Silver trades above $110 per ounce. It famously touched $50 in 1980, and then not again until 2011. Then last October, it finally broke through after a 45-year wait. Little wonder the silver bulls are so excited.

Silver is a friend of gold. It is a precious metal, but less precious than gold. While gold is prominent in jewellery, its primary role is as an investment. Silver, on the other hand, has industrial uses in electronics, solar panels, the car industry and catalysts, as well as being used for decorative purposes. In that sense, silver has a dual role, part industrial and part precious metal.

According to the Silver Institute, 1,030 million ounces of silver were supplied last year (around six times the quantity of gold), less than was consumed. The silver market has been in deficit for five years in a row, and as inventories have been wound down, silver is feeling the pinch.

The total supply of gold above ground, sitting in vaults and jewellery boxes, is estimated to be worth around $35trillion. There is much more silver held above ground, with an estimated worth of around $6trillion, a figure that has quadrupled over the past year due to the price surge. These metals have been part of the global monetary system since it began. Today, one ounce of gold buys 45 ounces of silver, half the amount of a year ago: silver is on a tear.

Why is silver rallying?

The gold-to-silver ratio is how most metal watchers think about the relationship between them. The price of both metals generally moves in sync, and so the ratio expresses relative value. In March 2020, during the market crash, silver was dirt cheap, as an ounce of gold bought 110 ounces of silver. Contrast that with April 2011, when that same gold ounce only bought 35 ounces of silver.

These swings can see silver beat gold by three times in bull markets and then give back the gains much faster in the bears. Little wonder silver was once described by a trader as “gold on crack”.

To understand why silver is rallying we should first understand gold, where the main source of demand has come from the non-OECD central banks who are diversifying their reserves. These economies have come a long way since the Asian crisis of the late 1990s, as they have grown along with their reserves. According to the International Monetary Fund, central banks’ reserves stand at $12.9trillion.

Historically, these reserves had been invested in government bonds, mainly US Treasuries, but ever since the war in Ukraine saw Russia’s assets confiscated, central banks have been seeking to diversify, and gold fits the bill. It is a timeless constant and a highly liquid asset that comes to the fore at times of financial stress. There are other reasons for this gold bull market, including the debasement of the US dollar.

When a savvy investor spots a gold bull market, they dash in front and buy the miners and silver, in the knowledge that they are likely to outperform. The miners win because they have additional gearing to higher prices, and silver because it is a smaller market. A surge in demand causes a squeeze.

This silver bull market has been underpinned by gold, but since the central banks are buying gold and not silver, who is? You would normally expect to see a stampede of retail investors. However, the quantity of silver held by exchange-traded funds (ETFs) is still below where it was five years ago, when silver traded below $30. Moreover, the hedge funds have been lightly positioned, according to data from the futures market.

The real bulls are in China, where the price trades at a 14% premium to the price in London, at $129. What do the Chinese see that we don’t? China manufactures the world’s solar panels and needs much of the annual new supply to do so. China also refines two-thirds of global silver and has raised export controls.

They have reclassified silver as a strategic metal, putting it in the same category as rare earths. An unintended consequence of Donald Trump’s tariffs has been the hoarding of commodities, especially metals. Out goes the free market, in come strategic reserves.

In the meantime, some investors have demanded physical delivery from the Commodity Exchange (COMEX) warehouses, where inventories have dropped by 22% since October. Then we hear that Goldman Sachs’s head of precious-metals trading, Benjamin Binet-Laisne, is leaving the bank, with no explanation. Market rumours suggest that someone out there has a very large short position in silver. Why else would the price surge so sharply?

While Western investors are only just starting to catch silver fever, the Chinese are going at full pace. They are worried about economic uncertainty, just as we are. But unlike us, and owing to capital controls, they have fewer investment choices. Now that property in China is out of favour, their primary choices are between cash, local stocks, gold, and silver.

This silver rally is one for the history books. Knowing how badly the silver booms have ended in the past, scepticism has become the consensus. But the world needs silver, the market remains in deficit, nation-states are hoarding, free trade has been suppressed, and mined supply hasn’t grown in a decade. It feels late to buy silver today, and for those who already own it, it is an easy decision to lighten up. But you never know, maybe it really is different this time.

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Isaac Newton, who must be one of the cleverest individuals ever to have lived, made groundbreaking contributions to physics, mathematics, mechanics, philosophy and astronomy. The laws of motion, the theory of gravitation and the reflecting telescope were among his many contributions. He was also a brilliant alchemist, obsessed with theology and biblical prophecy. As if that isn’t enough, he is credited with the design of the gold standard, the primary monetary system of the world for over two hundred years.

Counterfeit coins

In 1695, counterfeit coins accounted for more than a tenth of all English money in circulation. The English used the counterfeit coins in particular to pay their taxes. The Exchequer that year reported no more than ten good shillings for every hundred pounds of revenue. Coin clipping was also a major problem, especially of old coins, and silver coins were disappearing from circulation altogether.

Silver was worth more on the continent as bullion than it was in the UK as tender, so arbitrageurs shipped coins abroad, melted them down, and sold them for gold. Everyone from the Jews to the French was blamed, but by 1695, it was almost impossible to find legal silver in circulation. It had all been melted down and sold.

This all led to a shortage of currency, which inhibited trade. King William III begged the House of Commons to respond to the crisis and, seeking help, secretary of the Treasury William Lowndes wrote letters to England’s wisest men, asking their advice. Among them were philosopher John Locke, banker Josiah Child, and scientist Isaac Newton.

Newton was in his mid-40s and probably not far off the peak of his powers. He had published his most famous work, the Philosophiæ Naturalis Principia Mathematica, just eight years earlier in 1687, and it had established him as the cleverest man in the country. He would now apply his great mind to money.

With the formation of the Bank of England in 1694, Newton had become aware of the possibilities of paper money. “If interest be not yet low enough for the advantage of trade and the design of setting the poor on trade,” he wrote, “the only proper way to lower it is more paper credit till by trading and business we can get more money”.

He could see that token value and intrinsic value were not necessarily one and the same. It was also obvious to Newton that the currency criminals were rational actors. They would continue to clip, counterfeit and sell abroad while there was profit in it. Bullion smuggling carried the death sentence, yet still it went on. Coercion alone would not be enough to stop it from happening. The market itself needed to be changed.

Newton came up with two measures. Firstly, to deal with the clipping, all coins minted prior to 1662 should be called in, melted down, and, using machines, re-made into coins that had a single consistent edge. With no more hand-hammered coins in circulation, clipping coins would become that much more difficult. Re-minting the entire country’s coin, however, at a time of such primitive machinery, was no small undertaking. Secondly, to deal with the silver issue, the amount of silver in coins should be lowered so that the silver content and the face value of the coin were the same. The thought of such a devaluation went against the psyche. The idea that token value and intrinsic value might be different was alien and Newton’s second proposal was not widely welcomed. There were 20 shillings to a pound, so a shilling should contain a concomitant amount of silver.

Newton may have thought that the token was more important than the silver content, but landowners and the government, which was largely made up of them, would lose 20% of their wealth by Newton’s proposal. In 1696 Parliament approved the recoinage, but stipulated the new coins maintain the old weights. Newton warned that the silver outflow would continue.

Isaac Newton's new career

The following year, nudged by John Locke, Charles Montagu, the chancellor of the Exchequer, sent Newton a letter notifying him that the King intended to make him warden of the Mint. So began his new career. Perhaps the role was only intended as a sinecure, but Newton took it very seriously.

Putting his chemical and mathematical knowledge to good use, Newton got the Mint’s machines working and the coins minted at a speed that defied the predictions of even the boldest optimist. Newton would also have to learn the skills of a policeman – both investigator and interrogator – and he proved masterful. This ruthless enforcer of the law oversaw numerous investigations, exposing frauds and then prosecuting perpetrators. Poor counterfeiters had no idea what they were up against, and many were sent to the gallows for their crimes.

So good at the job of warden was Newton that, in 1699, he was promoted and made master of the Royal Mint. After the political union between England and Scotland in 1707, Newton directed a Scottish recoinage that would lead to a new currency for the new Kingdom of Great Britain. He had solved the clipping problem, the counterfeiting issue was vastly improved, but silver was still making its way across the Channel, just as Newton had said it would. As long as the silver content exceeded the face value of the coins, the trade would continue. By 1715, almost all of the coins that Newton had struck between 1696 and 1699 had left the country.

Newton’s studies had moved on from tides, planetary motions and pendulums to the gold markets. He drew up an extensive table of assays of foreign coins and in doing so realised that gold was cheaper in the new markets opening up in Asia than in Europe, and thus that silver was not just being sucked out of England, but out of Europe itself to India and China where it was traded for gold.

The 18th-century gold rush

Portuguese deserters had found alluvial gold two hundred miles inland from Rio de Janeiro in Minas Gerais in Brazil. Soon everyone was flocking there. By 1724, within just three decades of the discovery, world output had doubled. By 1750, 65% of global production was emanating from Brazil. The gold made its way to Lisbon, along with sugar, tobacco and other Brazilian products, and with it the Portuguese minted their moidores coins. The Portuguese used their gold to buy English cereal crops, beef and fish, woollen goods, manufactured articles, and luxuries. Portugal imported five times as much from England as it exported to it, and it used its gold to settle the difference.

The moidores, which weighed slightly more than an English guinea, worth 28 shillings, actually became currency. In London, the Bank of England began buying vast amounts of gold “to be coined as it comes in” and the Mint began minting guineas from the moidores. By 1715, the Bank had 800 kilogrammes, or 25,700 troy ounces (t.oz), a nascent central bank reserve, and this figure would rise to 15.5 tonnes, 500,000 t.oz, by 1730. So much gold coin had never been minted before, and London soon overtook Amsterdam as the foremost precious-metals market. Gold was coming and staying. Silver was leaving for Asia. In 1717, Newton was called on to investigate.

He came up with a new system in 1717. Less than three months later there was a Royal proclamation that forbade the exchange of gold guineas for more than 21 silver shillings – even if they were clipped or underweight. Thus was a guinea just over a pound, which was 20 shillings, or 113 grains of gold. The ratio of gold to silver was effectively set at roughly 1:15.5.

But silver-coin clipping continued, and full-weight silver coins continued to be exported to the continent, where 21 shillings of silver could still get you more than a guinea’s worth of gold (just over 7.6 grams/1/4 t.oz). Exports also headed to Asia, especially India and China, often via the East India Company, where silver was even more valuable. The result was that silver was used for imports, and thus left the country, while exports were traded for gold, which thus came into the country. All in all, some two-thirds of that Brazilian gold is thought to have ended up in England.

Britain had always been on a silver standard. A pound was a pound of sterling silver. Although the Royal proclamation suggested a bimetallic standard, in practice, with so much silver going abroad, it moved Britain from silver to its first gold standard.

Gold was more dependable than clipped silver. The future would look back on Newton as the father of the gold standard. His system proved the bedrock of Britain’s domestic and international trade throughout the 18th century, helping it to become such a formidable commercial power. But it was an accidental gold standard. Nobody – not the institutions nor the persons involved – had had the slightest intention of creating a new monetary system based on gold. Most people wanted to sustain silver as the prime coinage of the land. Newton had tried to create a functioning bimetallic standard.

But market forces had other ideas

The second half of the 19th century proved the age of the gold rush. Aside from taxation, it is difficult to think of anything more overlooked that has had a more profound influence on the course of human history than the gold rush. Nations, indeed civilisations, have been formed on the back of them. The 24th of January 1848 stands as a watershed moment, the dawn of a new golden age.

On that day a carpenter from New Jersey by the name of James Marshall saw something shiny at the bottom of a ditch while carrying out a routine inspection of a lumber mill he was helping build on the western slopes of the Sierra Nevada in California. Within a few years, the scale of the gold business changed out of all proportion.

Until that point there had been roughly one-third of an ounce of gold for every person on the planet. Fifty years later, even with a higher population, there was two-thirds of an ounce. The gold price should surely fall with all the new supply, feared bankers and economists. “The price must fall,” said The Economist, wrong about everything even then. But the gold price did not fall. It remained constant. What everyone had failed to appreciate was that most of the gold would be used as money, and that trade, exchange and economic expansion would be the result.

Surprisingly perhaps, the biggest casualty of the gold rush was silver. Silver had been used as money for thousands of years. Not for much longer. Its price halved. In 1850, only Britain, Portugal, Brazil, and a handful of other nations were on the gold standard. Everyone else was on bimetallic standards. By the end of the century, every major nation bar China was on a gold standard, the classical gold standard Newton is credited with having designed, but which, really, was accidental.

Dominic Frisby’s latest book is The Secret History of Gold: Myth, Money, Politics & Power, published by Penguin Business and available from all good bookshops. He writes investment newsletter The Flying Frisby.

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After World War II, America and its allies put in place a set of alliances, institutions and power structures to rebuild war-ravaged countries, create geopolitical stability and generate global economic growth. This post-war order has endured – with one important change – for much of the following eight decades.

The fall of the Berlin Wall and the dissolution of the Soviet Union seemingly marked the end of any alternative to Western capitalism and liberal democracy as the main global economic system. However, in recent years, it has become increasingly obvious that the ties holding this US-dominated system together are fraying and are likely to break.

We are heading into a new world that is likely to be more unstable. In a symbol of this change, on 5 September this year, US president Donald Trump signed an executive order renaming the Department of Defence as the Department of War. This restores the name that it carried from 1789 until 1947 and points to the rising risks of conflict in the years ahead.

So how should investors position themselves for what comes next? What areas that are currently under-represented in most portfolios should they consider for diversification and protection?

Rivalry and conflict between the US and China

The main question is how the shift from a single superpower to two contending nations – the US and China – will affect global supply, demand and the efficiencies of comparative advantage. Free trade has generated huge gains since the end of the Second World War, and even more so since the end of the Cold War. This is now clearly under threat.

With the end of the post-war order comes the new “Great Game”. This name was originally given to the struggle between Britain and Russia for influence in Central Asia (Afghanistan and Persia). This time, the strategic rivalry and political conflict is between the US and China. Paradoxically, it is America that is now pursuing a more inward-looking strategy under Trump’s Make America Great Again (MAGA) banner, while China aims to build economic and political alliances through its Belt and Road (BRI) and Global Development Initiative (GDI) projects.

While America strives to bring its manufacturing base back onshore, Europe is now having to divert budgets from social welfare to rearmament. Both are now in stiff competition with China to electrify the planet and build digital infrastructures. This will inevitably lead to global competition for resources across energy, metals and critical minerals.

This is leading the two superpowers to weaponise their core strategic advantages. For America, this is the US dollar, still the world’s global reserve currency. For China, it is a stranglehold on rare earth elements and critical minerals.

China needs an alternative to the dollar

Freezing and confiscation of assets and denial of access to global payments systems is forcing non-US aligned countries to look for an alternative store of wealth and means of exchange. Herein lies the potential significance of the Brics+, the informal name for the original group of five key emerging-market powers – Brazil, Russia, India, China, South Africa – plus other countries that have begun joining them for summits and policy coordination. Some see this group as a counterpart to the G7 group of developed economies. Initiatives by the Brics+ members so far include work on a development bank, central-bank cooperation and an international payment messaging system.

Any alternative to the dollar looks increasingly likely to be a form of tokenised, asset-backed digital currency. This explains why many central banks closely aligned with the Brics+ nations have been large buyers of gold and other precious metals.

If the creation of a new currency system seems far-fetched, it is worth a quick review of the genesis of the post-war order: the Bretton Woods Agreement of 1944. China is a great student of history, and this agreement provides an template for how new world orders are created. While World War II was still raging, more than 700 delegates from 44 countries met at Bretton Woods in New Hampshire in the US to work on a new global monetary system. The goal was to create a globally efficient foreign exchange market, prevent competitive currency devaluations and promote global economic growth.

John Maynard Keynes, one of the principal economists at the meeting, proposed creating a new international reserve currency called the “bancor” and setting up a global central bank called the “Clearing Union”. However, these proposals were eventually watered down by the US Treasury in favour of a more prominent role for the US dollar, whereby the dollar would be pegged to the price of gold, and other participating currencies would be pegged to the dollar. The agreement was fully implemented in 1958, pegging the US dollar to gold at $35 per ounce.

This system functioned until the early 1970s when it became evident that US gold reserves were not adequate to sustain the peg. This caused a run on gold, forcing first a temporary suspension of the dollar’s convertibility into gold followed by complete collapse of the agreement in 1973. US president Richard Nixon also imposed a 10% tariff on all dutiable imports to force its major trading partners to adjust their currencies upwards and trade barriers downwards. Does this sound familiar?

China has already taken the strategic initiative to convene the Brics+ group of nations. It has established the Shanghai Gold Exchange – and associated physical storage – and now holds a significant percentage of its reserves in gold. It has shown little desire to replace the dollar with its own currency – internalisation of the renminbi would erode the ability to operate capital controls – but it and its allies need an alternative to the dollar.

Given China’s embrace of technology and advanced domestic digital-currency adoption, it does not feel far-fetched to envisage it launching a Bretton Woods-style gold-backed digital currency for those unable or unwilling to access the US dollar system. Crypto tokenisation is the vehicle, not the asset.

