You shouldn’t regard silver as the lesser-known cousin of gold, but instead see the precious metal as a viable investment. While gold attracts most of the headlines and attention, silver also deserves its moment in the spotlight and in this blog post we’ll explain why.
History of Silver
First, let’s look back at where silver came from and how it’s evolved from a currency to a wearable item to the base for cups, spoons and dinnerware.
The first sign of silver mining goes back to 3000 B.C., in Turkey and Greece, when ancient folks figured out how to refine silver. They heated the silver ore and blew air over the metal, a process called cupellation. The silver doesn’t react to the air, but the base metals such as lead and copper oxidize and separate from the precious metal.
Also, silver can form in star explosions called supernovae, as does gold. A study published in September 2012 in the journal Astronomy and Astrophysics discovered that smaller stars that explode produce silver, while larger stars produce gold.
When Europeans landed on the New World in 1492, silver exploded in popularity. Spanish conquerors realized that South America was home to rich veins of silver and silver ore, and they mined that wealth heavily; according to the Silver Institute, an industry trade group, 85 percent of the silver produced worldwide came from Bolivia, Peru and Mexico between 1500 and 1800.
According to LiveScience, the properties of silver are:
- Atomic number (number of protons in the nucleus): 47
- Atomic symbol (on the Periodic Table of Elements): Ag
- Atomic weight (average mass of the atom): 107.8682
- Density: 10.501 grams per cubic centimeter
- Phase at room temperature: Solid
- Melting point: 1,763.2 degrees Fahrenheit (961.78 degrees Celsius)
- Boiling point: 3,924 F (2,162 C)
- Number of isotopes (atoms of the same element with a different number of neutrons): 66; 2 stable
- Most common isotopes: Ag-107 (51.839 percent natural abundance) and Ag-109 (48.161 percent natural abundance)
Silver soon became, like gold, a form of European currency through the Middle Ages. Later, The Coinage Act of 1792 in the U.S. defined a dollar in terms of silver, and specifically, a dollar was to be calculated at 371.25 grains of silver, in conjuction with the Spanish milled dollar. So, the true foundation for U.S. circulating currency was not gold but silver, and it’s interesting to note that the dollar value of gold coins was ultimately pegged to silver, and one ounce of gold was therefore valued at about 16 ounces of silver, or $20.
Silver soon became a de facto material to form the basis of making bowls, cups, spoons, candlesticks and much more. Silverware and flatware were spreading across dining tables in Europe and then North America. Silver was also seen as a symbol of hope: “The sale of silver had always been a convenient means of raising capital, for example, when executors had to clear debts,” as noted in Silver: History and Design (Harry N Abrams, 1996).
The first major silver strike in the US occurred in Nevada’s Comstock Lode, first discovered in 1857 by two brothers who died before they could enjoy the benefits of their claim. It was reported that $305,779,612.48 of silver was pulled from the ground between 1859 and 1992.
Silver lining for investors
Historically, the silver market has been volatile, with an impressive bull market that ran across most of the 2000s and early 2010s giving way to a pullback in recent years. Now, though, some experts view silver as an investment that could take advantage of industrial demand.
After all, silver is the best electrical and thermal conductor of all the metals, particularly in conductors, switches, contacts and fuses. Silver is also highly sought after for solar panel manufacturers: In 2017, photovoltaic demand for silver rose 19%, and, although it declined slightly in 2018, it still reached 80.5 million ounces that year.
Car manufacturers also rely on silver: In 2018, around 36 million ounces of silver were used in automobiles since every electrical action in a modern car is activated with silver-coated contacts.
It could be an opportune time to invest in silver and see what kind of return you can get. Key among the improved outlook for silver is the increasing consensus among analysts that a trade war between the U.S. and China has been averted. Silver benefits from this positive development because it bodes well for the global economy and precious metals industry as well as China’s manufacturing sector.
If China’s economy bounces back, it could trigger greater demand for silver, especially for use in the fabrication of photovoltaic cells for solar arrays. Globally, China is the largest manufacturer of solar panels with seven of the world’s 11 leading producers of solar panels being found on its mainland.
