What is silver?
Silver [AG], atomic number 47 is a soft, white metal. Its unique properties allow it to be used in several applications, offering electrical conductivity, thermal conductivity and reflection of any metal.
The precious metal has historically been used as a currency and is still used in bullion coins. Is has use-cases in solar panels, water filtration, jewellery, ornaments, high-value tableware, electrical contacts, conductors, specialized mirrors, and window coatings. Silver compounds are also used as disinfectants and are added to bandages, wound-dressings, catheters and other medical instruments.
Silver as a monetary asset.
Although used as a simple form of money as opposed to bartering, it took silver until the times of the Greek and Roman civilizations to become an essential part of the economy. An estimated silver stock of 10000 tonnes circulated in the Roman Empire.
Silver was widespread used in silver standards, giving a fixed weight of silver the role of unit of account. Well-known silver coins are the Greek drachma, the Roman denarius and the Spanish dollar.
The silver price is quoted in troy ounces, equal to 31.1034768 grams.
Production of silver by countries.
The 2018 global silver production was estimated being 26,900 tonnes, with Mexico being the biggest producer, mining 6,120 tonnes of silver. Peru and China are the numbers 2 and 3, mining approximately 4,160 and 3,570 tonnes.
Silver as an investment.
Like other precious metals, silver has a 4,000 year track record of being a store of value. And although the silver standard came to an end in 1935, the investment demand for silver is still flourishing. Some of the most iconic bullion coins are the American Silver Eagle and the Canadian Silver Maple Leaf.
Although sometimes still regarded as legal tender, no stacker will spend his silver bullion coins for their face value, they rather use them to preserve their wealth. Millions of Canadian Silver Maple Leaf coins are purchased as investment each year.
Similar to gold, many investors who invest in silver ETF's, do not understand that the issuers of those derivative contracts do not necessarily own the corresponding ounces. In fact, 5 or more people unknowingly claim ownership on the same ounces of silver.
The biggest silver mining companies (2020) by 12-month trailing (TTM) revenue.
1. Industrias Penoles SAB de CV (IPOAF) - Mexico:
- revenue: $4.2 billion;
- net income: -$299.5 million;
- market cap: $6.5 billion;
2. Polymetal International PLC (AUCOY) - Russia:
- revenue: $2.2 billion
- net income: $480.0 million
- market cap: $11.9 billion
3. Fresnillo PLC (FNLPF) - Mexico:
- revenue: $2.2 billion
- net income: $198.4 million
- market cap: $12.7 billion
Silver ETF's:
Silver ETFs provide investors with exposure to silver prices. These funds track the price changes of silver, allowing investors to profit from price appreciation of the precious metal without having to own the physical asset. Do you understand this? You're not buying any silver here, you're speculating!
The iShares Silver Trust is the biggest silver ETF with total assets of $14,693.2 and it had a 47.30% YTD on January the 4th 2021.
Common knowledge:
Gold moves first, followed by silver, which moves harder. Most small investors buy a stack of silver bullion coins, predominantly the American Silver Eagle and the Canadian Silver Maple Leaf, which offers them exposure to the real material silver. Paper assets like ETF's often copy the daily percentual movements of the silver price, they do not need to own any physical silver. The silver mining companies offer you leverage, but this works both ways: if the silver price doubles, their stock can go 5x or even 10x. Of course, this movement can also happen in the other direction when the silver price drops.
In the current macro and monetary environment, gold and silver, as well as Bitcoin, are considered to be a store of wealth, as well as a way to protect yourself against the collapse of the financial system. Both Warren Buffet and Ray Dalio have decided to invest considerably in gold in 2020, this should tell you something. It is only a matter of time for them to understand the value proposition of Bitcoin and allocate some of their wealth in the still very young crypto currency industry.
Disclaimer.
This article is not investment advice!
