Why silver is not just a semi-precious industrial metal

Of all the charges we have heard against silver recently the one that annoyed us most was that silver is just a semi-precious industrial metal and that therefore gold is now a better future insurance policy against money printing by the central banks.

Now just hold on a minute! Look back over the past decade or so at precious metal prices. Is it gold or silver that has given an investor the best return? Silver wins by a mile with gold up a maximum of seven times to silver’s 15 at its recent high.

Volatility warning

That outperformance comes with a volatility warning, however. Silver moves up and down like a yo-yo but the trend line is still straight up, and that line is steeper than for gold. Silver has been a better investment than gold, it is more precious not less.

True silver is used in industrial processes more than gold that only really has more limited dental applications like keeping this writer’s front teeth in place. That makes silver more vulnerable to a downturn in the industrial cycle, or you might think so. Actually that is not true either.

For when industrial production turns down so the producers of copper and zinc reduce their output, and most silver is produced as a by-product of mining copper and zinc. Thus if industry slows down there is less sliver produced and the reduced supply compensates for the reduced industrial demand for silver.

Investment demand

Of course the investment demand for silver is then the prime determinant of price and that is what has been growing over the past decade or so. Gold and silver are linked at the hip as precious metals and the available reserves of silver are a fraction of those of gold, so when the price of gold goes up the price of silver goes up proportionately higher because there is a smaller supply. Also as gold goes up in price investors turn to a cheaper alternative.

So this article clearly demonstrates that silver has not only behaved like a precious metal as an intrinsic store of value for more than a decade but done so better than gold and that its use in industry does not actually leave it vulnerable to an economic downturn but could actually boost the price by restricting supply.

ArabianMoney continues to be very confident about the outlook for silver prices, particularly this autumn, and our sister, paid-for investment newsletter has some interesting recommendations on the best way to invest in silver this month (for September only we are sending complimentary issues to anybody writing to: circulation@arabianmoney.net [6]).