Silver : The Hidden Multibagger Commodity
The Gold-Silver Ratio: A Historical Perspective
For centuries, the gold-silver ratio—the number of ounces of silver equivalent to one ounce of gold—remained relatively stable, often fixed by governments to stabilize currencies.
- The Roman Empire set the ratio
at 12:1.
- In medieval Europe, it ranged
between 9.4:1 and 12:1.
- The U.S.
fixed it at 15:1
under the Coinage
Act of 1792.
Today, the ratio stands at 86:1. If gold is priced at
$2,600 per ounce and silver at $30, this suggests silver is significantly
undervalued when compared to its historical benchmarks.
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| Gold to Silver Ratio and Calculation of estimated price |
Why the Imbalance?
- Industrial Consumption:
Silver is consumed heavily by industries, with insufficient recycling to
replenish supply.
- Market Manipulation: Short-selling in silver markets suppresses prices, while national silver reserves have gradually reduced.
- Historical
Context: For millennia, the ratio hovered between 13:1 and 20:1, indicating
the current 86:1 ratio is likely unsustainable.
Many analysts argue that a "fair" ratio
would be closer to 18:1, offering significant upside potential
for silver prices.
Silver, often overshadowed by gold, is emerging as
a silent powerhouse in the industrial and investment landscapes. The World
Silver Survey 2024 reports a fourth consecutive year of supply deficits,
with 2024’s shortfall projected at 215.3 million ounces—a 17% increase
from 2023. This persistent deficit stems from rising industrial demand and
stagnant supply, making silver a compelling investment opportunity.
In this article, we’ll explore why silver could outshine other commodities and delve into its historical and modern-day significance.
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| Image showing gold is responding to the global debt binge while silver is yet to respond. |
Why Silver matter more than ever? simply because Silver is no longer just a shiny metal used as jewellery and coins. It’s a critical component in the global push for sustainability, advanced technology, and modern healthcare.Silver’s long-term price chart shows signs of forming a cup and handle pattern, a bullish continuation pattern that suggests a significant price rally may be on the horizon.
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| Long term monthly chart of SILVER. (prepared by Author) |
Here’s what’s driving this transformation other than technical reasons:
The Key drivers of Silver demand
1. Solar Panels: Powering the Renewable Revolution
- Demand
Surge: In 2023, 232
million ounces of silver were consumed by the solar
industry, up from 193.5 million ounces in 2022—a 20% year-over-year
increase.
- Green Energy Boom: Solar is the fastest-growing renewable energy source, with installations like India’s 217 GW PV capacity driving this surge.
2. Electronics: The Backbone of Modern Life
Silver is critical for electronic devices, from
smartphones to smart homes, due to its reliability and conductivity.
- Industrial Demand: Electrical and electronics demand grew by 20% in 2023, driven by the rise of 5G technologies and IoT devices (home assistant devices such as alexa)
- Applications include circuit
boards, switches, connectors, and more.
3. Medicine & Healthcare : Nature’s Antimicrobial Wonder
Silver’s ability to kill bacteria and prevent
infections makes it indispensable in healthcare.
- Applications:
Used in wound dressings, surgical instruments, and
catheters, silver ensures safety and hygiene.
- With increasing focus on health, its demand in the medical field continues to grow.
- Of all chemical elements, silver has the most powerful antibacterial action with the least toxicity to animal cells
4. Automotive: the
Future of Mobility
With the shift to electric and hybrid vehicles, silver has
become a key player in automotive innovation.
- Critical Uses: Batteries,
switches, and infotainment systems depend on silver for reliable
performance.
- As EV
adoption accelerates globally, automotive demand for silver will only
rise.
5. Water Purification
Silver ions are used in water treatment systems to kill bacteria, ensuring
clean drinking water.
- Focus on Developing Nations:
Increasing investments in water infrastructure in Asia and Africa will
expand this application.
6. 5G Technology: The Future of
Connectivity
The global rollout of 5G networks has created significant
demand for silver in antennas, conductive inks, and connectors.
- These
applications require silver’s unique properties to ensure high-speed, low-latency data transfer.
7. Chemical Manufacturing
Silver acts as a catalyst in producing ethylene oxide,
which is essential for plastics, textiles, and antifreeze.
The Persistent Supply Crunch
Stagnant Production
Global silver mine production fell by 1% in 2023, to 830.5
million ounces. Strikes in Mexico, declining ore grades in Argentina, and
limited new projects have further constrained supply.
Recycling Plateau
Stockpile Depletion
Above-ground inventories are shrinking, with current levels amounting to just
15 months of global supply, signaling potential scarcity
ahead.
Why Silver
Could Be the Next Multibagger Commodity
- High Volatility, High
Reward: Silver prices are more volatile than gold,
offering greater upside potential in a bull market.
- Dual Role:
As both an industrial and investment metal, silver benefits from economic
growth and financial instability.
- Structural Demand Growth:
The global push for green energy and technological advancements ensures
sustained demand.
Conclusion
Silver is at the forefront of global
transformation, from renewable energy to advanced technologies. Despite its
growing importance, the metal remains undervalued, with a skewed gold-silver
ratio and persistent supply deficits.
More reads - https://en.m.wikipedia.org/wiki/Silver_Thursday
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