China's control of strategic resources

China’s strongest bargaining chip lies in its control of rare-earth elements (which are used in magnets, electrification, lasers and optical devices, catalysts and emission controls and radar/guidance systems), as well as critical minerals, that have broader energy, industrial and defence applications.

China has this control because, while the West focused on the comparative advantage of outsourcing its production to countries with lowest costs, China focused on building an end-to-end supply chain comprised of exploration, mining, refining and industrial manufacturing. With its looser environmental controls, it has come to dominate the global supply of these critical minerals.

In the tit-for-tat game of tariffs and sanctions, China is able to leverage its position in the one area where the US is completely vulnerable. So just as China and its allies have no alternative but to develop a competitor to the US dollar as a store of wealth and means of exchange, the US and Europe now see they have no choice but to develop alternative sources for mining and processing capacity to break this reliance. Exacerbating the situation, America’s prioritisation of its own MAGA agenda over historical alliances has left Europe and other previously US-aligned countries to build their own rather than collective resources.

If investors believe the post-war order is irretrievably compromised, they should consider investments that give exposure to these themes. Gold and precious metals for hard assets. Tokenisation and chips to enable digitalisation. Energy and power generation, rare earth elements and critical minerals, which will be in demand as both sides try to secure supply chains. And US and European defence stocks as the West joins in the new arms race.

Investors have many ways to access these ideas, including individual stocks, thematic exchange-traded funds (ETFs) or exchange-traded commodities (ETCs) that hold physical metals. Listed commodity futures and options are also becoming increasingly accessible, as major exchanges such as the Chicago Mercantile Exchange (CME) roll out mini and even micro contracts, which are 1/10 or 1/100 of the size of standard contracts and require less up-front capital. Such instruments are only suitable for experienced investors, but they offer a way to quickly add hedges or speculative positions to a portfolio – something that will become more valuable in a fast-changing world.

James Proudlock is managing director of OptionsDesk.

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Gold has risen more than 60% this year to over $4,300 per ounce. In doing so, it has transformed the outlook for the gold-mining industry after years plagued by post-pandemic supply chain snarl-ups, a lack of labour and the 2022 energy crisis.

Last quarter, gold producers generated roughly 50% more free cash flow than consensus estimates, notes Jim Luke, who runs Schroders ISF Global Gold among other funds. Importantly for investors, most companies are not rushing to spend this windfall.

Miners are still running their businesses using “conservative gold price assumptions” of around $2,500 to $2,800 per ounce, and letting cash build up on their balance sheets. In the first quarter of 2025, the sector moved from a net debt to a net cash position for the first time in more than 20 years.

Gold miners are deeply undervalued

As a result, gold miners now look deeply undervalued. Across the mining sector, the price/earnings (p/e) ratio has halved over the past decade, while the gold price has more than doubled, note Keith Watson and Robert Crayfourd, managers of the Golden Prospect Precious Metals (LSE: GPM) and CQS Natural Resources Growth and Income (LSE: CYN) investment trusts. “While there has been some recent performance, it’s not fully reflective of the current spot price, and that creates the opportunity.”

The big miners have now become cash cows, and analysts are struggling to catch up. Last week, Canaccord Genuity published a note on London-listed Fresnillo (LSE: FRES) for the second time in five weeks, revising its earnings targets higher by more than 70% for 2026.

“Our profitability profile for Fresnillo has moved faster than at any other time under our coverage,” they say. Two years ago, the firm’s capital spending commitments were consuming all of its operating cash flow. Today, cash flow exceeds spending by three times.

The cash influx is likely to lead to a rush in mergers and acquisitions (M&A) over the coming months and years. “It’s still cheaper to buy assets than to build them, and buying avoids the execution risk associated with development,” say Watson and Crayfourd. “We expect to see larger companies begin to focus on growth, which will create a bid for developers and smaller producers to be acquired.”

How to invest in gold miners

Funds that own a spread of larger miners, smaller producers and explorers could be the best way to capitalise on the sector. Golden Prospect is a pure play on precious metals, with roughly 85% in gold stocks. CQS Natural Resources has about 50% invested in precious metals miners, as this is where Watson and Crayfourd see the greatest value in the commodity space.

The BlackRock World Mining Trust (LSE: BRWM) and the open-ended BlackRock Gold and General Fund are both managed by the well-resourced Thematics and Sectors team at BlackRock, headed by mining-sector veteran Evy Hambro. As such, the investment trust team at Winterflood thinks these are some of the best ways to build exposure to the sector as a “one-stop shop” for investors looking for commodities exposure. Gold and General is a pure play, with almost 90% in gold and most of the balance in silver, while World Mining has 36% in gold.

There are also several other active funds that invest in gold and precious metals, as well as a growing number of passive exchange-traded funds (ETFs) that track various gold-mining benchmarks. The latter include Van Eck Gold Miners (LSE: GDGB) and L&G Gold Mining (LSE: AUCP). Both of these have done very well over the past year, but as the difference in returns – 83% versus 103% – shows, different funds and indices can have very different outcomes.

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Nothing can stop silver, it seems. Not even the $50-an-ounce mark. The price of $50/oz is the all-time high for silver. It reached that level in 1980, then again in 2011, but it’s never been able to get past it. It’s hard to think of any price in any market that is as psychologically significant a barrier as $50 silver. And yet this week silver sailed through it.

We might even have a supply squeeze on our hands – you get them in the silver markets every now and then. Demand from investors has shot up with the recent price surge, creating a shortage in London (where supply was already tight). Lease rates – the cost of borrowing the metal – have jumped by up to 30% in recent days.

Bid-offer spreads have risen from a typical three US cents to 20 cents. The spread between the London spot price and the Comex future price typically sits at minus 30 cents/oz. Suddenly, it’s $3/oz and silver has gone into backwardation: the spot price is now higher than the price of the future. That happened in 1980 as well, as silver was rocketing. By the way, if you adjust that $50 silver price for inflation, you get a figure around $200/oz for silver. Just in case you wanted an idea of what’s possible.

The backwardation has prompted traders to fly 1,000oz bars from Comex vaults in New York to London. The price gap justifies the transport costs, and remember: silver is bulky compared with gold. It is not cheap to fly.

Why such a shortage of silver? The market has been in deficit for five years, meaning demand has exceeded supply. The shortfall is around 150 million ounces annually, with London’s stock down by a third since 2021. Annual global silver production from mines peaked in 2016 at 900 million ounces. It’s been in the 830-860 tonne range ever since.

A surge in demand for silver

The major factor affecting demand has been solar panels. Until 2021, demand for silver in photovoltaic cells consistently remained below 100 million ounces per annum. Now it’s close to 250 million ounces. With the world electrifying, this appetite is unlikely to subside.

What’s interesting is that demand from exchange-traded funds is still below 2021 levels. In other words, investors are not fully committed yet. There is room for greater investment demand, and that puts further upward pressure on price.

What adds yet more potential rocket fuel to the price is the absurd levels of paper silver – something I have never fully been able to explain, although I am reluctant to cry manipulation as many do. But there are something like 360 paper contracts for every physical contract, and that has the potential to cause a short squeeze if paper contract holders request physical delivery. It happened in 2011 when silver went to $50. It happened in 1980, too.

Remember, silver tends to move later in bull markets and by more. We are seeing that now. A recent poll I ran on X showed that while gold is widely agreed to be in innings six of nine, silver is perhaps not even in innings three. I put that down to excessive bullishness among silver bugs. The market has been rising since 2022. Just quietly. Still, you can’t be too bullish in a bull market. It’s recognising when it’s over – that is the skill.

Chartists point out that the cup-and-handle pattern is regarded as extremely bullish. Silver has traced one out over 50 years. Typically, you would set a target matching the height of the cup: the distance from the bottom of the cup ($4) to the rim: $46. That gives us a target price of $96. Lord knows what price that means the miners would go to.

Don’t get carried away with silver

But remember, this is silver. If it can find a way of letting you down, it will. I’ve covered this market for 20 years. It is characterised by years of bear market, years of waiting, years of nothing but losses, punctuated by occasional spikes of hope. We are enjoying one such spike now.

Everyone’s saying this time it’s different. I don’t doubt that this bull market has legs. But it’s still silver. Don’t get carried away. There are many reasons to own silver. But be clear why you own it – and don’t own it for the wrong reasons.

Silver is not the same as gold. Yes, it was once a monetary metal, although its main purpose was as a medium of exchange, not as a store of wealth – just as gold’s main purpose was more to be a store of wealth rather than a medium of exchange. Central banks, institutions and individuals still use gold as a store of wealth today. They don’t use silver. Yes, some of us have silver coins and bars; there are the ETFs, but silver has nothing like the significance that gold does in this respect. Meanwhile, silver’s role as a medium of exchange is long gone.

Silver remains a beautiful, captivating, magical metal with a plethora of uses. Demand for silver will only increase as we make more mobile phones, computers, batteries, medical devices and, of course, solar panels (the most rapidly growing source of demand). The market, as I say, has been in deficit for five straight years, causing above-ground stock (mainly from recycling) to run low.

With that extraordinary paper-to-physical ratio of 361 contracts for every physical ounce of silver, bubbling under the surface is always the potential for a huge short squeeze as dealers scramble for physical metal to honour paper contracts. This happens occasionally and seems to be happening now. But it is not a permanent state of affairs.

The gold/silver ratio

There is 15 times as much silver in the ground as there is gold, and this historical monetary ratio between the two was always around 15. This has led many to argue that we will return to that ratio at some point. If gold remains around $4,000/oz, then silver would be $266/oz. But that ratio is not coming back, because silver’s role as money is not coming back. Don’t be under any illusions. The only chance of us ever reaching a ratio of 15 is on a spike, such as we saw in 1980, but things will quickly revert. Currently, the ratio lies at 80.

The price action of silver is unlike any other metal. In the 1970s, it meandered around $5/oz, then suddenly exploded to $50 as the Hunt brothers tried to corner the market. It then collapsed and spent the next 25 years meandering around the $5 mark again. Things picked up after 2004. There were huge spikes and dips as it launched to $50/oz once again in 2011. Then it crashed again. It traded in a range between $15 and $30 for another decade, but then, largely riding on the coat-tails of gold’s bull market – roughly since the US froze Russian dollar assets – silver has been creeping up and up and up.

Silver at $50 is a huge line in the sand. Maybe this is a genuine breakout, maybe not. But we are now at $52. There is no resistance overhead. Typical price action would be for us to rally a bit more, pull back to the breakout level, retest, then off to new highs. That’s when we start heading towards those cup-and-handle highs. I don’t think $100 silver is an impossibility. But I shall be lightening up as we rise.

My favourite silver play, my largest silver position and one I have covered before is Sierra Madre Gold and Silver (Canadian Venture Exchange: SM). Some Flying Frisby and MoneyWeek readers got into this one a couple of years ago below 30 cents. It is now sitting majestically at C$1.45. It can go higher. If silver hits $100, this could become a 10-dollar stock.

Where to invest in silver now

This Canadian-listed company, with a market value of C$270 million, has a producing mine in Mexico, La Fortuna, which it acquired from silver mining giant First Majestic (NYSE: AG). First Majestic had put it under care and maintenance during the bear market.

While the quality of the asset was not in doubt, it was deemed too small for a company of First Majestic’s size to bring back into production; hence the partnership with Sierra Madre. Sierra Madre spent several years putting it back into production, meeting most targets ahead of schedule, although its cost per ounce was higher than anticipated at $30/oz.

Full-scale commercial production began in January 2025. Production currently stands around 700,000 ounces per annum. There are also several potential catalysts for the stock. Firstly, production costs will come down from $30/oz to about $21 over the next two years as the group replaces rented equipment with its own, increasing efficiency and turnover.

The company also processes between 300 and 350 tonnes of rock per day. Recent investment in the business means improved equipment, and processing will rise to 750-800 tonnes by the second quarter of next year. Production will double, in other words. The miner is aiming to double that figure again by late 2027. Remember, this company has a habit of reaching its targets, which is unusual in the sector.

The La Fortuna mine is projected to have at least 15 years of life. But the bulk of this stock’s potential comes from exploration. There are many past producing mines on the property (most closed in the early 20th century), which produced more than a million ounces of silver annually. Geologic mapping has identified 60 kilometres of mineralised veins. The group also has multiple historic resource reports, one showing 200 million ounces in the 1990s, which never materialised due to the bear market. There is plenty of metal there, in other words.

“This is why we bought the property,” CEO Alex Langer tells me. It could be “the largest undeveloped silver district in Mexico”. Exploration begins next year. First Majestic had plans for a mill to process 3,000 tonnes of rock per day at one of the properties. So why didn’t it explore the property itself? Because it owns a huge stake in Sierra Madre (38%), so it can sit back and let Sierra Madre do the work.

The goal is to grow what was a development play, now a junior producer, into a mid-tier silver producer. The expansion plans are coming just as silver is rising. It feels like just the right point in the cycle.

If the company produces silver at $30 and the silver price rises from $40 to $50, profits double. If production costs come down to $20 and the silver price rises to $60, they double again. If production itself doubles, profits double again. If the silver price goes to $100 and this firm makes a major discovery and turns itself into a district-scale producer, then this becomes an asymmetric bet.

Flying Frisby and MoneyWeek readers who got into this one at 30 or 50 US cents may be tempted to take some profit. But there is every reason to carry on holding. Ultimately, this miner sinks or swims with the silver price, but even if silver just stays where it is there is still enormous potential for growth.

Dominic Frisby is the author of The Secret History of Gold: Money, Myth, Politics & Power, available at all good bookshops. He writes the investment newsletter The Flying Frisby: theflyingfrisby.com.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

It’s time for my annual article in which I put the boot into silver. Why now? Because, according to one of my WhatsApp chats, it’s breaking out. Silver is always supposedly breaking out. It never actually does.

Was there ever a metal with as much potential? Was there ever a metal you could so wholly depend on to let you down? If there is, I’m not aware of it (although during the past 15 years, platinum has been running it close).

But maybe, just maybe, this time is different. Let’s start with a bit of gossip from the front line. I have three friends who are CEOs of silver-mining companies. All three of them, based in Latin America, have reported back with the same story.

Typically, a miner would pay a company (usually a refiner) to take ore off their hands, and then treat and smelt it, so it can be sold. These so-called off-take agreements would usually amount to $120-$180 per tonne of ore. But at present, refiners aren’t charging anything. Somebody is subsidising it all.

Could it be that humongous, commodity-guzzling nation that begins with a C, I wonder? It wants silver for all those solar panels Ed Miliband is buying. This has to be a super-bullish signal. It’s starting to feel as though we are moving into a proper commodities bull market.

Remember 2021 and 2022? Commodities went ballistic during Covid and spiked as Vladimir Putin invaded Ukraine. Then they collapsed. Maybe 2021-2022 was just an appetiser, and a secular bull market in metals is at hand.

The supply and demand numbers have been portending it for long enough. In fact, they have been signalling it for so long, many of us have come to believe it would never happen. The case for investing in silver is as follows.

Firstly, we are in an age of currency debasement, so you want to own hard assets. In such an inflationary environment, the monetary metals, gold and silver, perform best. Silver has been accepted as money for millennia.

Silver as a monetary metal

Gold’s role was always more as a store of value than a medium of exchange. National banks keep it. Institutions keep it. Individuals keep it. Historically, we used silver, copper and nickel for all but high-value transactions.

Silver’s role as a medium of exchange came to an end with the gold rushes of the 19th century. The vast increase in the gold supply, which came as a result of the discoveries in California, Australia, South Africa and Canada, enabled nations to abandon silver. (My book The Secret History of Gold, published in August, delves into the history of the precious metals in more detail.)

In the case of the US, it was the Coinage Act of 1873, or as silver bugs like to call it, the Crime of ’73, that heralded the end of silver as official money. In the UK, largely thanks to the Portuguese discoveries of gold in Minas Gerais, Brazil, the process began a good 150 years earlier.

In these cashless times, there is little chance of silver regaining its role as a medium of exchange.

As a result, looking at gold-to-silver ratios – it now takes about 100 ounces of silver to buy an ounce of gold – and saying we are going back to the historical average of 12 or 15:1 is mistaken.

There may well only be 15 times as much silver in the Earth’s crust as gold (making 15:1 the natural ratio), but without its role as money, this is just not going to happen. Not for any prolonged period. In the last 100 years, we have only touched this 15:1 level once, for a day: Thursday, 27 March, 1980. Two brothers with the surname Hunt were trying to corner the silver market.

There are many reasons to invest in silver; I own physical silver. But expecting it to be monetised again should not be one of them. If the end of the world comes, and we get a collapse in fiat money, you might be glad you own silver, but you will be facing bigger problems, such as Armageddon.

Silver as a crucial industrial metal

Now we have nixed it as money, let’s consider silver’s extraordinarily widespread industrial use. You could write a book about the industrial uses of silver. There are so many, especially in this era of electronics. It might not be a very good book, but it would be long.

From medical equipment to electrical appliances, it’s harder to find products that don’t contain silver than ones that do. Every smartphone has silver in it; every computer; every jet engine; every solar panel. The best batteries contain silver. It’s used in detergent, deodorant, wart treatment, antimicrobial laboratory coats, 3D printing, plastics, jewellery, wood preservation, and water purification. It’s a “picks-and-shovels” play on new technology and the growing middle class of the developing world.

