When it comes to jewelry, everyone has their preference for looks, some people don’t like the color of yellow gold while others are modest and are okay with settling for silver as a cheaper alternative. Some people say that silver is the “cheap man’s gold.” Still, that didn’t stop people from enjoying well-designed silver jewelry, as well as other items made from silver variants such as old cutlery, art, sculptures, coins, medals, and other items. One question remains, however, why is silver so cheap when it used to have such a great value in the old days?
Even though silver has had its value for a very long time, it was always significantly cheaper compared to gold and other pricy materials. It has been cheaper than gold for centuries since these items started being valued.
There are a few exceptions like the Mansa Musa’s Mali empire, but that doesn’t change the fact that the gap between silver and gold is huge and many people who are getting into numismatics, antique collectibles and jewelry in particular have grown confused by the difference.
Both silver and gold were used to buy and sell goods since history started being written, yet gold could always buy much more than silver could. The value of silver and gold has changed throughout history, and there have been instances where the value of silver peaked and surpassed rose gold.
However, those fluctuations didn’t last long, and the silver would return to its average value, meaning it’d be much cheaper than gold. The lower value of silver didn’t stop collectors from collecting different goods made of it like coins, medals, jewelry, mirrors, and other objects.
So in summary, silver’s relative abundance, industrial demand, bulkiness, low monetary role, and growing supply all combine to make it a cheaper precious metal compared to gold. Its price is more driven by industrial use than financial factors.
That’s why we wrote this compelling guide which details all the things you should know about silver and its value. What factors affect the value of silver and why that is happening? Continue reading and at the end of this article, you’ll have a better understanding of silver’s value.
History of Silver
Silver has a long history, just like other precious metals. First, it was used for bartering, and then ancient civilizations started using it to craft coins for the sake of paying taxes and for other dealing purposes. It became popular during the Egyptian Dynasty, at around 3,100 BC when it was established that “one part of gold is equal to two and one-half parts of silver in value.”
The ratio was changed again during the Roman Empire and set to 12:1. The value of silver varied throughout history even after the fall of the Roman Empire, but gold has always remained more valuable than silver.
The first major change in gold to silver ratio started with the passed Coinage Act in 1792 when the official ratio between gold and silver fixed itself at 15:1. Even though the value of the ratio remained fixed, many factors influenced the value of both silver and gold in the 19th and 20th centuries across The United States.
Banks were adamant in creating regulations for both silver and gold and base the economy around the values of these precious metals, like it was in many other nations, especially in Europe. However, the Franco-Prussian War that occurred in 1870-1871 influenced the collapse of the silver markets because the Prussian victory resulted in demand for five billion gold francs from France.
That caused the surge of gold value and created the necessity to switch from the German Thaler which was a silver currency to a German mark which was a gold currency. That led to a halt in the production of silver coins, which ultimately led to gold being so much cheaper today.
The Civil War in the United States also influenced the lower value of silver. Mining companies across The USA found great deposits of silver, especially in Colorado, Leadville, Virginia City, Nevada, and Idaho, which led to an increase in supply. The great supply of silver also led to an increase in gold’s price, while silver dropped.
Throughout history, gold has always been seen as more valuable because of its rarity, as well as beauty which attracted wealthy people. Whenever the supply of silver would increase, so would the price of gold, still, the values of both remained steady throughout history. The demonetization of silver after The Civil War led to greater differences between the values of these two precious metals, which can still be seen today.
Also Read: Is Sterling Silver Worth Anything?
Why is Silver so Cheap? Key Factors to Consider
Silver, just like gold is a precious metal. Its name made it more valuable among the gentry throughout history, with a lot of jewelry being made from gold and silver and their alloys. Gold, for instance, was the symbol of great fortune and wealth, and only the richest noblemen could afford to have it with them.
Still, the difference is notable. We listed key factors as to why is the price of silver so lower than that of gold.
While silver always had a precious value, and it was too expensive for many people who lived on a margin, it was rarely seen in rich people. It led to confusion on how could two such similar precious metals have so many differences.
However, one of the key reasons why gold has a greater value than silver is because gold is a rarer material. While silver can be relatively easy to extract and mine, the same cannot be said for gold. Its sources are limited compared to those of silver, and extracting it takes much more time, energy, and money. On top of that, there’s less abundance of gold in the world compared to that of silver.
Silver is much more abundant in the earth’s crust than gold. The estimated global reserves of silver are around 530,000 metric tons, compared to around 54,000 metric tons for gold. This greater abundance makes silver less scarce and thus cheaper.
Both silver and gold are used in a variety of industries. For example, gold is used to make electronics which are widely used and in demand. Almost every smartphone in the world has gold inside, which further pushes its demand and with that a price.
Silver is also widely used, but its availability always ensures that the supply is greater than the demand which lowers its price further. Silver can also be used for electrical batteries, vehicles, jewelry, silverware, solar panels, dental alloys, X-ray imaging, soldering, and much more.
About 50% of silver demand comes from industrial uses like electronics, solar panels, medical applications, etc. This keeps silver prices more anchored to industrial activity rather than financial speculation like gold. The large industrial demand increases silver’s supply and availability, keeping its price down.
Supply and Demand
Both gold and silver have relative supply and demand. However, one thing worth pointing out is that gold is a stabler metal, which increases its reliability on the market. When there’s an economic uncertainty many people refer to buying gold to ensure their financial stability, which still establishes the value of gold on the market and puts it higher.
