What Are the Advantages of Owning Silver?

Since mining the first silver in Anatolia (modern-day Turkey) around 5,000 years ago, humankind has favored silver as currency. The Greeks, the Romans, and other civilizations minted silver coins and used them across their empires.

Silver has a long history as a store of value and as one of the world’s greatest currencies, but for retirement portfolios, the unique precious metal offers many other advantages starting with potential price appreciation due to the high demand for silver.

Silver is an essential element in the manufacturing of many products, including solar panels, mobile devices, and electronics, which means silver has intrinsic value. The precious metal may also act as a hedge during financial crises, recessions, and political uncertainty. These combined benefits mean that diversifying your portfolio with silver may reward your investments whether the economy is doing well or poorly, making silver popular among investors.

Here’s why you should acquire silver today

During high demand for precious metals, silver has outperformed gold

The price of silver is more volatile than the price of gold because of the factors that drive its price changes, including demand fluctuations between industrial and investment uses and the smaller silver market compared to gold. Therefore, investors who want to move away from volatility prefer gold over silver. But this volatility may be key during periods of economic turmoil, which cause precious metals to enter a bull market: During periods when precious-metals prices were on the rise, silver has outperformed gold significantly.

The 1970s — a decade that saw double-digit unemployment, soaring inflation, and immense geopolitical turmoil — are a great example of the performance of silver over gold. Within 10 years, as stock markets were failing, gold soared by 1,754%, but silver climbed an astonishing 2,490%.

The 2000s will always be remembered for the onset of the global war on terror and, at the end of the decade, the Great Recession. From 2000 to 2011, gold increased by a remarkable 542% but was beaten by silver, which soared by 908%.

When discussing the performance of precious metals, the financial media and investors focus on gold, but silver could deliver better returns than gold when precious metals prices rise fast.

Gold and Silver After 2008 graph.

The demand for silver is growing while its supply is limited

Silver is an optimal conductor of heat and electricity, so it is a key component in a wide range of products with growing demand. For instance, silver is used in solar panels, cellphones, computers, appliances, and electric vehicles.

Today, the industrial demand for silver accounts for around half of its global market. Nearly half of all mined silver has been either consumed by industrial use, destroyed, or discarded, while another 47% is believed to exist as jewelry. That leaves a supply for investment purposes of only 3% of the silver that has ever been mined — or $46 billion worth of silver for the entire investment world. This relatively small supply of available silver makes its price rise significantly when its demand increases.

Silver is undervalued

One way to see if silver is under- or overvalued is to compare its price to the price of gold. Historically, the ratio of the price of gold to the price of silver has been 16:1 (1 ounce of gold is 16 times more expensive than 1 ounce of silver). The current ratio stands at around 75:1. Many precious-metals experts are forecasting that the gold-to-silver ratio will narrow with silver bridging the gap. This would leave a significant amount of space for the precious metal to appreciate, and silver would need to increase by more than 4.5 times its current value just to return to the historical gold-to-silver ratio.

In other words, silver could be very undervalued today with a healthy margin for potential growth. We see a great opportunity to acquire silver at a price that could very well be substantially below its true value.

This is in addition to silver’s spectacular historical rates of return during financial uncertainty, exceeding the performance of gold during these times. In our opinion, that makes silver a highly important portfolio asset.