Is silver one of the most undervalued precious metals commonly traded today? For value investors, the answer to that question could mean a fortune. There’s strong evidence that silver is intrinsically worth a lot more than what it trades for right now. Price manipulation, ETFs, and silver leasing have artificially driven down the price of silver for decades, but it remains a commodity with the potential to triple in value in a matter of weeks, the way it did only in 2011. In 1979, it was trading at nearly $50 an ounce and many gold and silver investors suspect that silver should be worth even more than that.
Silver to Gold Ratio
The silver to gold ratio is the basis on which many investors believe silver is radically undervalued and has been for decades. For most of human history, when silver and gold were widely used as currencies and found in coins, the silver to gold ratio was 16 to 1. Today, the ratio is around 60 to 1, meaning it would take about 60 ounces to silver to buy one ounce of gold. With gold trading around $1,300 USD, if the historical silver to gold ratio were still in tact, silver would be trading over $80 per ounce. Almost no one believes that gold is overvalued (quite the opposite), so the expectation is that a correction in the silver to gold ratio would see silver’s price rising more rapidly than gold’s. Gold and silver dealers like Silver Gold Bull have started to become very enthusiastic about silver coins and bullion as their investment potential increases. There are many theories to the undervaluation of gold and silver prices, but leasing is often seen as the culprit.
Supply and Demand for Silver
The silver price is under enormous pressure from industrial demands including:
- Medical uses like pharmaceuticals and sterilizers
- Electronics, as silver is used in contacts for electrical switches in everything from home appliances to automobiles, as well as in solar panels
- Soldering for tight joints between metal pieces in pipes, though this process often uses recycled silver
- Chemical production, as silver is a catalyst used in the making of ethylene oxide, in turn used to make plastics, polyester, and antifreeze
These industrial uses for silver aren’t going away and, so far, there are few if any alternatives. Because of silver’s undervaluation, mining companies have not been producing silver or searching for new sources, either.
Where to Buy Silver
Investing in silver is seen by many as an opportunity to cash in on a valuation correction and the easiest way to buy silver is through a gold and silver dealer online. Online gold and silver dealers have lower premiums above spot thanks to their lower overhead. Lower premiums mean a higher return on investment in gold and silver. Some online dealers like Silver Gold Bull also cover the shipping costs on large orders, and if you’re serious about investing a significant part of your portfolio in silver and gold, you can easily take advantage of those deals and lower your costs.
The value of silver today is well below its historical value, without a clear reason beyond theories about price manipulation. But whether or not silver ever returns to its historical value in comparison to gold, the supply and demand conditions facing silver just make sense. The time to buy silver is now, before prices catch up with economic realities.
Founder Dinis Guarda
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