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Silver: Asset with HUGE Potential

Kam Hesari

Join us for the second episode of the Sprott Money Report featuring Kam Hesari, a seasoned financial sales representative dedicated to securing your and your family's financial well-being. With a wealth of experience and a comprehensive financial background, Kam holds prestigious designations including the Canadian Investment Manager (CIM) and Derivatives Market Specialist (DMS) from the Canadian Securities Institute. Tune in to our YouTube channel to gain valuable insights and expertise from Kam on navigating the financial landscape.

When it comes to investments, few assets are as enticing as Silver. As silver is a versatile and undervalued gem, often overshadowed by its cousin gold. Yet, when examined closely, silver reveals itself to be a lucrative investment option, with a rich history, diverse applications, and promising prospects for the future.

Throughout history, silver has served as both currency and store of value. In today's volatile economic climate, characterized by uncertainty and market instability, the appeal of silver as a safe haven investment is an absolute no brainer! As geopolitical tensions simmer and inflationary pressures mount, investors are seeking shelter in assets with intrinsic value and tangible utility. Silver, with its dual role as a precious metal and an industrial commodity, fits the bill perfectly.

Over 50% of the silver produced is used by the industrial sector. From electronics to medical devices, from solar panels to electric vehicles, silver is ubiquitous in modern technology and manufacturing. Its unparalleled conductivity, reflectivity, and antimicrobial properties make it indispensable in a wide array of applications. Whether it's powering electric vehicles or purifying drinking water, silver plays a vital role in shaping the future of technology and sustainability. As the world transitions towards renewable energy and advances in technology, the demand for silver is poised to soar.

Despite its abundant applications, the supply of silver is finite and dwindling due to declining mining output and low recycling rates. Unlike gold, which tends to be hoarded and recycled extensively, much of the silver used in industry is consumed and unrecoverable. As a result, the gap between supply and demand continues to widen. With industrial demand projected to continue to outpace supply in the years to come, investing in silver offers a compelling opportunity for long-term growth.

Throughout history, gold and silver have been beneficiaries of economic turmoil and political uncertainty. During periods of high inflation and market volatility, investors have flocked to these precious metals as safe havens to protect the value of their wealth. The stagflation of the 1970s, for example, witnessed a surge in demand for both gold and silver, as investors sought shelter from the eroding purchasing power.

The gold-to-silver ratio, a key metric for comparing the relative value of the two metals, currently sits at around 90 (historically high), signaling that silver is undervalued relative to gold. For long periods during history, this ratio hovered around 15:1, meaning one ounce of gold was equivalent to 15 ounces of silver. However, the ratio has widened over the centuries with a 20-year average of 60:1. 

During the 1970s stagflation, gold increased over 400% while silver went from $1.27 in the early 70s to $50 in 1980, which is an increase of over 3,800%. Furthermore, the gold-to-silver ratio came down to 14! (see chart below)

gold and silver prices

Interestingly, if we take the $50 high in silver in 1980 and adjust it for inflation, we get a silver price slightly above $171 USD.

gold and silver prices

The price of silver surged again during the U.S. debt ceiling crisis in 2011, underscoring its potential for significant gains in turbulent times. Silver went from $9.39 in 2008 to $50 in 2011. Furthermore, the gold silver ratio came down a little below 32. (see chart below)

gold and silver prices

The above examples show that silver has outperformed gold in bull markets, offering investors the potential for higher returns and portfolio diversification. As the gold-to-silver ratio hovers around 90, savvy investors are recognizing silver's potential for significant gains.

In conclusion, the gold-to-silver ratio, a key metric for evaluating the relative value of the two metals, suggests that silver is trading at a significant discount, presenting investors with a rare buying opportunity. With demand outpacing supply, its timeless appeal, diverse applications, and undervalued status, silver has huge potential to deliver outsized returns in the years to come!


About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.

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