Silver is set for long-term gains

published 16 September 2016

Silver has had an excellent year so far, rising by 40% to two-year highs around $19 an ounce. And its longer-term prospects look good. On the one hand, it is a monetary metal, tending to track gold's movements. Because the market is smaller, however, it is usually very volatile, amplifying gold's ups and downs. The receding likelihood of US interest-rate rises this year, along with sporadic scares such as Brexit, has given gold, and hence silver, a fillip.

So silver is seen as a potential safe haven and store of value in times of extreme monetary policy. On the other hand, though, it's not just a mini-gold. Just over half of demand stems from industry, and the world's appetite for silver is on the rise. Silver is a "strategic metal", First Majestic Silver's Keith Neumeyer says on Bloomberg.com. It is the most "electrically conducive material on the planet [and used] in circuit boards, solar panels, electric cars. As we electrify the planet, we require more and more silver."

So rising incomes and the spread of gadgets to developing countries imply more silver usage. Meanwhile, we are finding new uses for its anti-bacterial and reflective properties "in everything from hospital paints to Band-Aids to windows", adds Bloomberg.com's Natalie Obiko Pearson.

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In the short term, silver may pause for breath; while demand growth is steady yet unspectacular, mine output has risen this year, confounding expectations of a slowdown. But long-term investors who can stomach severe volatility may want to consider silver. They can gain exposure through the Physical Silver ETF (LSE: PHSP).

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.