In a rapidly evolving world that has volatility at all time highs and a market that is constantly changing it makes makes it harder and harder to predict stock market trends. There is an asset that is not subject to large swings in stock market volatility it performs better in crisis times and now I believe it’s the most undervalued asset in the world.
That’s it, its silver a precious metal that is not affected by a large downturn in the stock market and is considered a safe-haven asset. It is called this because during times of crisis the precious metals market often performs better and demand goes up as highlighted by the GFC the dot com crash and the great depression. Below is a Graph for the Dow to Silver ratio which determines how much Silver it takes to buy the Dow Jones industrial average if there is a decline in the chart it proves that it takes less sliver to buy the dow meaning silver has appreciated relative to the Dow.
Demand is stronger than ever before
The demand for silver is continuing to grow everyday as there is an increasing amount of uses for silver every year. This is particularly true with electronics as silver is the best electrical conductor of all the metals ideal for electrical application. Silver is mainly used for industrial purposes such as electronics for computers mobile phones and cameras and as the electronics industry grows so does the demand for silver. That is only some of the industrial demand applications for silver some others that may surprise you are listed below.
- 3D printing
- Stainless Glass
- Water purification
- Solar Panels
- Wood preservation
- Food garnishing
- Laundry Detergent
- Personal Deodorant
- Long life batteries
Find the description of how silver is used in these items here among many other uses.
The largest use for silver is industrial uses pinpointed by the below graph.
As you can see industrial uses of silver make up roughly 66.67% of the market and the demand for industrial uses is only increasing.
The most common silver supply misconception
I hear it all the time “Isn’t there an abundance of silver in the ground”? No there isn’t in fact you may be shocked to believe that there isn’t and it’s running out fast in the 1950s there was approximately 10 billion oz of silver and now there is only an estimated 1.6 billion oz of above-ground silver. The amount of above ground Gold is approximately 190,000 Tones which equates to approximately 6.7 Billion oz. As you see the supply of above-ground silver is rapidly diminishing and Gold is actually 4.18 times more abundant than silver in above-ground supply. Although silver is 17.5 times more abundant than Gold in the earths crust, with prices of silver so low producers are less likely to mine silver. Producers will prefer to focus on other assets that provide them with larger returns, however at the rate the above ground silver is running out prices will need to rise to motivate more producers to step into the market.
Banks aren’t oblivious to these market conditions either, JP Morgan the largest US bank owns over 50% of the worlds physical silver bullion which clearly points out their confidence in the asset.
Silver the ultimate store of value
Central banks around the globe have been stimulating the economy through a process called Quantitative easing (QE) which simply is a process of increasing the cash supply in order to help boost economic activity. However with QE increasing constantly and the QE road appears rather endless is seems that central banks are now resorting to larger and larger QE to keep stimulating the economy.
With this continuous increase in money supply the question has to be raised when it is enough? Is there going to come a time where purchasing power starts to become eroded as hyperinflation kicks in? This depends on how far central banks take QE but a way to hedge against inflation is to hold silver as it maintains value during inflationary times. A perfect example of this is in the 1970s when stagflation was present highlighted by the diagram below which displays the silver price over time which started at below $10 an oz in November 1971 and finished at $120 per oz in February 1980 an increase of over 1200%.
But you wanna know the craziest thing? The price of silver is the same as it was in 1916 so for over 100 years nothing has really changed something has to and soon with Silver at 15 USD oz analysts are now setting the conservative target for silver at $100 USD an oz that’s more than 6 times its current price. Silver is ridiculously undervalued and it won’t be like this forever.