The Potential of Silver
It is believed by many experts that silver is way underpriced. Even with prices gradually increasing to about $24 per ounce, silver is still a bargain!
Gold/Silver Ratio
Throughout most of history, silver has been about 16 ounces of silver to 1 ounce of gold until about 1875. “...There were times throughout the history of money where the ratio was even lower — China once had a 4 to 1 ratio and the ancient Egyptians even had a 1 to 1 ratio at one point.” - Gold to Silver Ratio, longtermtrends.net, 2023. Currently the price is around 80, which means it would be 80 ounces of silver to buy 1 ounce of gold. From 1875 until now, the ratio has been widened out of proportion to what many precious metals experts believe that it is incorrect because the paper markets are not trading in actual silver and gold but in futures contracts.
Paper Silver
The spot price of silver is determined by the paper market. The physical silver is supposed to be available if and when anyone owning silver futures asks for delivery of the silver but it is believed by many in the business that if a major holder of silver demanded delivery on their physical silver then they may not be able to get it because they are not setting aside the amount of silver to cover all of the contracts.
“On the market right now there are sufficient physical deficits of silver. The traders seem to ignore that…I believe the grey shiny metal is far too undervalued…in the long run, an economic downturn will have a positive effect on the prices of silver since a recession means eventual monetary easing, which is bullish for precious metals.” - Silver Prices Are Very Low And The Market Is Undersupplied, Anna Sokolidou, Seeking Alpha, 2022.
Industrial Silver
Silver is the best metal for conducting electricity. Many electronics like computers, phones, electric cars, solar panels, etc. use silver. As we know, these items are continually being manufactured on an exponential basis. Therefore it stands to reason that this will cause silver to be demanded in its physical form more and more and not just as an investment.
Demand for Silver as an Investment
“Physical investment in 2022 is on track to jump by 18% to 329 Moz, which would also be a new record. Support has come from investor fears of high inflation, the Russia-Ukraine war, recessionary concerns, mistrust in government, and buying on price dips. The rise was boosted further by a (near-doubling) of Indian demand, a recovery from a slump last year, with investors often taking advantage of lower rupee prices.” - GLOBAL SILVER DEMAND RISING TO A NEW HIGH IN 2022, The Global Source, The Silver Institute, 2022
With all these factors putting pressure on the silver paper market it may come to a reckoning of what the actual value of silver really is. Silver could be at least $100 per ounce or more if we go back to the 16 to 1 ratio which would be close to that.