A few weeks ago, I published an in-depth article on Investing in Uranium. That issue received terrific feedback (thank you!) and I got requests to expand my analysis into other precious metals.
So today I’m following up with an issue on Silver.
Silver is a deeply misunderstood asset. When investors discuss silver, they often treat it as nothing more than “gold’s little brother.”
But this is a mistake. Although both metals are influenced by the same factors, the silver market is unique, fascinating, and worth understanding on its own.
Today, I’ll cut through the noise and focus on the facts, exploring everything you don’t know about silver.
The first half of this issue is free:
- Understand why spot silver prices have climbed over 20% this year alone (and could be set to go much higher)
- Find out which high-tech industries are causing a silver demand boom.
- Why silver supply cannot keep up with demand (and what the decline of film photography has to do with it)
- Why most silver miners don’t actually care about the metal!
You’ll need the All-Access Pass to unlock the second half 🗝
- 🗝 Why one underreported trend weighing down silver prices may be ending.
- 🗝 How much silver is in vaults, how much is left to be withdrawn, and how long this supply is expected to last (← hugely important)
- 🗝 The bear & bull case for investing in silver right now
- 🗝 The overlooked considerations on both sides
- 🗝 The best (and worst) ways to invest in silver
Let’s go 👇
Note: The first half of this issue is free. But you’ll need the All-Access Pass to read the full thing. {% endif %}
Table of Contents
A brief monetary history of silver
You’re probably familiar with the gold standard, a method of stabilizing the value of a currency by pegging it to a fixed exchange rate with gold.
But for almost all of recorded history, gold wasn’t the main precious metal used to back currencies – silver was.
Silver is much more common than gold. About 19x more common..
That means if you’re using precious metals as a physical part of your currency (in the form of coins), silver is more feasible for everyday transactions.
So for almost 5,000 years, silver coins were the primary means of exchange for the world’s leading civilizations:
- As early as 3000 BC, the ancient Sumerians of Mesopotamia were transacting with the silver shekel.
- The drachma, usually made of silver, was used by ancient Greek city-states since the 500s BC.
- The Spanish dollar, popularly known as a piece of eight, was a silver coin that became the world’s first international currency in the 1500s (and remained legal tender in the US until 1857).
By the early 1800s, most industrialized nations either operated on a silver standard (like many Germanic states) or a bimetallic standard of both gold and silver (like France and Britain).
But eventually, gold began to win out — all thanks to a calculation error by one of the smartest mathematical minds in history.
Isaac Newton accidentally created the gold standard
Among other accomplishments, Sir Isaac Newton served as the Master of the British Royal Mint from 1699 up until his death in 1727.
In this role, Newton made a fateful recommendation to Parliament, advising them to adopt an updated exchange rate between the country’s gold and silver coins.
But here’s the problem: Thanks to some faulty data from other countries, Newton accidentally overvalued gold and undervalued silver!
Soon, silver began to flow out of the country as early arb traders sought to profit from the metal’s lower value in Britain and higher value in other countries (a particular case of Gresham’s law).
Without enough silver coins to go around for domestic transactions, Britain de facto adopted a gold standard after Newton’s recommendation and formally adopted it in 1819.
To have a common trading currency with one of the world’s wealthiest and most industrialized nations, other countries soon followed suit (a particular case of network effects).
Despite some short-lived attempts to reintroduce monetary silver, the metal was forever relegated to industrial use and investments.
By the late 1800s, the international gold standard had taken hold, lasting in one form or another until 1971 — which was the beginning of the end of the Bretton Woods System.
Why is the silver market booming?
While the metal has fallen out of favor as a monetary policy tool, silver is seeing a resurgence today as an investable asset.
For most of the recent past, silver has been trading range-bound between $20-$30/oz.
But since the start of this year, prices have been testing the upper end of that range, eclipsing $30 multiple times.
At first glance, silver’s performance might appear to be nothing more than an after-effect of gold’s performance.
Spot gold has climbed almost the same amount — 11% annualized over the past 5 years, and 21% in 2024.
It’s certainly true that similar factors drive silver and gold prices, as evidenced by the mostly positive correlation between the two metals.
But brushing off silver’s performance as riding gold’s coattails misses the vastly different underlying demand structures for the two metals.
Silver demand is mostly industrial (unlike gold)
Gold demand comes from two places:
- Financial markets, including investment purchases and reserve purchases by central banks.
- And the gold jewelry market.
That’s about it. These two markets account for 93% of global demand for gold. Industrial demand makes up the difference – just 7%.
Gold is truly a precious metal, with few ‘real’ purposes. But this isn’t the case for silver.
In 2023, about 60% of demand was industrial. Investment, jewelry, and silverware make up the minority 40%.
This demand structure is part of what makes the metal so intriguing. Unlike gold, silver is a practical hybrid metal — part precious and part industrial.
What’s more, industrial demand for silver is growing. It climbed 11% from 2022 to 2023, and is forecast to rise another 8.5% this year.
Demand growth mostly comes from two technology trends that are crucial to the clean energy transition.