Annual demand for silver stands at around 1.2 billion ounces. Roughly 60% of that demand, 700 million ounces, stems from industry (500 million from the electrical and electronics sectors, with solar panels comprising 50% of demand); 22% from jewellery and silverware; and 18% from investment.

Yearly supply is about one billion ounces (80% from mining, 20% recycling), so the market is in deficit. Hence the rising price. Most silver is produced as a by-product of other mines, especially lead and zinc. At one stage, BHP Billiton was the world’s largest silver producer, and it was all by-product.

In folklore, silver was often associated with both magic and the moon. Its properties are so varied and widespread that there really is something magical about it. Indeed, it has so many industrial uses, it is something of a mystery why the silver price has been so low for so long.

Some blame dark forces, others blame market forces, but since the demonetisation of the late 19th century, the words silver and price suppression have commonly been uttered in the same sentence.

Every time there is a sell-off, the suppression word is uttered. Every time there is a boom, the shorts are being hammered. Conspiracy or not, there is nothing to be done about it, so we just have to accept the market for what it is.

There is, however, a romance to silver. Perhaps that has something to do with its femininity and the moon, (gold, on the other hand, associated with the sun, is considered masculine).

But with its romantic lunar (or lunatic?) associations, it has a tendency to ignite the public imagination, occasionally with explosive results. It did in 1980 when it went to $50 an ounce (oz); it had been $2 just a few years earlier. It did it again in 2011 when it revisited $50 before collapsing.

Silver will at some point revisit $50/oz. At some other point it will get above that figure. The mother of all narratives will take hold, and silver will probably end up going to $100 or even $200/oz. That’s when you will want to have bought some silver stocks.

It will also, at some stage, revisit $15/oz. That’s when you don’t want to be owning silver stocks.

How to invest in silver

Silver has been in a bull market since summer 2022, but it has, broadly speaking, followed rather than led gold. Yet in the last few weeks, all of a sudden, silver has been leading gold. What’s more, silver miners are leading silver. That’s what makes me bullish.

The silver miners really have broken out. I haven’t seen this in a long time. This is why I’m saying it’s starting to feel like a proper metals bull market. So how am I playing this? What are the best ways to invest in silver and profit? Broadly speaking, there are four ways to get exposure to the silver price.

You can buy silver bullion (coins and bars), while a silver exchange-traded fund (ETC) is a second option. You can gain exposure via a spread bet, contract for difference (CFD), or future. Finally, there are silver miners.

If it’s bullion you want, try the Pure Gold Company and tell them I sent you. (They deliver worldwide or you can store with them.) If you have the time and the inclination, you can often pick up antique silver, especially Georgian silver tea sets, on eBay and elsewhere at prices below the spot value of the silver content.

My friends at the Stage Golfing Society recently bought a beautiful silver tureen to use as trophy for a golf tournament. You could melt down the tureen and sell it as bullion and you would get more than what they paid for it. Such arbitrage opportunities are not uncommon with physical silver, if you have the time and inclination to hunt them out.

Exchange-traded funds (ETFs) are simple and cheap. You buy them through your broker just as you would any share. UK investors can buy WisdomTree Physical Silver ETFs (LSE: PHSP). The Invesco Physical Silver ETC (LSE: SLVP) is another option.

There are also two- and three-times leveraged ETFs. Caveat emptor: if you know what you are doing, these can be good vehicles, but the costs can be quite high if you hold them for a long time. WisdomTree has a range, both long and short; LSE: 3LSI is the ticker for the three-times leveraged option.

On the subject of caveat emptor, there is also the CFD and spread-bet option. If the market moves in your favour, they can be very rewarding, but you can also lose a great deal more than your initial stake. Be sure to manage your risk: have an exit if the market goes against you, and keep your position sizes manageable. The most common mistake is to make position sizes too big.

The pick of the silver miners

The simplest way to buy silver mining companies, again, is via an ETF that tracks a basket of them.

Listed in both London and New York, both dollar-denominated, the GlobalX Silver Mining ETF (NYSE: SIL, LSE: SILG) is one option. And if you want to get really spicy, there’s the US-listed Amplify ETF Trust Junior Silver Miners ETF (NYSE: SILJ), which tracks the small caps.

Fresnillo (LSE: FRES) and Hochschild Mining (LSE: HOC) are the two biggest London-listed pure silver plays. My favourite large caps are Silvercrest (Toronto: SIL), Pan American (Toronto: PAAS), Mag Silver (Toronto: MAG); and First Majestic (Toronto: AG; NYSE: AG), run by my friend Keith Neumeyer, for which I have a very soft spot. The group also boasts a bullion shop.

But it is in the small-cap segment that the real opportunity lies. A few weeks ago I wrote about a recycling company, Comstock Lode (NYSE: LODE). This company is starting to move now, I am delighted to say, but there is still a real opportunity here, and it is highly geared to silver.

The company has, essentially, three businesses. A burgeoning biofuels arm, which it is spinning out. (It has managed to raise money for this subsidiary at a valuation of $1 billion, when the market value of Comstock Lode itself is barely $100 million. Yes, you read that right.)

Then it has some mining assets at Comstock Lode, Nevada; hence the name of the group. Comstock Lode enjoyed a huge silver rush in the 1860s. It was where Mark Twain famously lost his shirt. Some 225 million ounces of silver have been mined in the region, along with between six and eight million ounces of gold. Lode has six million proven ounces of silver in the ground, and 600,000 oz of gold. At $50/oz for the gold and $3/oz for the silver, this is also worth $50 million.

Comstock owns $100 million of Nevada real estate (this is data-centre country). And, finally, it has a burgeoning recycling business in Nevada, recycling solar panels. The demonstration facility is up and running and going great guns. The group is focusing on securing the equipment and money to construct the next facility.

The US is about to be hit with 33 million photovoltaic (PV) solar panels by 2030 – one million tonnes – and ten times that by 2050, as the panels in the first batch come to the end of their life. Around 90% of panels are dumped in landfill, but California has now banned them from landfills, so they have to be transported and buried out of state. Lode’s recycling plants are just across the border.

Lode needs to build three plants, which will cost $36 million. By 2030, it will be able to process ten million panels per year, or 300,000 tonnes. For every tonne it processes, it makes $600, with an 85% margin. So, assuming flawless execution, that’s $180 million in annual earnings. They still need financing, and that will either come from debt or equity (there are multiple solutions).

There is a lot of silver in a solar panel. Just ask the Chinese. So Lode is going to be producing a lot of silver. If it gets its solar-panel recycling business working, it will become the biggest silver producer in Nevada, perhaps even the entire US.

There is also Sierra Madre Silver and Gold (TSX Venture Exchange: SM), which I have mentioned in MoneyWeek before. This stock has been creeping up for some time, and now stands at around $0.70. It was in the $0.40s this time last year.

Sierra Madre has gone from development story to producing mine, processing about 500 tonnes of ore each day (t/day). It should produce 60,000 oz of silver equivalent per month next quarter. It has made this transition ahead of schedule and beaten expectations in doing so. The stock has almost tripled since the lows of 2024, when it hit C$0.25. It now has a market value of around C$100 million.

The company now needs to improve its operations. Its costs are quite high at $29/oz. CEO Alex Langer thinks he can get them down by $4-$5 with some equipment purchases (renting is expensive). There is some improvement work on the crushers to be done. Processing should increase to between 600 t/day and 800 t/day. With some improved equipment, this can get to 1,500.

A stock with room to rocket

They might need to raise a bit of money to do that and accelerate the process; it will take longer to get there from cash flow. When I spoke to Langer a fortnight ago, he had just come from a meeting with potential investors in Palo Alto, so I expect this was being discussed. But if they can get to 1,000 t/day, this should also help costs come down.

Then, probably early next year, we could see some exploratory drilling of the outer zones, which will make the whole company much more alluring.

If they can get the stock to a US$100 million market-cap stock, they qualify for inclusion in the Global X Silver Mining ETF, which could turbocharge liquidity and trigger institutional buying.

In short, this is a producing mine with exploration upside. It’s cheap and it is starting to make good money. A number of analysts have placed targets of C$1.10-C$1.30 on the stock. These are all quite realisable if the silver price holds. I see plenty of upside left in this one. I’m a happy holder.

Dominic Frisby writes the investment newsletter The Flying Frisby.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

The price of silver reached its lowest level of 2026 so far on 11 June before reports of an end to the Iran conflict pushed the precious metal higher later in the day.

The silver price closed at $67.52 per ounce – 5% below its level at the end of 2025 and 28% below its close price on 27 February, the day before the conflict broke out.

Silver sold off steeply in late January when it became clear Kevin Warsh was the likely pick as next chairman of the US Federal Reserve, a position he now occupies. Warsh is regarded as relatively disposed to higher interest rates compared to other candidates who were in the running; higher US interest rates are typically a headwind for gold and silver, so prices fell as the markets factored in revised interest rate expectations.

The war in Iran compounded this effect by pushing up global inflation. Given explosive gains for both metals last year, gold and silver both served as a source of liquidity for investors following the conflict’s outbreak.

Silver carries much of the same appeal as gold for investors, but benefits from additional demand thanks to its key role in advanced industrial technologies such as artificial intelligence (AI) data centres, electric vehicles (EVs) and solar technology.

“Silver tends to move a little bit like more volatile gold,” said Cosmo Sturge, director of market strategy at metals fund manager Baker Steel. “It tends to move directionally with gold, but with a little bit more volatility.”

If you’re deciding where to invest, does silver make sense now?

Why invest in silver?

While silver, like gold, is a precious metal with a rich history of usage in coinage, in the modern era it is silver’s industrial qualities that have the greatest bearing on its price.

“Historically, there would have been a closer relationship between silver and gold in their end uses,” Robert Crayfourd, portfolio manager of the Golden Prospect Precious Metals investment trust, told MoneyWeek. “But today, silver is over 50% industrial, and that’s primarily going into high-end electronics.”

Anything you can see around you with an on/off switch likely contains silver.

Other industrial use cases include brazing and alloys, the chemicals industry and medical equipment – the latter benefiting from the fact that bacteria cannot grow on silver, an inert ‘noble’ metal.

For these reasons, silver sometimes tracks action in copper prices more than gold.

Many of the same drivers that impact the gold price – financial stress, interest rates, inflation expectations and policy decisions – also influence silver.

Is now a good time to invest in silver?

In the short term, silver is under pressure – though reports that the US and Iran had reached a more lasting ceasefire, including an immediate re-opening of the Strait of Hormuz, saw silver prices rise on 11 and 12 June.

But there are various structural drivers in place that suggest silver prices could rise over the long term.

Silver is at the heart of boom industries like clean energy, AI and defence.

The Silver Institute, an industry body for the silver industry, and advisory firm Oxford Economics, published a report titled ‘Silver Demand Forecast to Expand Across Key Technology Sectors’ in December. It highlighted three major growth industries that are driving silver demand: solar photovoltaics (i.e. solar panels), electric vehicles (EVs) and AI data centres.

Silver is an important material for all three industries and their pace of growth is fuelling rapidly rising demand for silver.

The supply of silver may struggle to keep pace. While demand for silver is expected to have fallen around 4% in 2025 thanks to tariff uncertainty, it still lags supply, which The Silver Institute expects to remain flat.

That will have made 2025 the fifth successive year in which demand for silver has outweighed supply.

“What is really striking with silver is the supply side,” said Sturge. “While it has all these demand drivers, on the supply side it is more constrained than gold, because it’s a byproduct. There are very few silver mines globally.”

Between 2017 and 2025, total annual demand for silver increased around 16%, from 972 million ounces to 1.13 billion. Over the same period, supply only increased by 6%.

So the long-term drivers of silver prices seem supportive, meaning that the pullback in recent months could be viewed as a good buying opportunity for would-be silver investors.

Should you invest in silver or gold?

Their historical significance as precious metals used in coinage means that gold and silver are often directly compared by investors. The gold-silver ratio is reckoned to be the oldest continually-tracked financial ratio in existence. It describes how many ounces of silver are required to buy one ounce of gold. The higher its number, the more expensive gold is currently, compared to silver.

The gold-silver ratio is approximately 63 at the time of writing, having fallen from as high as 104 in April 2025 during the height of the year’s tariff turmoil.

At the start of 2026 the gold-silver ratio was above 90, indicating that silver has become cheaper relative to gold throughout the year so far. However, the ratio has increased sharply since early February, when it fell to the mid-40s.

How to invest in silver

There are various ways to invest in silver.

You can, in theory, buy physical silver in the form of silver coins or bars. These, however, incur 20% VAT, and also include 10-15% dealing spreads on top.

Specialist custodians can enable you to avoid sales tax while cutting this trading spread too. Using a custodian should also save the expense and risk of storing and insuring physical silver on your own property, as they will normally store your silver in a professional level vault.

Alternatively, you can gain exposure to movements in silver prices by buying a physical silver exchange-traded commodity (ETC). An ETC behaves similarly to an ETF, but it tracks the spot price of a particular commodity, as opposed to a bundle of stocks. The iShares Physical Silver ETC (LON: ISLN), for example, tracks the spot price of silver.

Buying shares in silver miners is another way to invest in silver. However, bear in mind that this is a different and arguably riskier investment than in physical silver or a tracker for the spot price, because while changes in the silver price will impact the share prices of silver miners, they are also exposed to other, unrelated factors, such as company mismanagement. Mining stocks tend to be more volatile than the commodities in which they focus.

An ETF which comprises silver miners, such as the Global X Silver Miners UCITS ETF (LON:SILV), can give you diversified exposure to silver miners. While doing so may dilute some of the company risk associated with buying individual silver miners, this should still be considered a distinct play from investing in physical silver (either directly or via an ETC).

Golden Prospect Precious Metals (LON:GPM) is an investment trust that invests in a diverse portfolio of precious metal miners. Similarly, Baker Steel’s Gold & Precious Metals Fund offers exposure to precious metals miners that are selected using a rigorous, bottom-up research process.

Silver has surged almost 50% in US dollar terms over the past 12 months. Gold’s performance hasn’t been quite as stellar, though a near-40% dollar return over that time frame is still pretty good. Yet fellow precious metals platinum and palladium are clear laggards. Platinum has managed a mere 11% dollar gain during the last year, while palladium, despite its recent bounce, has eked out a measly 7% increase. Within the last 20 years, though, both metals have made enormous gains. So what does the future hold for these two PGMs (platinum group metals)?

Platinum's prospects

Platinum has unique physical and catalytic properties. Thirty times scarcer than gold, it’s one of the world’s rarest metals. All the gold ever produced would fill three Olympic-sized swimming pools. But the total amount of platinum ever mined would merely cover your ankles in one such pool. Perhaps because it is so scarce, “few people are currently aware of the full range of interesting and highly beneficial things that platinum does”, says the World Platinum Investment Council (WPIC). Yet the metal is used in four core areas.

1. The auto industry
In the past five years, between 30% and 44% of total demand has come from the car industry. Ever-stricter regulations make platinum key to cutting vehicle emissions. “Auto catalyst demand for platinum is predicted to grow well into the decade, despite ongoing electrification of transport,” notes the WPIC, “because more platinum per vehicle is needed to achieve lower emissions requirements.”

Platinum’s catalytic and conductive properties turn hydrogen and air into water in zero-emission fuel-cell electric vehicles (FCEVs). The latter don’t need charging: they refuel in three minutes and have a 600-kilometre (375-mile) range. Buses and lorries are driving the sector’s expansion while extra refuelling infrastructure is developed. Demand from FCEVs will grow faster as the decade progresses, says the WPIC, and will eventually match current platinum automotive usage. Platinum is also used to make other vehicle components such as spark plugs and temperature control sensors, and oxygen monitors to support more carbon dioxide-efficient engines and airbags.

2. Industrial usage
Between 27% and 36% of the last five years' demand has been made up of industrial usage, for example making nitric acid for fertiliser and obtaining a greater yield from high-octane fuel. Platinum’s high melting point, stability and non-corrosiveness are key to glassmaking, while LED screens and glass fibre are made using platinum. Well tolerated by the body, the metal also has medical applications. Platinum-made compounds help treat cancers, while pacemakers contain platinum electrodes.

3. Hydrogen
Then there’s the new demand driver which is hydrogen. Proton exchange membrane (PEM) technology uses platinum catalysts in electrolysers to produce carbon-free green hydrogen. This can replace fossil fuels in a wide range of applications such as power generation, heating and steel manufacturing. It can also help to make aviation fuel as well as provide a power source for the above-mentioned FCEVs.

4. Jewellery
Platinum jewellery, meanwhile, has comprised between 23% and 30% of the metal’s use over the past five years, with China as the world’s largest market. Investment has been responsible for the remaining global demand. Historically this has been variable, but that may soon change.

In its most recent Platinum Quarterly, the WPIC forecast total 2024 demand growing 3% to 8,118 koz (thousand ounces). With supply (curbed by ongoing price drops) expected to decline 1% to 7,089 koz, 6% below the five-year average, the council expects a market deficit of 1,028 koz. Within this, full-year automotive demand is seen reaching a seven-year high of 3,237 koz, with the industrial, jewellery and investment segments all growing, too. Above-ground stocks are set to decline 25% to a four-year low, thus reducing demand cover to four months. Not only is that bullish in the short term, but platinum’s long-run prospects are, too. Demand from electrolysers and hydrogen fuel cells is set to grow strongly, reaching almost 900 koz per annum by 2030, says the WPIC. It forecasts platinum will remain in deficit “for the foreseeable future”, which would boost the price.