Silver doesn’t have such a stable demand. It’s more volatile and the price varies constantly. Silver is nearly always available, and as such it’s great to conduct heat and electricity. Being used so often, and being available at all times, just makes its value lower on the market, making it a poor instrument of investment.
The Value of Dollar & Stocks
The silver market is quite volatile, and much more than just jewelry. Silver has a close tie to the industry, which means that the value of silver also follows the values of the stock market. During poor economic periods, unless they can afford it, people won’t spend too much money, which results in lower prices. But, while the value of gold keeps rising, the value of silver keeps dropping.
When the manufacturing industry can afford to have a stable supply of silver, it is expected that the price will rise, but that doesn’t always apply to the value of silver on the market.
Additionally, inflation means that the U.S. dollar uses value so the governments always aim to protect their assets, to ensure high wealth. In such situations, people in power purchase silver to fight inflation. In such situations, the value of silver will rise, but only temporarily, causing it to drop even lower once the economic crisis draws to an end.
Lower interest rates are better for the performance of silver and its overall values. As mentioned earlier, inflation may cause interest rates to rise which could drown the value of silver because investors want to allocate their funds to assets that drive the interest rates.
However, when the interest rates are low, the influence on the economy affects the value of silver and makes it an inflation hedge. As interest rates fluctuate, the value of silver also fluctuates, rising and falling.
Silver is not held as a monetary asset on the balance sheets of central banks and financial institutions nearly to the extent that gold is. The huge global demand for gold as a financial asset and hedge against inflation increases gold’s value relative to the more industrially-driven silver.
Even though everyone has individual preferences for favorite jewelry and other items made from silver and gold, gold has been the pillar of high status and wealth throughout history. It has always been considered more beautiful as opposed to silver because of its radiant and warm color, representing the ultimate symbol in early civilizations such as Egypt and Ancient Greece.
Even with modern tools and technology, extracting gold is time-consuming and expensive. That said, imagine how hard it was to extract in ancient times, meaning it likely used to be even rarer.
Silver is bulky, with a lot of weight per dollar value. This makes it expensive to transport and store in large quantities. Gold is more portable and can be stored in smaller spaces. This convenience factor for gold keeps its value higher than silver.
Investing in Silver Vs. Gold
In order to be able to invest in gold and silver, you need to do good research but also be knowledgeable about what is happening around the world. People who can predict major industrial events and developments like the Industrial Revolution were better off investing in silver than gold.
Similarly, like with other industries, it’s often smart to invest in a cheaper material like gold, right after its value plummets onto the bottom. It’s not rare for people to invest in silver because it’s more affordable, but they’re more likely to do it when they assess that silver reached its lowest value.
However, the silver market and industry were quite silver for the last couple of decades, which means that the value of silver is not expected to change much in the future unless there are new and revolutionary ways to extract silver that will increase its supply.
The supply of silver has consistently grown over time as new sources have been explored and mining technology has improved. The supply of gold is much more constrained and limited. This growing silver supply helps keep its price down.
Still, given that the silver value is in-line with stock markets, there are no ways to precisely say what will influence the value of silver in the future. As opposed to silver, gold is a more popular investment option on the market, especially during political and financial unrest.
Even when markets look in good condition, the value of gold is still stable enough so it’s worth investing into. Many famous investors around the world agree that gold is one of the safest investments to make in the 21st century.
Keep in mind that there are some unpredictable cases where the value of silver may fluctuate majorly, which is why you shouldn’t solely rely on these foreseeable factors. If you’re looking into investing in silver, it’d be best to conduct thorough research and consider the options you have.
Education is key when considering investing in a market, regardless of what you’re investing into, so play it smart!
Where to Buy Silver Online?
Whether you’re looking to build an investment portfolio, or just collect silver for a “just in case” situation, here are the best platforms that will allow you to buy silver.
- JM Bullion: This is the most popular site for buying silver in rounds, bars, coins, and other shapes. You can also use it for trading and purchasing other goods such as gold.
- Money Metals: Money Metals is a platform that allows you to buy gold and silver. They have great deals, as well as frequent sales as well as cheap shipping packages. You can buy coins, rounds, bars, Fractionals, Canadian coins, and much more.
- com: This site offers different silver bullion categories such as rounds, coins, bars, and silver coins from different countries like The UK, Canada, and others. They also sell in other currencies and offer a selection of rare coins.
- Royal Mint: Like its name suggests Royal Mint allows you to purchase different silver bullion. You can search it for coins, rounds, bars, and other silver goods, as well as other materials like gold.
If you’re rather into trading and purchasing antique silver goods, eBay is a good place to get started. Using eBay, you can digitally access different online sellers and antique dealers and get your hands on rare silver materials that are hundreds of years old.
Make sure to do your research and verify that the sellers are legit and that they’re selling the actual silver. Some people are also interested in trading platforms for silver and gold. Some you can consider are:
Should You Invest in Silver?
According to a report in Reuters, there is an expected silver deficit that may take over in 2023. In addition to that, volatile global markets may lead the world into a recession which will affect different industries that use gold and silver for manufacturing processes.
With that in mind, many companies consider to start investing in silver mining. With the rise of sustainable solutions in efforts to fight climate change, the need for silver may definitely change with the potential for the silver value to rise in the future.
On this site, you can see the price of the silver change, with it being $24.372 per ounce at the time of writing this article, which is already higher compared to January 2023, but lower than some other times like March 2023. It’s hard to foresee how far may the investors go, making it hard to foresee a significant increase in price for silver.