Solar & EVs are driving demand growth
Silver has high industrial demand because it’s practical. It’s the single most electrically conductive metal we know of, with an unparalleled ability to transfer electricity.
As a result, silver has huge applications in electronics and technology.
And in recent years, two specific technologies have been driving silver’s demand growth:
- Solar panels, where silver is used as a conductive paste on silicon wafers.
- And electric vehicles, where virtually every electrical connection is coated with silver.
The EV industry accounts for a small but substantial 2.9% of global silver demand (up from basically nothing a decade ago.)
But the solar industry is really the main player here. Silver plays a vital role in producing solar cells that generate electricity.
Between 2013 and 2023, silver demand from photovoltaics climbed about 14% annualized. Today, the solar industry accounts for over 16% of global silver demand.
As we discussed in our State of Solar issue, solar energy has truly cemented itself as the dominant form of renewable energy, with new solar installations growing rapidly.
Solar energy has proven cost-effective and versatile. The technology accounted for over 73% of all global renewable energy additions in 2023.
This trend is highly bullish for silver. But there are some nuances:
- Silver is an expensive component of solar panels, especially considering recent price increases.
- As a result, the solar industry has found ways to become more resource-efficient in terms of silver, a trend that some forecasts think will accelerate.
- But at the same time, next-gen solar panels are actually more silver-intensive, not less.
The current industry-standard PERC solar panel uses 10mg of silver per watt compared with 13mg and 22mg in potential future models (TOPCon and Heterojunction, respectively).
Ultimately, we don’t know how solar or other energy transition technologies will evolve.
But given current panel installation and EV adoption rates, it’s hard to imagine silver demand declining anytime soon.
Silver supply has a structural deficit
Silver demand growth is just one side of the equation. If long-term supply growth keeps pace, we shouldn’t expect significant price appreciation.
But as it stands, silver supply appears unable to match demand.
The silver market hasn’t been in balance since 2020 — the last time supply exceeded demand.
Since then, the industry has been in a persistent and substantial deficit. In 2023, this deficit amounted to 5,700 tonnes, about 22% of total annual silver mine production.
And barring structural changes to how the silver market works, this deficit won’t disappear anytime soon…
Silver is naturally rare
In our recent issue on investing in uranium, I described how uranium’s unequal geographical distribution and diplomatic sensitivity lead to “artificial” rarity.
Uranium itself isn’t all that rare, so supply concerns are mostly about important stuff like geopolitics and processing capacity.
Silver, however, is rare as hell.
Yes, the metal is fairly well-distributed around the world, with no country producing over a quarter of global supply (Mexico leads the way, with China, Russia, Australia, and the US all in the top ten).
And silver processing isn’t tough at all — humanity has been doing it for thousands of years.
But silver is 36 times less abundant than uranium (in the earth’s crust)
(Earlier, I mentioned that silver is less rare than gold. But that’s a relative statement. In absolute terms, there’s nothing artificial about silver’s rarity.)
What’s more, silver is rarely found on its own.
Instead, most of silver’s abundance is found in ore, where it’s a small component of a larger compound, mostly made up of zinc & lead.
And this simple fact has huge consequences for how the silver supply chain works.
Silver miners don’t really care about silver!
Because silver is rarely found on its own, over 70% of silver production is a byproduct of other metals.
That’s right – the vast majority of new silver supply comes from miners who aren’t even primarily interested in silver.
Sure, extracting silver from the ore they dig up is a nice extra revenue stream. But these miners are mostly focused on more lucrative metals like lead, zinc, and copper.
This means that most silver suppliers have little incentive to respond to price changes in silver. (In economic terms, silver supply is relatively inelastic).
That helps explain why silver production growth has barely nudged over the past decade, despite rising demand.
Back in 2013, global mines produced 23,240 tonnes of silver. By 2023, that figure had grown to just 23,544 tonnes. This is just a 1% total growth in supply in 10 years.
Silver supply may be tied more closely to price changes in lead and zinc than to price changes in silver itself.
What’s stopping silver from climbing higher?
Given growing demand from high-tech industries, limited primary mine supply, and structural market deficits — you have to ask why silver prices haven’t climbed more.
But an underreported trend that’s been weighing down silver prices may be ending
To understand this market, you need to understand what’s happening with the silver vaults.
How much silver is in vaults, how much silver is left to be withdrawn, and how long this supply is expected to last (which is hugely important.)
Unlock the full issue. I’ll lay out the full bull case, and the (small) bear case, and tell you what I think is the best way to invest.
Disclosures and holdings
- This issue was written & researched by Brian Flaherty, and edited by Stefan von Imhof
- Neither author currently has holdings in silver, or any companies mentioned in this issue.
- After researching this issue, Stefan plans to make a small, long-term investment into silver — likely through one of the silver mining companies mentioned in this issue.
- Altea has no silver holdings.
- This issue was sponsored by Arta Finance
- This issue contains an affiliate link to TradingView
- To read the full issue you need the All-Access Pass