Factors that could drive platinum higher

Platinum’s value has been suppressed recently by concerns about future automotive demand. EU member states last year approved an emissions regulation that would stop sales of new carbon dioxide-emitting cars and vans in 2035. However, BMW has just said that such a ban is “no longer realistic” as electric vehicle (EVs) sales slow, meaning that Europe’s auto industry would experience a “massive shrinking”. In short, fossil fuel-powered vehicles could still be around for a long time. Yet fears over 2035 have affected future supply.

“Narrowing margins have led major miners to restructure plans to optimise costs,” said Daniel Hynes and Soni Kumari of ANZ Research. “This will likely delay growth projects and keep some mines in a state of care and maintenance. The delay in capex [capital expenditure] expansions is also weakening the prospects of long-term production growth.” In short, future platinum supply will continue to be curbed. For 2025, ANZ Research sees platinum reaching $1,273 per ounce, up almost a quarter from the present level.

Yet another factor could drive it much higher. Platinum has a long history of being a monetary metal. It was used as coinage in Czarist Russia, while modern examples of platinum coins include the Isle of Man Platinum Noble in 1983, Canada’s Platinum Maple Leaf in 1988, the American Platinum Eagle in 1997 and the Royal Mint’s Platinum Britannia coins in 2018. Yet the platinum/gold ratio (the price of the former divided by the latter) has dipped from 2.39 in 2001 to roughly 0.38, near the all-time low.

Even allowing for past concerns over platinum’s prospects, that’s an extraordinary drop. Were the metal to regain the mid-point of this range, the ratio would be 1.38, which at gold’s current value would lift platinum to almost $3,800 per ounce, 3.7 times the present price. Chinese economic stimulus measures could be one potential catalyst for such a revaluation.

Another might be Russia’s Ministry of Finance. It plans to buy platinum once again in 2025, according to the draft federal budget, to increase the share of highly liquid assets in Russia’s State Fund. And if global players start investing in platinum seriously, the price could really take off.

Now to palladium

Most of palladium is employed in catalytic converters for cars but it has a number of uses:

• It’s also used in jewellery and some dental fillings and crowns.
• White gold is a gold alloy that has been decolourised by alloying with another metal, sometimes palladium.
• Furthermore, the electronics industry employs palladium in ceramic capacitors (layers of palladium sandwiched between layers of ceramic), which are used in laptops and mobile phones.
• The metal is a good catalyst and is used in hydrogenation (treating with hydrogen). Hydrogen easily diffuses through heated palladium, providing a way of separating and purifying the gas.

Palladium's prospects
Palladium is expected to stay in a deep deficit of 1,281 koz in 2024 as total mining supply drops 6% year on year, says the WPIC. The council recently revised its projections for 2025-2028. Total mining supply is now forecast to be 6% lower than previously predicted as mines react to lower metal prices, while total recycling supply is forecast to be 8% less than earlier thought. Granted, average automotive demand is forecast to be 2% lower per annum over the period to 2028. However, average industrial demand is expected to be 5% a year higher due to greater electrical palladium usage. In the longer term, then, the palladium price is likely to be more dependent on supply changes – in particular recycling – than on declining demand. The supply/demand balance, though, is still predicted to shift from consecutive market deficits to an eventual growing excess, leading to a 725 koz surplus in 2028.

That sounds inauspicious. Yet the picture is better than it looks. Palladium isn’t likely to go into surplus until at least 2026. Further, with supply set to be lower than previously forecast, near-term deficits could be higher and more prolonged than earlier expectations, while the move to eventual surpluses may take longer. In other words, downside pressure on palladium prices could be less than feared.

On balance, then, palladium’s longer-term fundamentals – though reasonable – look markedly less bullish than platinum’s. The metal has similar supply constraints and the potential for automotive demand to rise higher for longer, but it also has a less diversified usage base and lacks the potential boost from the emerging hydrogen economy.

Fifteen years ago, palladium was worth just 20% of platinum. Now it’s dearer. However, the palladium/gold ratio has declined from 1.7 in early 2020 to just 0.43, not far above historic lows. Were palladium to return to the mid-point of this range, the ratio would bounce to 1.06, which at gold’s current value would lift palladium to $2,900 per ounce. That’s 2.6 times today’s price. As with platinum, China’s stimulus measures could be a big factor in forcing up palladium’s price. And Russia’s Ministry of Finance, which accumulated palladium reserves in the Soviet era but sold them by 2012, also intends to buy the metal once again in 2025. What’s more, Bloomberg reports that the US has asked G7 members to consider sanctioning Russian palladium. As this makes up 40% of global supply, a major interruption could send the metal’s price soaring.

How to invest in platinum group metals

So what’s the best way to play PGMs? The top platinum and palladium miners are based in southern Africa, where political uncertainty makes them highly risky, but the potential rewards could be spectacular.

Sibanye-Stillwater (NYSE: SBSW) is a multinational mining and metals processing group with a wide portfolio of extraction and processing operations across five continents, although most of its mines are in South Africa. The company is one of the world’s largest platinum, palladium, and rhodium producers (it’s also a top gold miner), while other PGMs such as iridium and ruthenium feature on its product list.

The market value is $3.3bn, total equity is $2.5bn and there is a long-term debt of $1bn. The stock is on a 2025 price/earnings (p/e) ratio of 12. In other words, this is a cheap but risky way of playing the platinum and palladium potential price rises.

Alternatively, WisdomTree Physical Platinum (LSE: PHPT) is an exchange-traded commodity (ETC) play designed to offer a simple, cost-efficient and secure way to access physical platinum by providing a return equivalent to movements in the metal’s spot price, less the 0.49% management fee.

This ETC is backed by segregated, individually identified and allocated physical platinum held by the custodian bank, HSBC. If physical platinum rises say, 1% in a day, then the ETC’s price will increase by 1%, excluding fees (the converse also applies). For those who prefer an equivalent palladium investment, there is the WisdomTree Physical Palladium (LSE: PHPD) ETC.

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With gold providing strong performance in 2024, many investors are looking to gold miners. The AuAg ESG Gold Mining Ucits ETF (LSE: ESGO) is an exchange-traded fund (ETF) offering equal-weighted exposure to mining companies with high environmental, social and governance (ESG) standards.

This ETF therefore has two unique features. Firstly, it is equally weighted, so its holdings are not dominated by one single stock or a handful of them. Secondly, the ESGO ETF allows investors to gain exposure to the best-in-class gold miners from an ESG perspective. As well as allowing investors to align their investments with their values, the ESG screening approach helps to mitigate risk. Companies with poor ESG scores, which the ETF does not provide exposure to, may be more at risk of being involved in controversies that can affect their bottom line.

Top gold and precious metal stocks to reduce risk

1. Wheaton Precious Metals (NYSE: WPM) is one of the largest players in the precious metals streaming business. Wheaton finances mining projects in exchange for a percentage of the production, allowing it to reduce operational and environmental risks.

In the second quarter of 2024, Wheaton reported revenues of $299m, a 13% year-on-year increase. It achieved a return on equity of 8.54% and a net margin of 50%. Wheaton is focused on minimising its environmental impact. The group’s latest Climate Change Report noted that 87% of emissions from firms it finances are now covered by reduction goals, while 70% of Wheaton’s current revenue is sourced from mines that are producing metals required for the clean energy transition. The company also noted that it is one of the top-rated companies by Sustainalytics and holds an AA ESG rating from MSCI.

2. B2Gold (NYSE: BTG) is a Canadian gold producer with mines in Mali, Namibia, and the Philippines. The company also has a 25% interest in Calibre Mining and a 19% interest in BeMetals. In addition, it has a portfolio of other exploration assets in Mali, Uzbekistan and Finland. B2Gold’s current valuation is attractive.

The miner has a forward price/earnings (p/e) ratio of 12.84, which is below the industry average of around 15, using the NYSE Arca Gold Miners index. This suggests that the stock is trading at a discount to its peers in the gold mining sector. B2Gold has been integrating renewable energy into its mining operations: 22.9% of total electricity consumed was from renewable sources in 2023. Its Otjikoto mine in Namibia is now principally powered by clean-energy sources, with renewables accounting for 81.4% of the electricity used.

A play on the monetary metals

3. Pan American Silver (NYSE: PAAS) While primarily a silver producer, Pan American Silver also produces significant amounts of gold. Its operations are spread across Latin America. As of 30 June 2024, Pan American reported 6,893 kiloounces (one thousand ounces) of proven and probable gold reserves. To translate this into more familiar terms, it is approximately 194.8 metric tonnes of gold reserves.

Its latest earnings report for the second quarter showed revenue of $686.3m, representing growth of 7.3%. Pan American has an ambitious goal to achieve net-zero emissions by 2050 and has been investing in energy efficiency at its sites. The miner hopes to reduce emissions from its operations by 30% by 2030.

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The gold-silver ratio has long been considered an important metric to gauge the best time to invest in precious metals.

If you monitor gold, you’ll know that the yellow metal is usually seen as a stable investment. The gold price had a glittering start to 2025, with investors flocking to the metal as a hedge against inflation.

Central banks are also buying up the commodity due to its diverse use in various industries like nanotechnology and cancer therapy.

Silver is traditionally more of a volatile investment, however, the ‘devil’s metal’ gained 21.5% last year and is up around 12% so far in 2025, leaving some investors wondering if now is a good time to invest in silver.

Whether you are new to precious metal investing or want to diversify your portfolio, it’s useful to know the relative value of silver against gold.

It can affect investor sentiment, help understand economic trends, offer a hedge against inflation, and influence your investment strategy.

What is the gold-silver ratio?

The gold-silver ratio compares the price of gold to the price of silver. Essentially, it tells you how many ounces of silver are needed to buy one ounce of gold and it is calculated by dividing the current market price of one ounce of gold by that of one ounce of silver.

The gold-silver ratio is the oldest tracked exchange rate that is still in use, and it is a guidepost for investment decisions, be it inflation, deflation, market crashes, and broader economic trends.

At the time of writing, gold was priced at £2,342.66 per ounce, and silver at £25.53 per ounce, so the gold-silver ratio was 92:1, according to UK bullion dealer Chards. Therefore, gold is currently 92 times more expensive than silver.

The higher the ratio, the more expensive gold is relative to silver. While there’s no definitive benchmark for the ratio, assessing the current gold-silver ratio against its average in recent years can be one factor that investors can use when making an assessment on when to buy or to swap holdings of either metal. Divide the current ratio by the average and you can calculate whether one metal looks too expensive or the other too cheap, based on average performance.

All-time gold-silver ratio

History of the gold-silver ratio

Gold and silver have been precious metals for a long time, and many may be surprised to know that the gold-silver ratio has been measured ever since ancient Roman times. The gold-silver ratio has evolved significantly over the centuries, due to changes in economic conditions, market dynamics and geopolitical events.

Long ago, the ratio between the two metals was set by governments and empires to control currency and coinage. The earliest record available dates back to around 3200 BCE, when ancient Egypt recorded a ratio as low as 2.5:1. The Roman civilisation was one of the earliest to set the ratio, which started at around 8:1, and over the decades, was bumped up to 12:1.

Since then, the value of gold has only risen, as the difficulty of mining and production of the two metals, notably gold, increased its scarcity value.

By the 18th century, most countries had moved away from using silver as common coinage and switched to gold alone. The US government's Coinage Act of 1792, which confirmed the dollar as the US standard currency unit also fixed the gold-silver ratio at 15:1. This ultimately resulted in gold being valued over silver, making the yellow metal more expensive, and causing gold coins to be hoarded and/or exported. The ratio was later adjusted to 16:1 in 1834.

By the 20th century, the ratio had already begun reaching dramatic heights of around 40 ounces of silver for one of gold, and even peaked at nearly 100:1 with the advent of World War II.

If the gold-silver ratio was still based on the availability of the natural supply of the metals it would stand at 15:1– estimates suggest there is roughly 15 times more silver in the Earth’s crust than gold.

But gold has been seen for years as a store of value, a hedge against inflation and the gap between gold and silver is ever mounting.

In April 2020, the gold-silver ratio reached a record 125:1, as a response to the onset of the Covid pandemic. Today, the ratio has dropped from those heights and is now sitting around 92 ounces of silver to one ounce of gold.

Related content

• Is now a good time to invest in gold?
• The mystery of America’s gold and why an audit matters
• How to buy gold bullion
• How to profit from the scramble for metals and minerals

'Should I invest in gold or silver?' is a question that comes up a lot. In fact, a friend was asking me about it just this week. So let’s try to resolve it here and now, once and for all: gold or silver – which should you buy? Full disclosure: in my own portfolio at one stage I was geared as much as 70% towards silver and 30% towards gold. But in 2011, when silver went to $50, I rolled into gold and never went back. My physical allocation is now probably something like 90% gold and 10% silver. To be clear, we are not talking about mining companies, which are a different kettle of fish altogether – just physical metal. 

Silver has a great deal more potential than gold. There is every possibility that the silver price could triple or quadruple from today’s price of just below $30 per ounce (oz). It could even go to $200. But my experience of 20 years’ investing in silver is that if it can find a way of disappointing, it will. The out-and-out silver bugs all scream manipulation, and maybe the silver market is manipulated and suppressed. Certainly, if all the longs on the futures exchanges were to hold out for delivery, the silver price would go shooting up. There is not the physical supply to deliver on all the contracts. That applies to many commodities, although to none, it seems, as consistently as to silver. 

But why invest in something if forces are stronger than you are repressing it? It is unlikely, meanwhile, that gold will triple or quadruple from today’s price of $2,500/oz unless we enter into some kind of currency crisis or extreme inflation. Then again, the silver price could easily halve from $30/oz. I don’t think a 50% correction in gold is likely, except in the event of some deflationary financial panic or liquidity crisis such as we saw with Covid in 2020. In any case, such a correction would be temporary.

What's the right silver-to-gold ratio

My friend was told to buy silver because the silver-to-gold ratio at 86 is high and should go lower. Let’s consider that argument. There is 15 times as much silver in the Earth’s crust as there is gold, and throughout all of history the monetary ratio between the two reflected natural supply. Fifteen silver coins got you a gold coin. But silver stopped being used as money in the late 19th century. The many gold rushes of the period increased the gold supply, and most countries around the world followed Britain’s model and adopted pure gold standards. 

By 1900, China was the only major country in the world on a bi-metallic standard. Every other nation was on gold alone. In my lifetime, the silver-to-gold ratio has only once gone back to its natural levels of 15, and that was in 1980 for an afternoon, when the Hunt brothers’ infamous attempt to corner the silver market reached its climax. The reality is that the silver-to-gold ratio has gradually been climbing for a generation now, averaging between 50 and 85, although going above or below those levels at times of market extremity. In 2020, it went to 125. 

I accept that the silver-to-gold ratio “should” be 15. In fact, perhaps it should be even lower because silver gets consumed, while gold does not. But in practice, I don’t think that ratio will ever go to 15 in my lifetime, certainly not for any extended period. The other argument that my friend was given to buy silver instead of gold was that silver has many industrial uses. This is indeed the case. But even though the range of silver’s industrial applications is expanding, the silver price has not taken off. Gold’s use throughout history has been to store or display wealth; silver’s has been to exchange it. Silver no longer has that use, nor is it likely to. We don’t use metal as a medium of exchange anymore. Money is digital. We don’t buy gold to become millionaires.

We buy gold to protect the value of what we have already earned. Gold will continue to do that. Silver might not. Silver is much more speculative. It has the potential to earn you more money than gold, but it also has the potential to lose you more than gold. Why not own both? Are you buying precious metals because you think fiat money is going to collapse and, in this hyperinflationary scenario, you’re suddenly going to become a multimillionaire, sweeping up assets at bargain basement prices because you own precious metals? Or are you buying them because you think the purchasing power of fiat money will continue to erode over the next ten or 20 years and you want to protect what you have? 

If your purpose is speculation and you want to get rich, then maybe silver or silver options are a way to do that, or silver mining companies. But they are all also ways to become poor. If your purpose is simply to protect what you have earned, then gold is the way. There is a definite case for both. But understand why you are buying the metal and be truthful with yourself as to why you’re buying it. That will give you the answer between gold and silver. As for my friend’s question, I hedged: I suggested buying 75% gold and 25% silver.

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Silver is often described as the “devil’s metal”. It is extremely volatile and has a startling ability to burn holes in investors’ pockets. Never has the latter trait been more evident than in recent months. In March 2011, silver hit $48.60 per ounce, a record peak. Three years ago, it traded at $28.50/oz. Yet now, in real (inflation-adjusted) terms, dollar-priced silver is hardly any higher than it was just after World War I. 

The metal’s underperformance is thrown into sharp relief by the gold/silver ratio. This indicates how many silver ounces equal one gold ounce (there’s more on this topic later on). At present, the ratio shows that silver is looking cheap compared with bullion. However, with silver’s fundamentals both strong and improving, it could soon be re-rated relative to gold. 

