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In the intricate realm of investment, silver stands as a shining example of a multifaceted asset. Not only is it capitalising on the surge in industrial demand, but it also retains its allure as a safe haven asset in tumultuous times. Coupled with a dwindling supply, this has spurred the interest of intrepid investors ready to embrace the pull of this precious metal.
In the unpredictable world of financial predictions, a touch of luck often proves indispensable. Casting our minds back to mid-September of the previous year, silver was a prudent long-term wager, holding steady at $20 per ounce. Now, as we stand on the cusp of another September, a full year later, silver dances around the $24 mark, a modest climb year on year, but a slight fall from its flirtation with $26 in early May.
Nevertheless, it's crucial to contextualise silver's rally. In January 2021, the metal soared to $28.50, with a peak of $48.60 in 2011, an all-time high may i add. Accounting for inflation though, silver's dollar-adjusted value scarcely surpasses that of its 1918 price. But a revival could be on the horizon over the next years. The bedrock of silver remains robust, its fundamentals flourishing. Additionally, the broader economic landscape offers a more promising outlook.
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Silver, a remarkably versatile industrial element, constantly broadens its scope of application. Its exceptional durability and unrivaled electrical conductivity render it ideal for coating electrical contacts on printed circuit boards. Consequently, it finds its way into computers, mobile phones, solar cells, and even sophisticated military systems(nudge nudge, wink wink 😉!!). The recent surge in industrial demand (up by 5%) and physical investment (up by 22%), alongside impressive rises in jewelry (29%) and silverware (80%), attests to silvers diversification ability. Paradoxically, global mine production slightly contracted to 822.4 million ounces last year, leading to supply shortages.
The cumulative impact of these supply deficits over 2021-2023 is projected to lead to a staggering drop of 430.9 million ounces from the 2020 peak, surpassing 50% of the anticipated annual mine production for this year alone. This prompts the question: Are we on the brink of a silver price surge, considering the already overtaken supply by demand?
Now, why opt for silver over its illustrious counterpart, gold? Silver's role as an economic barometer has not gone unnoticed by investors. Throughout history, it has mirrored and, at times, amplified the movements of gold, the quintessential safe haven during times of political or inflationary turmoil. The gold to silver ratio, indicating how many ounces of silver equal one ounce of gold, has a storied history. The 21st century has seen it vacillate between 50:1 and 70:1, with a peak of 105:1 in 2020. Presently around 80, edging near the top of its century-spanning 15-113 range, a shift to the midpoint of this range (around 64) would translate to a 30% surge in silver. Further compression to the 20th century's 47 level, even assuming gold remains steady, could catapult silver's price to approximately $40 per ounce, a compelling proposition for investors.
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The silver investment landscape offers various avenues, each with its appeal. One such avenue involves direct exposure through physical silver in the form of coins and bars. As the age old adage goes, "If you don't hold it, you don't own it", a sentiment particularly resonant with precious metals like gold and silver. While silver mining stocks hold potential, nothing quite compares to the tangible connection of holding a silver coin. While silver ETFs offer an alternative, those with a preference for tangibility might want to steer clear.
Mastering the nuances that steer silver's trajectory, from economic conditions to geopolitical risks, is pivotal. Diversification emerges as a risk management strategy, and contemplating diverse silver investment avenues—physical silver, silver ETFs, and silver mining stocks—can amplify this approach. Above all, maintaining a long term perspective, grounded in the intrinsic value of silver, empowers investors to navigate short-term market movements. By staying abreast of developments and adhering to these principles, savvy investors can potentially reap rewards in the ever evolving silver market.
**Data used taken from the Silver Institute
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Silver is where it's at gold is great but silver got that big potential
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