Silverware has long been a popular vehicle for silver, as it gives the owner a symbolic status of wealth and refinery. Copper is mixed with silver to strengthen it for use as cutlery, bowls and decorative items.
Turning to jewellery, few materials are well-suited for adorning pieces than silver. Lustrous but resilient, the metal responds well to sculpting, requires minimal care and lasts for a lifetime. While it can tarnish, taking good care of your silver jewellery is simple and effective.
So how can you invest in silver?
The easiest way to invest in silver is actually buy the physical metal. Bullion silver is available in coin and bar form, and most coin dealers and precious metals dealers will likely offer silver bullion in various sizes and formats. Typically, you can find coins and bars as small as a single ounce, or large bullion bars as big as 1,000 ounces.
Owning silver bullion has the benefit of having its value track the market price of silver directly. But, there are some disadvantages such as typically paying a slight premium to buy silver from dealers and storing bullion involves some logistical challenges and added costs.
For traders, exchange-traded funds that themselves own silver offer a great substitute to owning bullion directly. Each share of a silver ETF relates to a certain notional amount of silver, and the prices of ETF shares typically track silver prices closely. Like any mutual fund or ETF, silver ETFs carry expenses that get charged through to shareholders, but they tend to be fairly modest.
Then there are silver-mining stocks which usually rise in value when silver prices go up and fall when silver performs poorly. However, the challenge with silver miners is that you also have to deal with the risks involved in actually operating a mining operation. Sometimes, an accident at a mine or a poor result in exploring a potential property for silver will equal in disappointing performance from a particular company, even if the silver market is generally strong. That company-specific risk is hard to hedge against, but if you’re accustomed to risky investments in your portfolio, you might not be fazed by such a challenge.
Lastly, investors can opt to buy shares of silver streaming companies. These companies don’t manage mining operations themselves but rather offer financing to miners, getting back a royalty or streaming interest in their production. This kind of financing doesn’t dilute the equity of existing shareholders or weigh down the miners’ balance sheets with debt, the Globe & Mail explains.
The Globe goes on to write: “Rather than a royalty cheque, streamers get gold and silver, which they sell. Put another way, the streamer makes an upfront payment to the mine operating company, and in return gets a fixed percentage of the future silver or gold production from a mine at a predetermined price.
Historically, mine operators have not been known to enrich their shareholders. Streaming companies, for the most part, have.”
Some experts contend that investing in silver is an important piece of being a diversified investor. As one advisor says, “Like gold, silver is part of the precious metals asset class, and can act as a hedge against inflation and a portfolio diversification technique to mitigate geopolitical, monetary and systemic risks. Like gold, silver is a store of value and has retained its purchasing power over long periods of time.”
Another factor playing a role here is that the world is consuming silver at an alarming rate. While there was 140 months of available above ground silver in 1970, supply had diminished to only 50 months’ worth by 1990, and by 2010 there was only 11 months of available above ground silver to be available. It is believed that as much as 98% of the above ground silver has already been consumed.
Also, in the latest figures we could find, scrap silver supply levels have been declining sharply in recent years. Scrap silver supply moved from 260 million ounces in 2011 to just 138 million ounces in 2017.
Yahoo writes that demand in jewellery fabrication, which accounts for approximately one-fifth of total silver demand, is expected to grow. “For many fashion-conscious consumers, silver is more desirable than gold because of its color neutrality, which provides more versatility. India will emerge as a major consumer courtesy of increased investor interest and growth in jewelry, decorative items and silverware fabrication,” the article goes on to say.
Investing in silver could offer you an opportunity to diversify your portfolio and find a precious metal that you find attractive as an investment potential, even if you already invest in gold or gold-mining companies. It’s always smart to track the price of silver too, which is why Gold.to listed the price of silver on our website alongside the price of gold. Both tickers are updated by the hour.
If you have any silver jewellery or collectibles you’d like appraised by our precious-metals experts, contact us anytime or reach out to trusted silver and gold buyer Muzeum, based in downtown Toronto.