Why? For starters, silver is an industrial metal whose range of applications keeps growing. It is extremely durable, one of the world’s best electricity conductors, and is particularly suited to coating electrical contacts on printed circuit boards. So it is used in nearly all computers and mobile phones, as well as in electricity-producing solar cells and plasma-display panels. Televisions’ on/off buttons, microwave ovens, toys and keyboards employ silver membrane switches. Silver ink removes the need for wires. Silver in medical devices, bandages and ointments fights infections. Furthermore, water-purification systems use silver ions as a sanitiser, in particular, to counter antibiotic-resistant bacteria such as MRSA. Silver is also used within the vehicle, power generation and construction sectors. It is very popular in the jewellery industry too; it is often alloyed to improve durability – in sterling silver, for instance, which constitutes 92.5% silver and 7.5% other metals. 

Last year, overall silver supply was estimated at just over one billion ounces, according to the Silver Institute (SI), 820 million ounces of which came from mine production (the second-lowest level for a decade). Overall demand for silver in 2023 was 1.14 billion ounces, according to the SI, 632 million ounces of which stemmed from industry and 208 million from photography and jewellery. Net investment in physical silver (coins and bars), although in line with historic levels, actually declined by 20% from 2022, which helps to explain the recent weakness in the metal’s price. However, this still left a silver deficit for last year of around 140 million ounces. In the near term, there are risks attached to silver’s market value. If the US were to go into recession (still quite possible), industrial demand for silver would be adversely affected. Meanwhile, business confidence in China may remain fragile, so Chinese silver usage could be sluggish for the next few months.

Supply squeeze

Looking beyond 2024, however, the outlook for silver is highly auspicious. In particular, one major supply-side hurdle is approaching. 

Mexico is the planet’s top silver producer, supplying almost a quarter of global output, according to the United States Geological Survey (USGS). However, Mexico’s silver production is now declining at a double-digit annual rate, notes Tavi Costa at money manager Crescat Capital. Why? Labour, political and environmental activism is mounting. Last year, the Mexican government overhauled mining laws, including shorter concessions and tighter rules for permits. Mexico’s silver reserves are therefore dwindling. By 2026, at current production rates, they could be exhausted. 

By contrast, the artificial intelligence (AI) boom could mean surging demand for precious metals in 2024, notes researcher SchiffGold. Precious-metals research consultancy Metals Focus recently forecast that increased demand for chips powering AI would drive “widespread support for a range of precious metals-bearing components”. 

In addition, by 2027 solar manufacturers will need more than 20% of annual silver supply, says the University of New South Wales. It expects that by 2050 solar panel production will comprise 85%-98% of current global silver reserves. Oxford Economics forecasts that “between 2023 and 2033... the output of end users of industrial silver will increase by 46% in real terms”.

Could the flood of liquidity return?

Another major factor for silver is overall demand from investors, which is set to continue rising in the long term as investors worldwide seek a hedge against inflation and a store of value. 

And it could well receive a near-term fillip too. America’s rising inflation rate in 2021 and 2022 drove the US Federal Reserve to keep hiking interest rates. It has also operated quantitative tightening (QT, or reducing the amount of printed money in the system) rather than quantitative easing (QE, adding printed money to the system). This looks set to change, though. It appears that America’s financial plumbing is starting to clog up as liquidity is removed from the system; there are signs that the current cash surplus in money markets is rapidly diminishing. 

Lorie Logan, president of the Reserve Bank of Dallas, “has confirmed that the Fed’s QT is effectively over due to the sudden unexpected slide in systemic liquidity”, says news site ZeroHedge. In plain English, this means that cash in the US system is soon set to dry up. 

“The Fed is on course to end QT and restart QE in the coming months, against a backdrop of loose fiscal policy and a still-resilient economy, opening the door to a reappearance of inflationary pressures that the Fed may have little appetite (or ability) to restrain,” agrees Melissa Davies, chief economist at hedge fund Redburn Atlantic, in the Financial Times. 

With the money supply likely to take off again, the value of bullion, the classic safe haven during times of political and/or inflationary stress, is set to surge once more. However, silver acts as an even more potent monetary barometer, having historically mimicked – and indeed amplified – movements in gold. To return to the gold/silver ratio. 

It’s “the oldest continuously tracked exchange rate in history”, says Investopedia, as gold and silver prices “have such a well-established correlation. For the whole of the 20th century, the average gold/silver ratio was 47:1. In the 21st century, the ratio has ranged mainly between 50:1 and 70:1, with a low of 35:1 in 2011.

Lower real yields will boost precious metals

The current gold/silver ratio is around 88, near the top of its 100-year range between 15 and 113. A return to just the mid-point of that century-long spread (around 64, even assuming unchanged gold) would lift silver to almost $32. If the ratio were to compress to the 20th century’s average level of 47, again presuming that gold stays still, silver would rise to $43 per ounce. 

“The Fed cutting cycle and falling US real yields are expected to push gold prices to new nominal highs in the middle of 2024, reaching an average of $2,175/oz by the fourth quarter,” says J.P. Morgan. “Silver prices will probably follow gold, averaging around $30/oz in the fourth quarter.” 

Commerzbank also expects silver to climb to $30 by the end of 2024, which would bring the gold/silver ratio down to 72. By themselves, those would be very good returns. But silver could do even better. That is because, in precious metal bull markets, it normally outperforms gold, having lagged it in the early stages. Indeed, most of silver’s appreciation tends to be seen in the bull market’s latter stages. 

“We expect silver to clear $26/oz, which will open the door to $34/oz,” says Taki Tsaklanos at InvestingHaven. “[Then] the path to $50 could follow, supported by strengthening market sentiment, potential supply-demand imbalances, and external catalysts.” 

What to buy in silver now

So what are the best silver bets? 

One possibility is direct exposure via an exchange-traded fund (ETF). Alternatively, you can obtain greater leverage with shares in silver miners, whose profits and stock prices are likely to rise (and fall) faster than the metal’s price. Established silver producers have less upward potential than “juniors” or developers, but are also less risky. They often produce several other metals, providing extra diversification. You could also benefit from rising dividends. 

Furthermore, with many silver mines in countries that can be ambivalent about non-domestically owned operations, it pays to consider potential political risk. 

The following investment ideas remain excellent ways of playing rising silver.

WisdomTree Physical Silver (LSE: PHSP) is an exchange-traded commodity (ETC) fund that offers a simple, cost-efficient and secure way to get a return equivalent to silver’s spot-price movements, minus management fees. In other words, if spot silver rises 1% a day, the ETC will increase by 1%, excluding fees (and vice versa). WisdomTree Physical Silver is backed by individually identified silver bars held by custodian HSBC Bank. 

Wheaton Precious Metals (NYSE or Toronto: WPM) is one of the world’s largest precious metals (PM) streaming companies. Wheaton makes upfront payments to miners in exchange for being allowed to acquire a proportion of their future precious metals production at a fixed price, typically below market value. So it benefits from rising silver prices and achieves high profit margins without taking the risks to which physical miners are exposed. 

Wheaton has a portfolio of low-cost, long-life assets. As of 30 September 2023, it had 29 long-term purchase agreements with 23 different miners for the purchase of precious metals and cobalt relating to 18 operating mining assets and 14 in development. In 2023’s third quarter, a third of revenues came from silver. Wheaton’s market capitalisation is $21bn. While the stock’s 2024 prospective price/earnings (p/e) ratio is 36, WPM’s valuation isn’t earnings-driven. It is powered by PM prices, in particular those of silver and gold, making it an excellent way to cash in on their upside potential. 

Hecla Mining (NYSE: HL), the oldest US-listed American miner of precious metals, is also the largest primary US silver producer. The company operates mines in Alaska, Idaho, Quebec (Canada) and Yukon (Canada), while owning several exploration and predevelopment projects in world-class silver- and gold-mining districts throughout North America. In other words, it ticks all the political-stability boxes. Net debt on 30 September 2023, including finance leases, was $515m versus equity of $2bn and a $2.5bn market value. Again, the primary driver of the company’s shares is the silver price rather than earnings estimates. If this appreciates as we expect it will, Hecla is a long-term buy.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription. 

Silver has been a dreadful investment over the last six months. Having reached $26.50 per ounce (oz) in March 2022, the price is now just $18/oz. Indeed, in real (inflation-adjusted) terms, dollar-priced silver is lower now than it was just after World War I. Yet the long-term outlook for investing in silver remains auspicious.

The many uses of silver

Silver is a monetary metal, like gold, but also an industrial one whose range of applications keeps on expanding. Ideal for jewellery, it is very durable and also one of the world’s best electricity conductors. Nearly all computers and mobile phones contain silver, as it is perfect for coating electrical contacts on printed circuit boards. Silver is also used in making electricity-producing solar cells and plasma display panels.

On/off buttons for televisions, phones, microwave ovens, children’s toys and keyboards all use silver membrane switches. Silver ink removes the need for wires. To help fight infections, silver coatings are applied to medical devices, bandages and ointments. Furthermore, silver ions are effective against antibiotic-resistant bacteria, specifically MRSA, and are added to water-purification systems as a sanitiser.

Just six months ago, the metal’s fundamentals seemed rock solid. Inflation was taking off in the US, UK and Europe. Inflation is good news for monetary metals, given their traditional role as a store of value and a safe haven from economic and political turmoil. Furthermore, real interest rates were declining, which normally presages price increases (precious metals carry no yield, so their relative appeal is greater when real interest rates fall).

Supply is constrained while demand is rising

And the global supply/demand balance was moving in silver’s favour. Russia, which at the time provided 5% of the world’s silver, according to financial-data provider S&P Global Market Intelligence, had just invaded Ukraine. Russian supplies of the metal appeared to be under threat. The Silver Institute’s April 2022 World Survey forecast global silver mine production growing by 2.5% year-on-year to 843.2 million ounces . For a third straight year, silver recycling was set to grow by 4%. Overall supply was estimated at 1,030 million ounces.

Meanwhile, 2022 industrial demand was expected to hit a new record high, with the big drivers being more electric vehicles, or EVs (which have higher silver loadings than those with internal combustion engines) and more investment in renewable energy. Jewellery fabrication was forecast to top 2019 levels, while purchases of physical silver for investment were likely to remain flat at around 25% of overall usage. Total demand was estimated at 1,102 million ounces, creating a 72 million ounce deficit.

Headwinds gathered in spring

In short, silver looked set to mount a sustained move to new high ground. But then the game changed. Spooked by America’s ever-increasing cost of living, the US Federal Reserve began raising America’s main interest rate. This boosted the US dollar, hampering silver as it is priced in dollars. It also pushed up real interest rates, creating another headwind for silver. In April 2022 the greenback broke strongly upwards out of the narrow range in which it had traded since 2014. This hit the dollar value of silver so hard that the metal’s value began to fall sharply in other currencies too.

Today, silver’s immediate pricing backdrop is still looking unclear. The dollar has continued to climb, reaching its highest level against the rest of the world’s currencies for 20 years. The Fed has persisted in raising interest rates and has been talking tough on future increases in borrowing costs, regardless of the resultant downside risks to the US economy and its unemployment rate.

For example, John Williams, head of the Federal Reserve Bank of New York, said that America’s central bank will probably need to get its policy rate “somewhat above” 3.5% and keep it there through to the end of 2023. “Based on what I’m seeing in the inflation data and… in the economy, it’s going to take some time before I would expect to see adjustments of rates downward,” he told The Wall Street Journal.

At face value, this is negative news for silver. What’s more, a nasty recession would curb industrial demand for the metal, while the effect of Russian sanctions is still unclear. No wonder, then, that following silver’s recent price decline, many momentum traders expect the downtrend to continue.

Remember, though, former Fed chair Ben Bernanke’s observation that “monetary policy is 90% talk”. The Fed may appear to be playing hardball on rates, yet as Johns Hopkins University applied economics professor Steve Hanke comments, the US could be heading for a “whopper” of a recession next year. If America’s jobless rate starts climbing, the Fed could soon be singing a very different tune, and start trimming rates. In other words, look out for US rate cuts in 2023 even though inflation might well persist for longer than expected. As real interest rates fall back, silver could rebound like a coiled spring. Demand expectations would also be likely to rise.

The sky’s the limit for the silver price

How high might the silver price go? Silver has historically mimicked and amplified gold’s movements. The gold/silver price ratio is currently around 94, near the top of its range since 1945. It has only been higher on two occasions: early 1991 and at the start of the pandemic in Spring 2020. A return to 70 (assuming gold stays unchanged) would lift silver by a third.

Granted, global silver mine production will see continued growth over the medium term, says the Silver Institute. Yet Russian production may begin to fall if sanctions remain in place. And on a five-year horizon, world output will begin to decline unless sufficient capital investments are made. In addition, recycling looks set to decline for the next year or two.

Silver demand, meanwhile, is forecast to grow steadily in the next few years to successive record highs, says the institute, with industrial needs to the fore. Major drivers will be increasing use of EVs and green-economy applications. Jewellery demand is expected to expand even faster and physical investment is forecast to hold its own.

In short, this is a long-term positive outlook for prices. If physical investment does better than the Silver Institute’s expectations as silver’s monetary attractions increase amid falling interest rates and stubbornly high inflation, silver prices will be boosted further.

What’s the upside? Keith Neumeyer, CEO of Canadian silver miner First Majestic Silver, has often said that silver could reach $130 per ounce. He believes the current stockmarket cycle is similar to the 2000 dotcom bubble. As equities decline, he thinks silver mining will enjoy a big rebound. Lobo Tiggre, founder and editor of Independent Speculator, reckons Russian sanctions will create a “new Iron Curtain”, and the global economic fallout will endure, says Investing News Network (INN). Tiggre also says silver could reach triple-digit levels.

“Given our expectations for inflation to increase over the coming months... we continue to believe that gold and silver prices will continue to climb over the coming quarters,” analysts from Canadian financial services group CIBC told INN in May 2022; at the same time, Peter Krauth of Silver Stock Investor said that “we are very likely... to experience the greatest silver bull market of our generation”.

How to invest in silver now

What to buy? Investors must decide the level of risk they can stomach. You can buy direct exposure via an exchange-traded fund (ETF) tracking the price of the metal. Alternatively, silver miners tend to be leveraged plays, rising and falling faster than the price of the metal itself. The most upside scope comes from buying high-risk, very volatile, “junior” explorers. If things go awry, however, investors can see their stakes obliterated.

Lower down the risk scale, there are developers who are already planning how to extract their minerals. Yet even if feasibility studies (including budgets, permit approvals and capital-raising plans for mine construction) have been undertaken, there is still no guarantee of production.

If you prefer a relatively safe investment, stick to established silver producers that generate real cash flow. They have the least upward potential but also the lowest downside risk. Major miners can often produce several other metals, which provides further diversification. Further, if their mining operations keep prospering, you could benefit from rising dividend payments.

Lastly, remember political risk. Many silver mines are in countries that can be ambivalent about foreign-owned operations. Invest where there is unequivocal support for the mining industry. We look at three investment options below.

What to buy

The WisdomTree Physical Silver (LSE: PHSP) is an exchange-traded commodity (ETC) fund that offers a simple, cost-efficient and secure way to play physical silver by providing a return equivalent to movements in the metal’s spot price, minus fees. WisdomTree Physical Silver is backed by segregated, individually identified and allocated silver bars that are held by HSBC Bank.

Wheaton Precious Metals (Toronto: WPM and NYSE: WPM), is one of the world’s largest precious metals streaming companies. It buys all, or part of, the PM or cobalt output from high-quality mines for an upfront payment and an extra sum on metal delivery. Wheaton has a portfolio of low-cost, long-life assets: it has streaming agreements with 23 operating mines and 13 development-stage projects.

In 2022’s second quarter, WPM generated 43% of its revenues from silver. Apart from that first cash payment, Wheaton typically doesn’t incur capital expenditure or exploration expenses at its suppliers, so it benefits from rising silver prices and achieves high profit margins without taking the risks to which physical miners are exposed. Such attributes are factored into WPM’s share price.

The market cap is $14.5bn and the stock stands on a prospective price/earnings (p/e) ratio of 25. But WPM’s valuation isn’t earnings-driven – it’s powered by precious metal prices, especially silver and gold. Their scope for price rises makes this a potentially very profitable stock.

Hecla Mining (NYSE: HL), the oldest NYSE-listed American precious metals miner, is the largest primary US silver producer with a 40% market in world-class North American silver and gold mining districts. Having just completed the acquisition of Canada’s Alexco, it ticks all the political-stability boxes.

“Hecla is… the world’s-fastest growing established silver miner,” says president and CEO Phillips S. Baker, Jr. “With additional production from Alexco’s Keno Hill, we expect Hecla to produce 17 million ounces-20 million ounces per year in the next few years, 30 to 55% more than 2021.”

Net debt is $336m versus equity of $1.8bn and a €2.2bn market value. The shares are on a similar p/e to Wheaton, but again the company’s shares are mainly driven by silver prices. A long-term buy.

US inflation numbers came in yesterday at 8.3%.

The markets were expecting something lower – after all, the oil price had fallen back, not to mention most commodities.

8.3% was above expectations and the markets did not like it one bit. Down they went like liquid through an open sluice. Hopes and dreams of a sustained recovery since the June carnage went with them.

Actually, not totally.

The US stockmarket is rallying – for now

While the S&P 500, which I use as a barometer for global markets, has been making a sequence of lower highs since the beginning of the year – ie, the broader trend is down – it has also been making a series of higher lows since June, meaning the intermediate trend is up.

Yesterday’s lows are still higher than last week’s lows, which were higher than the July lows, which were higher than the June lows. So there is something of an intermediate term up-trend in place.

