Silver is a precious metal used for thousands of years, for jewelry, trade and utensils. It has been used as currency (silver coins) and has backed many monetary systems. Originally the British “Pound” represented the value of one “pound” of Sterling Silver. As with other precious metals, Silver coins and bullion are used as an investment to guard against inflation and currency devaluation. The United States stopped making silver coins as currency in 1964.
Silver possesses the highest electrical conductivity of any element. Unlike Gold, the majority of Silver mined each year is used in industry, 60% is used in manufacturing, electronics, chemical application, medicine, etc. New products like cell phones, computers, tablets, solar panels all use silver. The recovery and recycling of industrial silver is very small; most is lost forever. Each American Tomahawk Cruise Missile contains about 30 pounds of silver!
Another 15% of Silver is still used in photography. So, if you include photography in “industrial use”, that becomes 75% of silver used industrially each year. 20% is used for jewelry and silverware. Only 5% of silver goes into silver coins and bullion.
In 2013 the annual worldwide production of silver was 819 million ounces (Yes, ounces. Not pounds, not tonnes), and industrial consumption was 922 million ounces. So industry used 103 million ounces more than was mined last year. The future industrial use for Silver is projected to increase greatly in the next few years (Electric cars are coming, you know, plus more and more electronic devices).
Historically, the ratio of Silver and Gold prices has been about 15 to 1. (Meaning if you multiplied the spot price of silver by 15 you would get the price of Gold). Now, in 2014, the ratio of Silver prices to Gold is almost 70 to 1. Many people look at this and postulate that Silver prices should therefore be $81 per ounce. No one has a crystal ball. Past performance is no guarantee of future results; neither are we certain that the former or historical ratio of silver and gold prices is some magical number that will automatically be re-achieved. Having said that, we believe that Silver is grossly undervalued and that current prices are a real bargain.
Even with major price corrections in the past 3 years, Silver is still up about 400% from the year 2000.
Many people are not aware that much of that price correction in precious metals has nothing to do with the physical metals market. It is affected by electronic and non-physical trading–like futures contracts, ETF’s and gold and silver stocks. The value and benefit of real gold or silver in your hand is much better than a paper asset vaguely tied to the metals. (Just because you buy stock in Proctor & Gamble does NOT mean you own any soap).
With shaky economies and volatile fiscal and monetary policies around the world, many people are investing in tangible assets like Silver. The greater use of Silver in industry adds more pressure to its demand. This is probably why Silver has out-performed Gold in recent years and that trend could easily continue.
For more specific information on Gold and Silver coins, please request our FREE Precious Metals Investor Kit.