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How To Invest in Silver

Throughout history, silver has been used as money. We have examined the value of silver prices over time. The reason governments began using paper money was the decrease in the supply of both silver and gold. When we looked at the amount of silver being mined in 2011 alone, the estimate is 23,100 metric tons across the globe. The estimated reserves of silver in the world is 530,000 metric tons. Of the available reserves, two-thirds of the sliver was mined after 1900, and only 25 percent after 1975. This shows the amount of silver being mined has substantially decreased.

Silver Bullion

The Historical Value of Silver

​The Price of Silver During Ancient Times

We believe understanding the difficulty in making a comparison between ancient and modern labor is important in determining the value of silver. The modern definition of craftsman and laborer is imprecise. We were also unable to determine the actual length of a workday in ancient times. In ancient Babylon, the earnings of workers were approximately 2.1 grams if silver for each workday. During this time the cost of a sheep was between 2.6 and sixteen grams of silver.

The wages for workers in ancient Greece were higher. The typical wage for a laborer was approximately 4.3 grams of silver per day. This is the equivalent of one drachma. During the fifth century, wages increased to roughly 2.5 drachmai. During this time, three kilograms of olive oil could be purchased for one drachma. Roughly 54 liters of wheat sold for three drachmai. During the fourth century, laborers were paid five drachmai per day. This was enough to purchase food for two weeks for one individual.

Unfortunately, the Romans were responsible for substantial inflation and debasement. During Roman times laborers earned 4.2 grams of silver per day. This is the equivalent of 1.2 denarii. Although these wages are similar to those of the Greeks, inflation from Nero to Diocletian was substantial. The content of silver in a denarius was decreased from 94 percent to forty percent to virtually nothing. Over the next 250 years, the cost of wheat increased by approximately 15,000 times.

​The Price of Silver During the Medieval Period

During this period, cities grew and trade increased. There were also plaques and wars that decimated large areas of Europe. As wages increased, wage control was enforced by the nobility. During 1300 AD, a laborer earned roughly two pounds of sterling silver per year. This is the equivalent of about 2.1 grams of silver each day. We learned in 1261, a thatcher earned approximately 2.8 grams of silver per day. Three pence is the equivalent of 4.2 grams of silver. In 1341, pay increased to three pence, four pence by 1381 and six pence by 1481.

By the 1350s, craftsmen were earning roughly four pence per day. During the 14th century in England, the price of wine was three to ten pence for each gallon with two dozen eggs selling for one pence. During the middle of the 15th century, an ax sold for five pence with the cost of wheat about 0.2 grams of silver for each liter.

​The Price of Silver During the Industrial Age

During the 18th and 19th centuries, silver and gold coins were used in addition to paper money. The prices for silver and gold were fixed for long periods of time. In 1717, the price of gold was fixed by Sir Issac Newton. There was very little change in price until World War I. The only exception was during the Napoleonic Wars. In the United States, silver prices remain around $1.30 per ounce from the founding of the country until the Civil War. The price of silver during the war increased to almost three dollars per ounce. Until the 1870s, the price remained above $1.3 per ounce.

Silver prices over time continued to change. Towards the end of the 19th century, the price of silver declined. By 1897, silver was only worth $0.60 per ounce. Until World War I, the cost of silver remained at about $0.50 per ounce. The low occurred during 1932 when the price decreased to $0.25 per ounce. After World War II, the price of silver increased to $0.70 per ounce. By 1950, the price was $0.80 per ounce and more than $1 per ounce by 1960.

During the 1970s, the price of silver increased to $50 per ounce. The price of silver was manipulated in January of 1980 as an attempt to corner the market was made. The silver crash occurred shortly afterward. In 1981, silver was worth $8 per ounce and just $6 by 1986. By the early 1990s, the price of silver was less than $4 per ounce. During the end of the 1990s and the first ten years of the 21st century, silver came back with a vengeance. The current worth of silver is approximately $33 per ounce.

​The Future of Silver​​​​

Silver prices over time have been volatile. This is due to the labor supply and the impact of technology, trade growth and wars on consumer goods. The way silver is being viewed by modern governments makes continued inflation almost a certainty. For over 2,000 years, a full day of labor could be purchased for between one-tenth and one-fifteenth of an ounce of silver. When we applied these terms to today’s prices, we realized silver should be worth $264 per ounce according to the global standard.

We find the difference between the current value of gold and silver interesting. Gold is worth more than fifty times the amount of silver. When the global reserves and ration of production are factored in, the worth of gold versus silver is three times greater than what it should be. We believe the value of silver will continue to increase despite the volatility and inconsistency of the past.

Why is Silver a Good Investment?

We asked ourselves why is silver a good investment. We believe there are numerous compelling reasons silver should be added to every investment portfolio in addition to the expected increase in price. Our reasons are defined below.

Silver is Still Money: Despite silver not being used for actual currency, it is still money. Silver is unable to be created like digital or paper money. Physical silver is the ultimate investment. No promise or contract is necessary when holding physical silver as opposed to stocks, bonds or almost any other type of investment. Silver has absolutely no default risk. When we looked back at history, silver was used for coin more frequently than gold.