If you draw a trendline off both the lows and the highs, they are both still intact and you end up with something of a wedge pattern, as the chart below shows.

If you dabble in such dark arts as day trading, or short-term flips, I would wager that the odds – in the short term – favour going long with a stop just below that rising trend line, with a target somewhere near the falling blue line around 4,200. That said, as we have just seen, rallies could fail at any time, so if the market moves in your favour, you would want to keep moving your stops up to protect any gains.

Unlike some patterns – double tops, head and shoulders highs and lows, for example, which I find quite useful – I have over the years found wedges to be utterly useless as predictive tools. So I am not going to forecast off the back of it.

A long-term downtrend will, in a month or two, assuming both those trend lines hold, which is some assumption itself, shortly butt up against a jittery, shorter-term uptrend and one of them will prevail.

Seasonally, we are coming into a bad time of year for markets. The last four Septembers have all seen sell-offs of between 5% and 20%, so stockmarket-wise, I do not see this as a time to be taking huge risks or making large bets. It’s a time for prudence and capital conservation.

Silver – huge potential that’s never realised

I was, however, encouraged yesterday by the action in precious metals, in particular the dogs of recent months silver and platinum. Yes, they sold off, but on a relative basis they help up well.

This comes on the back of an extraordinary day on Monday when silver rose some 5%.

My ambivalence towards silver is long since documented. There is no other metal with as much potential. It is both a monetary metal and an industrial metal, used in virtually every computer related application you can think of – every phone, every computer contains silver – not to mention all the bio tech.

It “should” be a play on both currency debasement and technological progress. Yet in practice it proves to be neither and, at $19, is trading at the same price it was in 1980.

There is about 15 times as much silver in the earth’s crust as there is gold, hence there is an argument that silver should be 1/15th the gold price – over $100, in other words. But I have been listening to such arguments for 20 years and the metal never delivers.

Silver aficionados scream manipulation, but they have been screaming that since the 1970s. Why would you want to own something whose price is deliberately suppressed by powers far greater than you? Surely you would want to own something whose price is artificially boosted. There’s more profit in it.

I own silver, quite a bit in fact, and I own some silver miners. Because one day, you never know, it might actually go to the moon. That’s its planet after all. I want to make sure I’ve got a seat on the rocket if it does. I don’t think I could live with myself if it went there and I didn’t have exposure, having written about it so much over the years. But I’ve long since stopped holding my breath.

Silver could be about to go on a multi-week bull run

That said, I do think silver could enjoy a multi-week rally from here and I’ll explain why.

The COMEX is the world's largest futures and options trading exchange for metals. There are three groups of traders: the commercials, the large speculators and the small speculators. The commercials tend to be seen as the smart money, and, as they are often acting on behalf of miners, they tend to be sellers and so they tend to be short.

Every Friday evening, the positions of the various traders the previous Tuesday – the open interest, as it is known – is announced. On Friday we discovered something extraordinary. That the commercials are net long – ie buyers – for only the third time in 40 years.

That suggests a genuine shortage of metal.

Meanwhile the speculators, who for the most part do not have metal to deliver, are net short. This opens up the possibility for a short squeeze.

Now this is silver, so don’t get your hopes up and don’t take on too much risk. If it can go wrong it will. But the stage is set for a multi-week rally. If the broader markets correct, then silver will come tumbling down with them. But if they can remain flat or rising slightly, then silver should enjoy a good run.

Buying silver is justifiable on a value basis – silver is cheap below $20. It has displayed lots of relative strength over the past two days. My moving average crossover system is also on a buy signal.

Go silver!

But, remember folks, it’s silver…

Metals are not going to stop crashing until the US dollar turns.

I’ve been banging on about that for some time. I don’t know when that will be; nor does anyone.

But this US dollar action feels like the parabolic blow-off that you get towards the end of bull markets, rather than the creeping disbelief you get at the beginning.

I’m hearing talk of forex interventions coming – that may or may not be so, so I’m not ready to pull the trigger just yet.

But…

Platinum looks cheap, regardless of what happens next

I’m closely following the price action of two metals that look remarkably cheap. They are silver and platinum. I mentioned them last week.

The case for platinum, the main use of which is in catalytic converters for diesel engines, is pretty simple. You would normally expect it to trade at a 25% premium to gold; that is the historical average. But demand has been shattered since the Volkswagen emissions scandal of 2015 and the subsequent move away from diesel engines.

Gold is currently at $1,720/oz. If history is any guide, platinum “should” be above $2,000/oz. It isn’t, though; it’s $830.

I don’t really know what’s going to change on the demand side. Platinum may have a major role to play in fuel cells and the hydrogen economy (as a catalyst), but so far this has not been perceived as being enough to push the price higher.

In any case, here is a 20-year chart of platinum. I’ve drawn a dashed blue line around $780 and you can see the platinum has been below this level just once in almost 20 years – during the corona panic of March 2020.

It went to $600/oz intraday back then. Otherwise the $770 area has been the floor.

So if you can pick platinum up below $800, let’s just say your downside is likely to be limited.

And now to the perennial great disappointment that is silver

Silver is not quite as clear cut. Oh, silver! How I used to love it back in the noughties. Experience changed my view.

Was there ever a metal with so much potential? Silver is to electronics and modern tech as sugar or salt is to food – it is in just about everything.

Then there is its monetary allure as well. Didn’t silver go to $50 during the inflation of the 1970s? Aren’t you supposed to take refuge in precious metals during inflationary episodes?

Here we are in 2022 and silver has fallen off a cliff. It’s sitting at $18.

For five years between 2015 and 2020 that $19-$20 area was resistance. Technical analysis 101 says $19-$20 should now be support. But silver – being silver – has cut straight through it.

It went to $12 in the corona panic and $8 in 2008, but the $14 zone has for many years been a pivotal price zone.

Here’s a long-term chart with a dashed line drawn at the $14 mark.

Can it get to $14 on this move? It would be extraordinary, given the amounts of money that have been printed, for it to go that low. There should be some support at $18 and at $16, but it’s silver, so never underestimate its capacity to disappoint.

If the US dollar index goes to 120, a number I’ve been harping on about for months, then silver will get that low. And in a panic it will probably surpass it (if surpass is the right word).

As I say, I’m not quite ready to pull the trigger. My appetite for risk has been somewhat tempered by the market action of recent months. But, as with platinum below $800, your downside is limited buying silver at $14 or below.

When I say buying silver or platinum, I don’t necessarily mean going down to the bullion shop and buying bars, nice though they are. I mean physical metal stored in vaults, ETFs (exchange-traded funds), mining companies, even options or spread betting the price (though these last two are only for the experienced and highly risk-aware, so if you don’t already know how to do it, I suggest you don’t).

If we get to those kinds of levels, I’ll put out another piece explaining in more detail some ways to play it. I must say if silver goes to $14 I’m likely to get out the leverage.

But I’m not quite ready to pull the trigger yet. Bottom fishing is a dangerous and often expensive game. However, silver and platinum are very much coming into the “buy” zone. And at a certain point they will be irresistibly cheap.

I’d say we are nearly there, but not quite yet. Patience…

Dominic will be performing his show, How Heavy?, a lecture with funny bits about the history of weights and measures, at the Edinburgh Fringe this August. You can get tickets here.

Blue is beautiful when it comes to diamonds. Two of the top three to have fetched the highest prices for coloured diamonds at auction are “fancy vivid” examples – the top spot still belongs to the CTF Pink Star, which sold for HK$553m ($71.2m) in Hong Kong in April 2017.

Last week, the De Beers Blue joined this trio in third place. It sold for HK$451m, also in Hong Kong, with Sotheby’s – only just behind the Oppenheimer Blue, which fetched just $70,000 more in Geneva in May 2016 in nominal terms. It’s not every day that blue diamonds are unearthed in the rough. According to Sotheby’s, only one brilliant blue gem turns up for every 10,000 gem-quality diamonds found, with trace elements of the chemical element boron responsible for their colour.

Simply the greatest

The rough diamond from which the De Beers Blue was cut was dug up by London-listed Petra Diamonds at the famous Cullinan mine in South Africa last April. It was, at 39.34 carats, a whopper. At 15.1 carats, the resulting De Beers Blue is to date the only blue diamond over 15 carats to appear at auction; only five blues over ten carats have ever passed over the auction block.

The Gemological Institute of America (GIA) graded the De Beers Blue a deep-hued “fancy vivid”, an internally flawless diamond, underlining its exceptional rarity yet further. It is “quite simply the greatest blue diamond of its size I have ever seen during my 31-year-career at Sotheby’s”, says Patti Wong of Sotheby’s Asia.

And size matters as much for white diamonds as it does for coloured gems. The largest white diamond ever to appear at auction will be leading the Christie’s Geneva Magnificent Jewels sale on 11 May. Called The Rock, it is a 228-carat pear-shaped diamond, mined and polished in South Africa two decades ago. The GIA graded it as G for colour (meaning it is “near colourless”) and VS1 for clarity (“very slightly included” – an “inclusion”, in the jargon, is a blemish or imperfection within the diamond).

The Rock even comes with a letter from the non-profit institute attesting to its status as the biggest white diamond it has ever graded, far in excess of the second-place 163-carat gem, which sold for an auction record-high $33.7m in November 2017, also with Christie’s. That should give some indication of the price The Rock should fetch on Wednesday. Christie’s expects between $20m and $30m.

Going back to the coloured diamonds, pink still reigns supreme in the price stakes. As if a little reminder of that were needed to put blue-diamond enthusiasts back in their place, last month Christie’s sold the 8.8-carat purple-pink Fuchsia Rose above its upper pre-sale estimate, for $6.8m. Pink truly is the crown jewel of coloured diamonds – at least for now.

Dig (in your jewellery box) for victory!

During the First World War, Christie’s held a suite of auctions in aid of the Red Cross and the Order of St John, to help those affected and left struggling by the war. Among the lots was the Red Cross Diamond. At 205 carats, it is a canary-yellow cushion-shaped diamond with a pavilion faceted in the shape of a Maltese cross (the same as that used by the Order of St John for its symbol). The rough stone from which it had been cut had weighed 375 carats when it was dug out of the rock in South Africa in 1901. Following a “spirited bidding battle” on 10 April 1918, the Red Cross Diamond sold for “a staggering” £10,000 to London jeweller SJ Phillips, the equivalent of around £600,000 today, and more than three times the starting bid, according to Christie’s.

The day’s sale made £50,000 (£3m today) in total, while the Red Cross auctions raised a combined £320,000 (£13.9m) for the relief effort. Christie’s also held the Red Cross Pearls sale that December, in 1918, following a nationwide appeal for people to donate their pearls to raise funds for the treatment and care of those wounded in the war.

The Red Cross Diamond next appeared at auction in Geneva in 1973, when it sold for CHF1.8m, and it is appearing for a third time in just over 100 years at Christie’s Magnificent Jewels sale this month (see above). It is expected to sell for CHF7m-10m. A portion of the sale proceeds will be donated to the Red Cross.

Auctions

Going…

Pablo Picasso kept his extramarital affair a secret from the moment he met his lover and muse, Marie-Thérèse Walter, in 1927, when she was just 17. For the next five years, Picasso would introduce her into his paintings in coded form, sometimes embedded symbolically in the composition or rendering her unmistakable profile in the background, says Sotheby’s. Then, in 1932, his “annus mirabilis”, Walter fully emerged for the first time. In Femme nue couchée (above), painted that year, Picasso evokes Walter with “the strong and sensuous fin-like limbs of a sea-creature”. She was an accomplished swimmer, and together they spent “their headiest days” by the sea. The auction house expects it to fetch more than $60m in New York on 17 May.

Gone…

In 1935, while still in a relationship with Marie-Thérèse Walter – and married to his wife, Olga Khokhlova – Picasso met Dora Maar, a photographer 26 years his junior. “Both strong characters, their love affair was passionate and turbulent, the emotional intensity of which is suggested by the… fiery [red] background” of Dora Maar, a portrait Picasso painted in 1939, says Sotheby’s. Appearing in the painting in a “striking self-possessed and proud pose”, Maar is “contemplative and inscrutable”. Throughout their nine-year relationship, Maar remained “a constant companion and supporter” of Picasso and she appears in a number of the artist’s most familiar works, such as Weeping Woman (1937). The painting Dora Maar sold for HK$169.4m (£17.2m) in Hong Kong last week.

SEE ALSO:

The $15m violins up for auction

Almost exactly 42 years ago to the day, an attempt to corner the silver market by the three Hunt brothers – Nelson, Lamar, and William – ended in disaster. The trio, the sons of Texas oil billionaire Haroldson Lafayette Hunt Junior, began buying in 1979, with the silver price sitting at just over $6 an ounce. By 18 January 1980, the price of silver had hit a record of just under $50 per ounce, and the Hunt brothers were thought to own around a third of the entire world supply of silver not held by governments. However, the Hunts had borrowed heavily to back their purchases – so when concerned regulators introduced limits on leverage, and the Federal Reserve discouraged banks from making such loans, the silver price began to fall, and the brothers soon faced a huge margin call that they couldn’t fund. By 27 March 1980 – “Silver Thursday” – the silver price had plunged all the way back to $11 per ounce, and the Hunts lost a fortune.

After that, silver took 30 years to regain the $50 level, which it finally achieved in 2011. Another decade on, and the price is still struggling to top $25 per ounce. Indeed, in real (inflation-adjusted) terms, dollar-priced silver isn’t much higher now than it was just after World War I. Yet silver is an extremely useful element whose range of applications just keeps growing. It’s very durable and one of the world’s best conductors of electricity, which means that nearly all computers and mobile phones contain silver, as it’s perfect for coating electrical contacts on printed circuit boards. The metal is also used in making solar cells and in plasma display panels. On/off buttons for TVs, phones, microwaves, children’s toys and keyboards all use silver membrane switches, while silver ink removes the need for wires. Silver coatings are applied to medical devices, bandages and ointments to help fight infections. Silver ions are effective against antibiotic-resistant bacteria, specifically MRSA, and are also added to water-purification systems as a sanitiser. And, of course, silver is also widely used for jewellery.

Silver is cheap compared with gold

Finally, silver is not just of industrial use – it’s also a monetary metal. Like gold, it’s a hedge against inflation, or to be more precise, against negative real interest rates. The more negative these are, the lower the inflation-adjusted “cost of carry” for investors in precious metals. While silver is taking time to respond to surging consumer prices, it may be just a matter of time. Gold, the classic safe haven and main monetary metal, has also been a headline beneficiary of Russia’s invasion of Ukraine. But investors are waking up to silver’s similar qualities. The gold/silver price ratio is currently around 78, which is towards the top of its 40-year range. A return to a ratio of 70 – assuming gold stays unchanged – would lift silver by around 10%.

Overall, the Silver Institute, a trade body, expects demand for silver to reach a record high of 1.112 billion ounces this year, “driven by record silver industrial fabrication (which it predicts will improve by 5%) as silver’s uses expand in both traditional and critical green technologies”. On the other side of the equation, the Silver Institute expects that global silver supply will rise by 7% to 1.092 billion ounces, with mined output expected to grow by the same percentage, leading to a 2022 supply shortfall of 20 million ounces. This would clearly be bullish for prices. That deficit could rise further – Russia provides 5% of the world’s silver supply, according to S&P Global Market Intelligence. The extent of the West’s post-invasion sanctions on Russian commodity exports, such as silver, is still unclear, but there must be a major question mark here. Any supply interruptions would provide a further boost for the silver price.

Platinum looks cheap too

Platinum has also halved in price since its peak of 14 years ago, even though it’s another extremely useful metal. It is the least reactive metal around (it has a very high melting point, and an even higher boiling point), it’s non-toxic, and it’s rare. All the platinum ever produced would only cover your ankles in an Olympic-sized swimming pool. By contrast, the world’s total gold output would fill three such pools, notes the World Platinum Investment Council (WPIC).

Platinum is a key “green” metal. It’s used in the construction of energy-efficient fibreglass, in solar panels and in manufacturing wind turbines. Platinum is also vital in medical devices. Platinum wiring and coils are used in “brain pacemakers” to treat movement disorders; in cochlear implants; in heart pacemakers, of which more than 700,000 are fitted worldwide each year. Platinum alloys have also been widely used in coronary artery disease procedures, such as balloon angioplasty and stenting, while in orthopaedics platinum compound coatings are vital in reducing implant rejection. Platinum compounds such as cisplatin can treat specific cancers, including testicular and ovarian cancers. Then there’s platinum’s use in catalytic converters (internal combustion engines’ exhaust emission controls). In addition, the metal’s catalytic properties are employed in releasing the power of hydrogen in fuel cells, an area of huge potential.

All of that said, however, more platinum is being produced than is currently being used. For 2022, WPIC expects overall demand to rise by 7% year-on-year as the economy continues to recover and the semiconductor shortage that has dented car output eases off. With supply expected to rise by 1%, that would leave a 2022 surplus of 652,000 ounces, around half that of 2021. At first glance, that’s not too bullish for platinum prices. Yet the outlook for the metal may be rather brighter than it appears.

The shortage of new cars is prolonging the lifespan of existing vehicles, which means fewer cars are being scrapped, which in turn means the supply of platinum-containing catalytic converters sent to recyclers has fallen. Meanwhile, the substitution of platinum for palladium (which has soared in price) could end up being greater than estimated, while Chinese imports may also beat expectations.

