Silver is sometimes viewed as the lesser-known monetary metal, consigned to the shadows as gold captures the attention of investors.
Yet silver’s credentials are as significant as those of gold. Like gold, silver has traded as real money since ancient times. It has traditionally been the money of the common person, in part because an ounce of the white metal is valued at a fraction of an ounce of gold. Some of the earliest English pennies were silver and called sterlings – 240 of these coins were minted from a pound of silver, thus a pound of sterlings. The prominent American economist Milton Friedman said that : "the major monetary metal in history is silver not gold."
More volatile than gold
Silver prices tend to follow the moves in gold. By that we mean, the price of gold will often move first, then silver will follow. Silver also tends to be more volatile than gold, in that it can rise more and fall more than gold. This reflects in part the fact that the market for silver is smaller than the gold market.
The gold price has touched a series of record highs this year, which, in Jupiter Asset Management's view, reflects several factors: the outlook for lower interest rates, a weakening dollar, financial market concern about US government finances, and gold’s safe-haven status in a time of geopolitical and market uncertainty. Gold is seen as a safe haven because historically it has been able to maintain its value during periods of economic or geopolitical disruption. Central banks around the world have been increasing their acquisition of gold in recent years, in part for this reason.
The silver price also has risen sharply this year due to the same factors that have fuelled gold’s move. Silver is viewed as a safe-haven asset, too. On October 17, the spot silver price reached an all-time high of $54.5 per ounce, breaking a 45-year high of $49.5 set on January 18, 1980. It has since fallen back slightly below $50, at the time of writing.
Silver shortage
There is another part of the silver story that we like and find interesting, which sets it apart from gold: There is a structural shortage of silver. Stocks of the white metal are being used faster than they are being replenished from mining and recycling. This is because of its use in industry. In addition to being used as a store of monetary value, silver has currency as an industrial metal – it has the highest electrical connectivity properties of any element and is an excellent catalyst for chemical reactions. Over 60% of the silver supply goes to industry use: electronics and technology, including advanced batteries, solar panels and medical and military applications. Silver can be found in solar cells, water purifiers, touch screens and smartphones, electric vehicles and semiconductors.
Industrial demand for silver rose by 4% in 2024 to just over 680 million ounces, reaching a record high for the fourth consecutive year. Silver demand also exceeded supply last year, also for the fourth consecutive year, according to the Silver Institute. The silver shortage is manageable until it isn’t, in our view. There is no stockpile, as there is with gold.
Silver mining
Another way of investing in silver (and gold) is via the shares of mining companies that produce these metals. Profitability of the miners is rising along with the metal prices. And in our view, the shares are trading at attractive valuations – below their long-term averages on a share to cash value and share prices to net asset value, two metrics that we follow.
Despite the price gains for silver and gold this year, mainstream investors haven’t participated in the rally to the extent they have previously. Bullion exchange-traded fund holdings are below the peak levels reached in 2020 (gold) and 2021 (silver). Investors including hedge funds and investors in the futures market have been behind most of the trading activity this year. We expect this to change.
Many investors have little or no exposure to monetary metals
– in particular to silver. These assets could be considered for a place in a well-diversified investment portfolio.
Ned Naylor-Leyland
Fund Manager - Head of Gold & Silver at Jupiter Asset Management
Jupiter Asset ManagementJupiter Asset Management (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered in England Company Number 141274. Registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ.
The value of securities and the income from them can fall as well as rise. Past performance should not be seen as an indicator of future returns. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.