Inventories of silver are decreasing. Stockpiles of silver are no longer being held by governments or institutions. The only countries with an inventory of silver are the United States, Mexica and India. Silver inventories held by governments have decreased by 73 percent since 1996 because silver coins do not have as high of a silver content. Silver has become incredibly important for the industrial sector. As industrial needs increase, governments will be unable to fulfill them. This will only increase the value even more.

Silver is cheaper to purchase and easier to sell than gold. Since the denomination of silver is smaller than gold, it can be used to meet financial obligations. Silver bullion, bars and coins can be sold all over the world. An investor can sell their entire portfolio of silver or liquidate just the amount they need. This makes silver better for smaller purchases. The demand for silver is consistently increasing. The mints of almost every major government have experienced record sales. Most are currently operating at their peak production.

The rising demand for silver is most obvious in India and China. Both of these markets are tremendous with a prominent history including precious metals. As the populations of both countries continue to grow, the need for silver will also increase. In every major country, the creation of currency, the profits from paper and digital trading are at the forefront. One of the only remaining assets that can literally be held in the palm of the hand is silver. We have found this to be true regardless of the country.

Silver is both confidential and private. Physical silver is subject to any type of cybercrime or hacking. It is impossible to simply erase a silver coin, but this has happened numerous times with digital assets. Silver is a much cheaper investment for the average investor. A precious metal such as silver is capable of maintaining the standard of living. Silver is the ideal precious metal to purchase because right now it is still affordable. Most people are unable to afford to give a $5,000 gold chain as a gift, but they can afford to give the gift of silver.

Silver is currently being used for almost all major industries including solar panels, batteries, medical applications, electronics and so much more. Whether it is seen or not, silver can be found almost anywhere. This makes silver an absolutely indispensable metal. Silver is used more often for reflective, thermally conductive and electrically conductive needs than any other metal. Current modern life would not be possible without silver. The reason industrial uses for silver have skyrocketed is because of the rare characteristics of the metal.

More than half of the demand for silver is from the industrial sector. The number of industrial products requiring silver is consistently growing. New vehicles such as Volkswagen are being equipped with self-heating windshields. The tiny wires of the past are being replaced with an invisible, ultra-thin layer of silver. The bottoms of the windshields contain filaments of silver for heating the wipers to prevent them from becoming frozen to the glass.

Cell phones now contain silver. Most require approximately one-third of a gram. Cell phone technology all over the world is exploding. The estimate is by the end of 2019, 5.75 billion cell phones will have been sold. When the silver content is multiplied, this demand will require 1.916 billion grams. This is the equivalent of 57.49 million ounces of silver just for cell phones. Silver is also an important and common catalyst for producing ethylene oxide. This is necessary for the production of chemicals and plastics.

Due to the growth of the industry, the demand for silver has increased by 32 percent. The main constituent of solar panels is silver because it is necessary to manufacture photovoltaic cells. The increase in demand for silver rose 75 percent from 2015 to 2018. Due to technology, the industrial uses for silver are going to continue to increase. This makes silver an ideal investment. Even in the bull markets, silver is outperforming gold.

There is currently a small market for silver. This means when even the smallest amount of silver flows in and out of the industrial sector, the impact on the price is tremendous. This impact is far greater than what is currently being seen with gold. The bottom line is silver is expected to have a bigger impact on the market than gold. The crash of silver prices in 2011 must also be taken into consideration. The price of silver dropped 72.1 percent during the next five years. This meant the only way miners could make a profit was to reduce the costs.

The area with the most substantial cuts was exploring and developing new mines. This dramatically decreased the amount of silver being mined because there were very few new silver mines. Approximately two-thirds of the supply of silver is a byproduct of other metals such as zinc and copper. The supply available from these sources will impact how much silver becomes available on the market. All of this has laid the groundwork for a peak in the need for a consistent supply of silver.

If the demand remains where it currently stands, obtaining enough silver is going to become increasingly difficult. The need for silver by modern society is continuing to increase. As this demand fails to be met, the price of silver is expected to dramatically increase. Any investor with silver in their portfolio will be in an excellent position to make a tremendous profit.

Silver for Your Retirement Plan?

​Yes, this is entirely doable, and if you look at precious metals retirement custodians, you’ll see this is becoming very trendy. While the gold ira is more heavily marketed, you can choose to invest in silver just as easily.

In fact, the company that I recommend you use for any precious metals IRA can set you up with a silver IRA, and that company is GoldCo.  Check out my GoldCo review to see what makes them #1, or visit the link below to visit their website.  

Tim Schmidt

A Florida-based Entrepreneur, Author, and Life Hacker, Tim Schmidt decided to take control of his retirement portfolio several years ago by setting up a self-directed IRA. This website shares his thoughts and opinions on retirement, investing, and managing credit. You can follow his career and travels on his Official Website as well as on his Instagram page.

IRA Investing For Retirement

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