Furthermore, says WPIC, almost 75% of the world’s mined platinum comes from South Africa. That’s a country with an increasingly unstable political climate. Another 7.5% is from Zimbabwe, which is worse. And more than 10% emanated from Russia last year. As with silver, there must be a major doubt about how much of this Russian output will reach the market. The less that does, the more prices could climb.

Palladium could have further to go

Other platinum group metals have done better, but surging inflation – and Russian military manoeuvres – mean that now could still a good time to buy in. But what are the best bets? Palladium has the lowest melting point of all platinum group metals and is also the least dense. Yet it’s a good oxidation catalyst as well as being conductive, oxidation resistant and ductile, notes the International Platinum Group Metals Association (IPA). “But its most incredible property is the ability to absorb 900 times its own volume of hydrogen at room temperature,” says the IPA. “This makes palladium an efficient and safe hydrogen storage medium and purifier. It is also used in chemical processes that require hydrogen exchange between two reactants, such as that which produces butadiene and cyclohexane, the raw materials for synthetic rubber and nylon.” Palladium plays an important role in catalytic converters and air-purification equipment. Its stability and conductivity make it a more effective and durable form of plating than gold in electronic components.

But from an investment perspective, the stand-out statistic on palladium is that more than 40% of it comes from Russia, according to S&P Global Market Intelligence. Or rather it did in 2020. Again, how this will play out during the Ukraine invasion is hard to predict. But the recent surge in palladium could continue for some time.

The more obscure precious metals

What about the other lesser-known (and much-less traded) platinum group metals? Rhodium is extremely hard and corrosion resistant, and also has excellent catalytic capabilities. Rhodium-platinum gauzes are used in the production of nitric acid. Some vehicle exhaust emission control catalysts contain rhodium. The metal’s high melting point, temperature stability and corrosion resistance make it key to industrial processes, such as glass and glass-fibre production. Rhodium’s hardness makes it an excellent alloying agent to harden platinum.

Iridium is the rarest platinum group metal and is amongst the densest known elements (we’ll get to the densest below). It’s also the most corrosion-resistant known metal. Although brittle, it’s extremely hard (four times harder than platinum) and with its high melting point, temperature stability and corrosion resistance, is employed in high-temperature equipment, such as crucibles that grow crystals for laser technology. Iridium is also used in medical and surgical technologies employed to combat cancer, Parkinson’s disease, heart conditions and even deafness and blindness. Industrial applications include production of chlorine and caustic soda.

Ruthenium is rarely employed alone because it’s extremely difficult to work with in its pure form. It remains hard and brittle even at temperatures as high as 1,500°C. But ruthenium is used with platinum and palladium in imparting hardness in certain jewellery alloys and improving resistance to abrasion in electrical contact surfaces. It is also useful because of its electrical, electrochemical and catalytic properties, its resistance to corrosion and its stability under varying operating conditions. Its main electronics application is in resistors. And it’s used increasingly in computer hard discs to increase data storing density. It features also in catalytic applications in gas-to-liquids technology to generate sulphur-free, high-quality fuels.

Osmium is the densest known metal and the hardest platinum group metal (ten times harder than platinum). It has a higher melting point than other platinum group metals, and so it is used where frictional wear must be avoided and is often alloyed with platinum and iridium. Its conductivity makes it a more effective, durable alternative to gold for plating in electronic products. Like the other platinum group metals it’s a very efficient oxidation catalyst and is used in fuel cells. Forensic science employs osmium for staining fingerprints and DNA (as osmium tetroxide).

In summary: while they’ve already performed better than silver, platinum and even palladium, these other platinum group metals could continue to rise in price as demand for their qualities grows. Throw in surging inflation and the uncertainties created by Russia’s Ukraine invasion, and all the metals mentioned today could have significant long-term upside. The box below gives three stocks to consider buying now.

What to consider before you invest

Before putting money into this sector, prospective investors need to decide on the level of risk with which they are comfortable. The scope for the most upside – as you’d expect – comes from the riskiest stocks, the “junior” explorers. However, if things go awry, which is far from uncommon in this sector, investors can get completely wiped out. Relative to the junior explorers, developers are lower on the risk scale because they’re already planning how to extract their minerals. But even if feasibility studies (including budgets, permit approvals and capital-raising plans for mine construction) have been undertaken, there’s still no guarantee of production. Remember that junior explorers and developers don’t generates cashflow. So an investment in their shares comes down to hoping that positive news flow on drilling and mining offsets the drag from ongoing cash-raising. The latter generally involves issuing fresh equity that dilutes existing shareholders’ interests.

Silver, platinum and platinum group metal stocks are naturally volatile. If you prefer a relatively safe investment, it’s better to stick to established producers that produce actual cashflow. They have the least upward potential, but also have the lowest downside risk. Major miners often produce several metals, which diversifies risk. And if their mining operations keep doing well, you might also be rewarded with growing dividends.

Lastly, don’t forget political risk: southern Africa isn’t the only area for this. Several South American countries can be ambivalent about non-domestically owned miners. The safest approach is – where possible – to invest where there’s unequivocal support for the mining industry.

Three platinum group metal plays to investigate

Wheaton Precious Metals (NYSE: WPM) is one of the largest precious metals streaming companies in the world. It buys all, or part of, the precious metal or cobalt output from high-quality mines for an upfront payment plus an extra sum on delivery of the metal. Wheaton has built up a portfolio of low-cost, long-life assets – it currently has streaming agreements with 24 operating mines and eight development stage projects.

Last year WPM generated 49% of its revenues from silver and 5% from palladium. The key point for WPM’s shareholders is that apart from that first-upfront cash payment, Wheaton typically doesn’t incur capital expenditure or exploration expenses, unlike its suppliers. So the company benefits from rising silver prices and achieves high profit margins without taking the risks to which physical miners are exposed.

These attributes are, of course, factored into WPM’s share price. The market capitalisation is $21.8bn and the stock stands on a prospective price/earnings (p/e) ratio of 35, according to analyst estimates compiled by MarketWatch. But WPM’s valuation isn’t earnings-driven – it’s powered by precious metals prices, in particular the price of silver. And their upside scope makes this a potentially very profitable stock to own.

Hecla Mining (NYSE: HL) is the largest primary US silver producer and the oldest NYSE-listed precious metals miner in North America. It operates two mines in the US and one in Canada, as well as several exploration properties and pre-development projects in world-class silver and gold mining districts throughout North America. As well as silver, Hecla also produces gold, lead and zinc.

In other words, Hecla ticks all the boxes on both political stability and, with a market cap of $3.76bn, on its status within the mining industry. Long-term debt is just over $500m compared with equity of $1.8bn. While Hecla’s shares trade on an even higher p/e than Wheaton, again the firm’s shares are mainly driven by silver prices.

Sibanye-Stillwater (NYSE: SBSW) is a multinational mining and metals processor with a wide portfolio of extraction and processing operations across five continents, although most of its mines are in South Africa. The company is one of the world’s largest producers of platinum, palladium, and rhodium (it’s also a top gold miner), while other PGMs, such as iridium and ruthenium, feature on its product list. The market cap is $13.7bn, total equity is $5.1bn and there’s long-term debt of $1.27bn. Probably the easiest way to invest in Sibanye-Stillwater is via the NYSE-quoted American depositary receipt (ADR) that represents four shares in the group. Analyst estimates are for earnings per share of $3.24 in 2022, which compares with a current ADR price of $19, according to MarketWatch, putting the stock on a low p/e of below six.

Furthermore, the company is currently distributing a decent dividend. Although consistent pay-outs from miners are by no means guaranteed – particularly when, like Sibanye, they operate in politically unstable areas such as South Africa – the hefty 7% yield is very appealing in these days of meagre retur

Today we consider silver. One day it will go to the moon – it has close ties with that planet, after all.

The question is whether it is worth the wait – “one day” and “within reasonable investment time horizons” are not the same thing.

The latter suggests three to five years; the former could mean a lifetime. Or more.

Five reasons you should rush out and buy silver

I’ve said it before: there is probably no investment with as much potential as silver, except perhaps some little-known tech that neither you nor I can understand. Yet there is no investment more frustrating.

With that in mind, today I offer you five reasons to buy silver – and five reasons not to. Balance is everything, after all.

Let’s start with why you should go all in and buy.

1. Silver is cheap

The all-time high for silver was $50/oz, a price set a long time ago in the mists of time. Well, 1980. $50 was subsequently re-tested in 2011. The re-test failed.

Today silver sits at $22.60 – that’s 55% lower. Is there any other asset, let alone a commodity, that is trading at such a discount to its all-time highs, especially with all the currency debasement that has gone on? It’s so cheap.

2. Silver should be much more expensive

There is roughly 15 times as much silver in the earth’s crust as there is gold, thus, the silver price should be 15 times the gold price. Indeed, that is the historical average. And by historical average I mean in Ancient Mesopotamia, in Ancient Greece, in the Dark and Middle Ages, in the Early Modern Era, right up to the 20th century.

Today the silver price is 79 times the gold price. A return to the historical average would mean silver five times higher, above $100/oz. And that’s assuming there is no appreciation in the gold price.

What’s more, silver gets consumed and so no longer exists; gold does not – it remains. Thus, really, the ratio should be lower than 15.

3. The silver price is suppressed (so the story goes)

The amount of silver sold forward on the Comex amounts to more than one year’s supply. In other words, the silver that has been sold can’t be delivered. Sooner or later this means there is going to be a run on physical silver. And the price will go bananas.

4. Silver has myriad uses

Silver is the best thermal and electrical conductor of all metals, so every phone, every computer, every TV, every (decent) battery, every photovoltaic cell contains silver. Before the invention/discovery of antibiotics, silver was the world’s most important antimicrobial agent. These antimicrobial, non-toxic qualities mean it has huge demand in medicine and consumer products – from biocides to fridges to paint.

Its high reflectivity means it has demand in jewellery, silverware, mirrors and solar energy. It is malleable and ductile which means it can be beaten into sheets, drawn into wire, reduced into nanosilver or turned into paste – thus a plethora of industrial applications require it. Then there are its catalytic properties, which means it finds use in plastics, nuclear energy, the brazing and soldering; its photosensitivity…

In short, it is nothing short of amazing how many uses this incredibly versatile metal is. If you want a picks-and-shovels play on cutting edge technology and man’s never-ending progress, surely silver is it. Everything uses it!

5. Silver is money

The word even means money – a pound was once a pound of sterling silver. “Argent” is silver. “Plata” is silver. In this age of relentless currency debasement, money-printing and inflation, you need to protect yourself. Silver, as a monetary and precious metal, does that.

Five reasons not to touch silver

And now for the rebuttals.

1. Silver isn’t cheap

Those two all-time highs are illusory figures. The 1980 high came at the end of the inflation of the 1970s, when the Hunt brothers infamously attempted to corner the market and triggered a panic. The 2011 high came after a speculative frenzy accompanied by a false silver shortage narrative at the end of a decade-long bull market. While those highs do show what’s possible, they mean nothing.

2. Ratios don’t matter

Who cares what the historical average is? There may be 15 times more silver in the earth’s crust, but it’s a lot easier to mine than the gold is. Indeed, most silver is produced as a by-product of mining for other metals, zinc especially.

Many of the world’s largest silver producers are not even silver companies - Glencore, Codelco, Vedanta (Hindustan Zinc), Southern Copper, Polymetal, Newmont. Silver makes up such a small part of their revenue that the price is (almost) unimportant.

The market sets the price. Not the earth’s crust.

3. Silver isn’t being suppressed

Price manipulation stories have been doing the rounds since the 1970s. They have lost their credibility. The derivatives market is always bigger than the physical markets; if you looked at the magnitude of the global derivatives market, you’d be packing your tins and guns and making for the hills tomorrow (with lots of silver coins).

It’s only when you realise most of them cancel each other out, then calmness returns. If the price is suppressed, there is nothing you can do anyway. Only worry about what you can affect, and all that. Let nefarious silver-price-manipulation narratives be somebody else’s problem.

4. Silver is useful but you don’t need much

Yes, silver’s myriad uses are amazing, but the amount of silver required for pretty much all of them is minuscule, so it doesn’t have much effect on prices. Current physical supplies meet demand, particularly when you factor in recycling. If there was a genuine shortage, you’d know about it pretty quickly. There isn’t – that’s why the price is low.

5. Money has moved on

Silver may have been money once upon a time, but it isn’t now. It hasn’t been money for a hundred years or more and it’s unlikely ever to be again. It’s as irrelevant to money as the horse is to transport. Money is no longer physical; it is digital, and cryptocurrencies are the money of the future – metal isn’t

As for being a hedge against inflation, silver’s been useless. How much money has been printed since 1980? How much has currency been debased? And silver is trading at the same price it was 40 years ago. Come off it – it’s been a rotten inflation hedge.

And so there we have it. Five reasons to own silver, and five reasons not to. How about that for balance?

I will say this: I own silver; I don’t think I’ve ever known an investment with as much potential. But it never delivers.

It’s like that talented genius you know. They could do anything, but they always find a way to screw up. You can only look at them, shake your head and go, “if only”.

Dominic’s film, Adam Smith: Father of the Fringe, about the unlikely influence of the father of economics on the greatest arts festival in the world is now available to watch on YouTube.

If there is one commodity that has disappointed investors more than any other these past five years, it has almost certainly been platinum.

Most others have had their moment in the sun, even if brief, but platinum has been wretched.

Its day will come. The question is: when?

Three good reasons for platinum being cheaper than gold right now

We tend to think of platinum as being more expensive than gold – that’s why platinum credit cards are higher status than gold and why, in the world of album certification, platinum (one million units sold) ranks higher than gold (half a million units).

Historically, platinum has been the more expensive, which makes sense as it is rarer. Typically the platinum price will be 1.25 times that of gold.

With gold sitting at around $1,800 an ounce, therefore, you would expect the platinum price to be trading around $2,250 an ounce.

It isn’t, though; it isn’t even trading at half that. it isn’t even trading at $1,000 an ounce – it’s at $980. On its current trajectory, platinum is going to be half the price of gold at some point over the next fortnight. A mere 15 years ago, it was double the price of gold.

Why the disappointing performance? There are three reasons, as far as I can tell.

There are three main sources of platinum demand around the world: cars – platinum is used in catalytic converters to oxidise carbon monoxide in diesel engines; investment – people buy platinum for the same reasons they do gold and silver; and jewellery.

Since the Volkswagen diesel scandal of late 2015 – when it emerged that diesel engines weren’t quite as clean as they were made out to be – demand for diesel cars has plummeted. Unfavourable taxation has only amplified this.

Meanwhile, many of the investors who in the 2000s might have bought platinum now buy bitcoin. The speculative anti-inflation trade has moved over to crypto.

And, as far as jewellery is concerned, platinum is not as fashionable as it was ten years ago – probably because it is now worth less, and jewellery is a status symbol.

The supply of platinum is hugely centralised: over 70% of annual global supply comes from one region of South Africa – the Bushveld. With one central point of failure, the market is extremely vulnerable. Should something significant go wrong there – strikes, power supply failures, some kind of natural disaster, political disruption – the platinum market has big problems. And platinum owners will make out like bandits.

But for now, things are tickety boo. As the World Platinum Investment Council says this week in its quarterly report, platinum mine supply “continues to recover gradually from the Covid-19-related operational disruptions” and is up by 13% this quarter year on year. For 2021, total mine supply is expected to be up 25% on last year.

Recycling is another major source of supply and that has declined by 9%, but even so total supply is up by more than 7% this quarter.

Meanwhile, because of the semiconductor chip shortage, car manufacturing has not grown by as much as originally forecast – up only 3% in 2020 – and this too has hit platinum demand.

However, tightening emissions legislation means that platinum loadings in catalytic converters are increasing. With the high price of palladium, some substitution has started to occur, with platinum instead of palladium being used in other types of engine.

Vehicle demand is set to increase next year, which should be good for platinum, though the palladium price has fallen dramatically, so we are likely to see less substitution.

Platinum isn’t in short supply – but it might be if green hydrogen ever takes off

As for investment, demand for bars and coins is on the rise, but flows into exchange-traded funds (ETFs) are down. Many are rolling out of ETFs into dividend-paying miners, and many are moving into the considerably more racy crypto markets. Coin and bar demand should remain, however.

As for jewellery, the Chinese currently prefer gold, and they are the big buyers. It’s fashion, so it can (and will) change – but that is the current trend.

For years platinum was in deficit. Annual demand was greater than supply and that pushed up prices. Now there is a surplus and so it is hard to get very excited about this market. That won’t last forever.

The light at the end of the tunnel for platinum investors is green hydrogen; it would seem to be the best route to decarbonisation. Platinum is used in water electrolysers to produce green hydrogen, and also in hydrogen fuel cells, which can power fuel cell electric vehicles. Platinum is key to unlocking hydrogen and will thus be key to meeting global net zero targets.

This is well known, however, and currently the market is going, “meh”. That could mean green hydrogen is too many years away for the market to care, or that the market doesn’t believe the politicians on net zero, or, quite simply, that the market has got it wrong. Or a bit of all three.

But all in all it looks for now like platinum’s doldrums will continue. Until they don’t. And then it will all look very obvious that everyone should have some platinum in their portfolio, rather as we discovered with uranium earlier this year.

