyer has boldly predicted. In fact, in order for the precious metal to jump to US$130, its price would have to increase from its current value by 500 percent.
Neumeyer sees triple digit silver prices in the cards in part because he believes the current market compares to the year 2000, when investors were sailing high on the dot-com bubble and the mining sector was down. He believes its only a matter of time before the market corrects, like it did in 2001 and 2002, and mining sees a big rebound in pricing. It was during this time that Neumeyer himself invested heavily in mining stocks and came out on top.
Ive been calling for triple digit silver for a few years now and Im more enthused now, said Neumeyer at an event in January 2020. But Im cautiously enthused because, you know, I thought it would have happened sooner than it currently is happening.
The silver CEOs enthusiasm is based on the fact that governments in the western world continue to print money and take on massive debt loads. I think the central banks around the world have put themselves into a corner. I think interest rates are either going to stay stable or go lower, and the governments are just going to keep printing money and deficit spending, he said. This scenario is very supportive for gold, and of course that will drag silver along.
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Why Do We Love Silver So Much
Silver has been a popular metal since ancient times. Its aesthetic appeal made it useful for jewelry, figurines, and ritual objects. Silver was often used as to mint coinage in the ancient world, leading to a great number of conflicts among ancient societies that possessed silver mines.
Greece, Spain, Italy, and Anatolia all possessed lucrative silver mines, but theres also evidence of silver being used extensively in China, Korea, Japan, and even in South America.
The ease with which silver is mined, worked, and reused have made it a completely international commodity, in the full sense of the phrase. This shiny and beautiful substance has both connected and divided humanity from the ancient world until now.
How Could Silver Be Worth More Than Gold
Silver would have to rise in value 89 times from todays price in order to be worth more than gold. So what could cause silver to be worth more than gold?
The post from Dont Tread on Me that we referenced above is titled The Case for the 1:1 Gold to Silver Ratio.
Here are their 11 reasons why the gold silver ratio will fall to 1:1 in the coming years:
If you prefer to watch rather than read then heres a video from FutureMoneyTrends.com that also argues Why Silver Will be Worth More Than Gold
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Which Factors Influence The Gold
Gold and silver prices generally move in the same direction day-to-day. But the size of their fluctuations varies greatly.
Over the last half-a-century, gold has averaged a daily move of 0.5% up or down in US Dollar terms, but silver has moved more than 0.9%. That’s because silver is a much smaller market than gold by value, around one-tenth the size. So the same flow of cash, in or out, will hit silver prices much harder, and that will move its ratio to gold prices down or up.
Because of the silver market’s size and volatility, speculative trading in the grey metal is much heavier than gold, relative to the physical market’s underlying value.
At its record peak of summer 2019, the volume of betting on silver prices via Comex futures and options was equivalent to 175% of annual mine output worldwide, and it has averaged 117% across the last decade. For gold, in contrast, the last 10 years’ average open interest in Comex derivatives equated to just 65% of one year’s global mine output. Even early 2020’s new record high in gold open interest has taken it only to 109%.
Such heavy speculation in silver contrasts with its solid and steady demand from the industrial sector. Almost 60% of silver’s annual demand now comes for productive uses, versus barely 10% for gold.