Fans of the devil’s metal have faced frustration, says David J. Stevenson. But that may be about to change
Silver is often described as the “devil’s metal”. It is extremely volatile, and has a startling ability to burn holes in investors’ pockets. Never has the latter trait been more evident that in recent months.
In March 2011, silver hit $48.60 per ounce, a record peak. Three years ago, it traded at $28.50/oz. Yet now, in real (inflation-adjusted) terms, dollar-priced silver is hardly any higher than it was just after World War I.
The metal’s underperformance is thrown into sharp relief by the gold/silver ratio. This indicates how many silver ounces equal one gold ounce (there’s more on this topic later on). At present, the ratio shows that silver is looking cheap compared with bullion. However, with silver’s fundamentals both strong and improving, it could soon be rerated relative to gold.
Why? For starters, silver is an industrial metal whose range of applications keeps growing. It is extremely durable, one of the world’s best electricity conductors, and is particularly suited to coating electrical contacts on printed circuit boards. So it is used in nearly all computers and mobile phones, as well as in electricity-producing solar cells and plasma-display panels.
Televisions’ on/off buttons, microwave ovens, toys and keyboards employ silver membrane switches. Silver ink removes the need for wires. Silver in medical devices, bandages and ointments fights infections. Furthermore, water-purification systems use silver ions as a sanitiser, in particular to counter antibiotic-resistant bacteria such as MRSA.
Silver is also used within the vehicle, power generation and construction sectors. It is very popular in the jewellery industry too; it is often alloyed to improve durability – in sterling silver, for instance, which constitutes 92.5% silver and 7.5% other metals.
Last year, overall silver supply was estimated at just over one billion ounces, according to the Silver Institute (SI), 820 million ounces of which came from mine production (the second-lowest level for a decade). Overall demand for silver in 2023 was 1.14 billion ounces, according to the SI, 632 million ounces of which stemmed from industry and 208 million from photography and jewellery.
Net investment in physical silver (coins and bars), al