Buy when the market is boring and nobody cares, that’s often the time to buy, then wait, then gloat.

Over the past year platinum has ranged between $850 and $1,350. We’re currently at $980 and in a downtrend. If you can pick it up below $900, I can’t see how this goes wrong as a long-term investment – but, as I say, you may have to wait a while.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

I did something I haven’t done in what feels like a long time yesterday: I bought silver. Quite a lot of it.

You know my views on silver: it might have bucket loads of potential – almost more than any other metal – but it never delivers.

Will this time be different? I doubt it. But it’s cheap, and it’s hard to find anything you can say that about at the moment.

My calculation is that the upside is greater than the downside. And so I’ve taken the plunge.

Silver has so much potential – realising it is another matter

The silver story is one of the most compelling in the investment world. It’s got all the potential that a monetary metal should have in an inflationary environment that wiser heads than me are comparing to the 1970s. In fact, if there was a better-performing investment than silver in the 1970s. I’d like to know what it was.

It went from below $2 an ounce in the early part of the decade, all the way to $50 in 1980.

It does all the things that a monetary metal is supposed to do: physical silver in your possession is nobody else’s liability; it gets you out of the financial system; it acts as insurance; it hedges against the debasement of currency. And so on. At the same time, it has all the potential of a base metal – and base metals also tend to do well during inflation.

I could write a book tens of thousands of words long about the numerous industrial uses of silver. It might not be a very good book, but it would be long. From medical equipment to electrical appliances, it’s almost harder to find things that don’t contain silver than things that do. Every smartphone has silver in it; every computer; every jet engine; every solar panel. The best batteries contain silver; it’s used in detergent, deodorant, wart treatment, antimicrobial lab coats, 3D printing, plastics, jewellery, wood preservation, water purification – it’s like a “picks-and-shovels” play on new tech and the growing middle class of the developing world.

Annual silver demand stands at around a billion ounces. Roughly 50% comes from industry; 20% from jewellery; 25% from investment demand; and “other” (silverware and photography mostly) makes up the difference.

Supply more or less matches demand. Roughly 80% is from mining and 20% from recycling. Just a small surge in investment demand, however, and suddenly there is a shortage.

On a historical basis, silver is probably cheaper than anything else. The ratio of gold-silver in the earth’s crust is 1:15 – there is 15 times as much silver. Therefore the ratio in price between the two should be 15. Indeed, somewhere between 15 and 20 is the historical average – at least, until the 20th century and fiat money came along.

Until then, you see, we had used silver as money. Didn’t matter whether you were a farmer in Ancient Mesopotamia, an oarsman in Ancient Greece, a soldier in Ancient Rome, a bard in Medieval Europe, or a cowboy in the Wild West – your money was the same: it was silver.

But today the average isn’t 15, it’s 77. If we were to go back to the historical average, and the gold price were to remain around $1,750 an ounce, silver would go above $115. And here we are today with silver at $22.

As I say, it has a lot of potential.

Silver is the worst-kept secret in the investment world

But as I also say: it never delivers. It’s not like silver’s potential is unknown. People have been spreading the word for decades. Silver’s potential is the worst kept secret in the investment world.

You feel like you’re beating the system when you buy silver and giving it the two fingers. That only adds to its lustre.

And yet, just as it looks like it’s getting started, it sells off. And we fools who bought into the potential story are left with egg on our faces. There is no more frustrating investment than silver – except perhaps your teenage daughter.

But there are three inevitabilities in life: death, taxes and the fact that one day silver is going back to $50. I’m certain of that; if only we knew when.

When it does go to $50 it will move with the speed of a cryptocurrency you’ve never heard of – so much so, that it will be hard to get on board.

One day it will go above $50 and then who knows where it will go. I just wonder how long we have to wait.

The time to buy is when the market is boring. When nobody cares.

Silver has been weak of late. The upside looks greater than the downside – at least from the vantage point of my desk. It’s done a mini-inverted head-and-shoulders thing around $21-$22. I can’t see it slipping below $20 unless we get some kind of liquidity crisis, rush-to-cash situation – such as in March 2020.

In this world of rotation, it feels like precious metals are due a run. And so I’ve bought some silver. My instinct tells me we are going to wander back up to the mid-to-high $20s. Maybe I’m wrong and we’re going back to $15. I just don’t know.

But on a risk-reward basis, I’m betting that this is one of those times when silver’s reward outweighs its risk. At least you can’t accuse me of going into the trade without my eyes wide open.

But if we really are heading back into the 1970s, then oil goes over $150 and silver’s going to $50. Silver at $22 feels like oil felt at $50 last year: cheap – and risky. There aren’t many assets you can say that about right now.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Never, in the history of financial markets, has there been a commodity with as much potential as silver. Every time you look at the investment case for the “metal of the moon”, you quickly become convinced it is on its way there. Lamborghinis and other spoils start to fill your dreams.

And yet, never has a commodity disappointed its investors so consistently. It’s trading at the same price today as it was 40 years ago. It's the metal that always lets you down. As a new group of traders might be about to find out.

Silver is the next target in the revolt against Wall Street

Last week, the financial news was dominated by the story of the extraordinarily successful raid on Wall Street by a gang of Reddit users. Thanks to some superlative research by a user who goes by the name u/deepfuckingvalue – his French, not mine, but please excuse it all the same – it was discovered that there was an excessively large short position in video games retailer, Gamestop (NYSE: GME) that amounted to 140% of the float (the percentage of a company’s shares that are available for trading). Given that only about 25% of the float actually trades, the effective short position was much greater than that.

Here was DFValue’s plan: they were going to short the short sellers. Translated into plain English: buy the stock, and not sell for love nor money. With such an excessive short position, short sellers would not be able to cover and the price would be driven much higher.

DFValue’s investment of under $50,000 many moons ago built into a pot worth more than $30m. Seeing the ongoing success of the trade, an online mob gradually built up. “Wall Street did us in 2008. Now we are going to do them!” was their mantra.

The mob bought as much stock as they could, and then levered up with call options. The mother of all short squeezes was the result and the stock went from under $5 to over $400.

We all love to sock it to The Man, and The Man was well and truly socked by an online peasants’ revolt wielding little more than their stimulus cheques (or so the story goes – it’s more nuanced than that, but who cares about nuance in a mania?). Buoyed up by their success, the mob buying moved into other companies, most notably cinema chain AMC Theatres (NYSE: AMC). There’s now talk of bringing down Wall Street.

Perhaps some have got a little ahead of themselves. This was just some little-known retail stock and a group of specialist short traders. But, hey, nuance in a mania.

Their next target is silver. Why silver? Because it’s the most shorted metal on the planet – or so we are told. The explanation for its perennially disappointing price performance is: “manipulation”!

The story is that a large investment bank is suppressing the supply on the COMEX (commodities exchange). This bank can’t deliver on all the silver it has sold short; the silver sold short is greater than annual production. If enough people buy silver and demand delivery, the ensuing short squeeze would bring said bank down.

This story has been around for as long as I have. But in the last couple of days it has caught hold once again – more on Twitter than on the infamous Reddit channel r/wallstreetbets – but even so a mob, armed with memes, has formed nonetheless, and in weekend trading, silver has gapped up dramatically. It closed last week at $27, now it is touching $30.

The fundamental case for silver

Let’s quickly summarise the investment case for silver, beyond “it’s next for the Wall Street Bets treatment”. Like gold, silver is a monetary metal. The words “silver” and “money” are even interchangeable in umpteen different languages – for example, “argent” in French, “plata” in Spanish. A pound was once a pound of sterling silver; one US dollar was once an ounce of silver – and, perhaps as a result, the metal has a tendency to arouse a certain patriotic sentiment in some quarters of the US.

And so one investment case for silver is the same as the case for gold – it is an inflation hedge in an era of monetary debasement, it is nobody else’s liability and so on.

Here’s your fun silver fact of the day: the 30 pieces of silver that Judas was paid to betray Jesus amounts to about 15 ounces. That’s $450 in today’s money. $450 is pretty cheap for a Messiah, I’d say. It’s another example of how “undervalued” silver is today – or what a rotten inflation hedge it has been, depending on your point of view (today they would have to pay him in bitcoin).

Meanwhile, silver has a plethora of exciting industrial uses, especially in multiple new technologies, from medical to electrical. Every smartphone has silver in it; every computer; every jet engine; every solar panel (demand for silver on photovoltaic cells has gone from one million ounces in 2000, to around 50 million ounces last year – about 5% of silver's annual supply). It finds widespread use in battery technology and in 3D printing. The question is not so much which modern technologies contain silver, as which don’t.

New discoveries are being made all the time about its ability to combat infection, fungi, bacteria and even bad smells. As a result, demand is increasing from medicine, biotechnology and clothing. The metal is used in everything from treatment of warts and bad breath to purifying water. It is also an ingredient in hospital paint. Heck, they’ll probably soon find out it cures Covid – it certainly fights off vampires.

The arguments to say that silver should be well over $100 an ounce

Then of course, there is jewellery and investor buying, which together with silverware, make up about 50% of annual demand.

Often the metal is in deficit, but currently silver supply roughly matches demand – just below a billion ounces per annum. A little bit of increased investor demand, however, quickly throws things out of balance and, yes, does have the potential to send the price quickly higher.

About 80% of silver's billion-ounce annual demand comes from mining, the rest from scrap. Most silver is produced as a by-product of lead and zinc mining, which has suffered dramatic underinvestment over the last decade, leading to a paucity of major new discoveries.

There are some pure silver mining plays, but, with two or three exceptions, most have struggled to make money in recent years, either through inept management or a flawed business model. The result is perennially disappointing share price performance with most trapped in a perpetual cycle of disappointment.

Currently silver trades around $27 an ounce. (edit: it’s gapped up overnight to $30). What’s a fair price? Well, silver is about 15 times more abundant in the earth’s crust than gold, so one valuation methodology says silver should be 1/15th the gold price. This was the rough ratio between the two historically – 15 silver coins got you a gold coin of equal weight.

Gold today is $1,850. So 1/15th of that is $127. Wait a minute! That’s nearly five times higher than where we are today. That’s always the logic that gets the silver bugs salivating. Silver “should” be over $100.

In 1980 you could buy the average UK house (currently over £300,000) for about 1,000 ounces of silver (currently £20,000). Silver would have to rise 15-fold to something over $200/oz for that particular ratio to be achieved again.

In short, what's not to like? Silver seems to have so much going for it. And yet, silver’s all-time high was $50 in 1980. It re-tested that level again in 2011 and failed. And here we are today at $30.

Silver: hang around for a good time, but not a long time

The silver story has been about for as long as I can remember. It just never seems to deliver on its potential; not for any extended period anyway. For years it doesn't move; or, worse, it sinks. But when it runs, it really runs. And now this “it’s the next GME” narrative is out, it looks like another run has got started.

I own silver, I’m long silver, I want it to go up. I’m all for bringing down large investment banks if it means quality memes. But I also know that if you actually want to make money from silver, you should hang around for a good time – but not a long time.

Gamestop was a $1bn market cap company. Silver is a $25bn market. So the short squeeze is not such a given. Many short sellers (often mining companies, locking in a price for next year’s production, rather than trying to speculate on the silver price) will stand aside in the short term and let the mob have its day. But they will come back and try to hammer the price. They always do.

If silver can clear $30, there is a good chance it will run to $50. There is a massive “greater fool theory” situation in play here. Perhaps this time – third time lucky – silver will get through $50.

But, remember, it’s silver. As you have heard me say on these pages many times, silver always lets you down. It’s the metal that always disappoints. Every silver lining has a cloud.

The ancient Greeks should have had a myth for the frustrations born out of investing in silver. This compelling, alluring, irresistible and beautiful investment that lures you with its vast potential. Yet, once trapped, you are doomed to disappointment by its never-ending failure to deliver.

As I said, stay around for a good time, but not a long time.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Today we check in on what has been, to put it mildly, one of my weaker market calls of recent years. That is platinum. What has it done? Where is it now? And where’s it going next?

Currently, the platinum price sits at $870/oz. It was $870/oz, a full 17 years ago, in 2003. It’s hard to think of a single asset in the world that costs the same as it did in 2003.

Think of all the inflation that’s taken place since then. A 2003 dollar is very different to the 2020 version. Indeed, I read yesterday that 22% of all the US dollars in existence were created just this year. That money printer is really going “brrrr” – but barely a cent of it is going into platinum.

Where did it all go wrong for platinum?

Platinum enjoyed an extraordinarily good run in the noughties. It was one of the commodities of the decade, going from a low of around $400/oz in 2001 to a high of $2,285/oz in 2008.

It crashed along with everything else in 2008, rebounded to just shy of $2,000/oz in 2011, and ever since it’s been in what feels like interminable decline.

All metals, whether base or precious, had a woeful time after 2011. But what really did for platinum was the Volkswagen diesel scandal of 2015. Platinum’s main use is in catalytic converters for diesel engines; before the scandal hit, more than half of annual demand for platinum came from the automotive industry.

The scandal, if you remember, was that Volkswagen, which had been trumpeting the low emissions of its diesel engines for many years, was found to have been cheating the tests in the US. By installing a “defeat device” – software designed to pass regulatory lab tests – it had faked emissions levels in some 580,000 vehicles it sold between 2006 and 2015. In real-world driving, the emissions were several times the permissible limits. There followed a change in attitudes towards diesel vehicles, and the big loser has been platinum.

Platinum has spent most of the years since ranging just below the $1,000/oz mark. Then, in the corona panic of March, it got absolutely obliterated, hitting a low of $560/oz. But since then, riding on the coattails of gold, palladium and silver, it had a good summer, going above $1,000/oz, before slipping back to today’s price of $870/oz.

The investment case for platinum

The case for platinum is the same as it was a couple of years ago: it is extraordinarily cheap relative to everything else. We think of platinum as being more valuable than gold, for example. A platinum credit card ranks higher than a gold card. In the record industry, you’d rather go platinum.

Historically, because platinum is rarer and more expensive to mine, it tends to trade around 1.25 times the gold price. Presently, however, platinum is not even half the price of gold. It’s extraordinary, and in ten years time I expect it will look obvious that platinum is “too cheap” and offers an exceptional opportunity.

The thing is, I said that two years ago. That’s the problem with the logic of value investing – it can require a lot of patience.

But if we do get a reversion to the mean, and gold stays at $2,000, then platinum will go to $2,500 – a triple from today’s price of $870. And in 2008, platinum was double the gold price. That’s what possible.

You can compare platinum to palladium as well. Historically, palladium tends to trade around half the platinum price. With platinum at $870/oz you’d expect palladium to be somewhere in the $400s. But it’s trading at $2,375 – almost three times the platinum price. Palladium is even at a 25% premium to gold, which is where platinum “should be”.

Palladium is used in petrol-engine catalytic converters. There is no easy substitute. Demand has remained strong; supply has been constrained. Thus do we have its price.

But, on a value basis, I look at platinum and I think this is not a question of “if”, but “when”. Roughly 40% of annual platinum demand still comes from the automotive industry. Another 30% or so is from jewellery. The rest is from its other industrial uses, especially in medicine, chemistry and glass. Investor demand is tiny, at around 3%.

Total platinum demand is likely to be around 11% lower in 2020 than in 2019, according to the World Platinum Investment Council’s latest quarterly report. However, supply – most of which comes from South Africa – will fall by 14%. Yet despite the fact that this market seems to be perennially in deficit, platinum resolutely refuses to catch a bid.

But it won’t take a lot to move it. A change in narrative will wake up investors, and increased investor demand could put some fuel under the price.

Platinum needs a new narrative – and one’s coming round the corner

My view is that the change in narrative will come from the so-called “hydrogen economy”.

In July, the European Union implemented its hydrogen strategy, highlighting the crucial role that hydrogen will play in decarbonising industry, transport, power generation and buildings across Europe. There’s a lot of political capital in going green – hence Boris Johnson’s recent noises about wind turbines.

Platinum will have a key catalytic role in this. It has a vital role in both the generation of green hydrogen, and in fuel cells for fuel cell electric vehicles.

Perhaps we are sleepwalking into one of those situations in which platinum becomes a key strategic commodity. Everyone will want it and there won’t be enough of it – a bit like cobalt and vanadium a couple of years back. You can’t just press a button and increase platinum supply, it takes years.

It doesn’t help that platinum production is so centred in South Africa – more than 70% of annual supply comes from there – and South Africa has a host of its own problems.

So this has all the makings of being one of those niche commodity bubbles that can make you a fortune if you’re on the right side of it all.

But we may still be a couple of years away from that. Who knows? That’s the magical unknown ingredient – the timing.

As I mentioned last week, I’m in the market for a new motor and I had car-buying agent chum Ashley Winstone of Palmdale Motors, who’s at the coalface of automotive demand, on the phone. He knows what kind of cars people want and why. He seems to think fossil fuel cars have another ten years.

We might have to wait a while, but the fuel-cell narrative will be out long before the cars hit the roads. So the question, as far as potential platinum investors are concerned, is: is this new, green, hydrogen economy really going to happen?

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is available at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Gold has continued to soar this week. Silver has soared even more.

I imagine that there are now two questions on the mind of the average investor reading this today.

Is gold in a bubble? If not, is there still time to get in on the act?

No, gold’s not a bubble, and yes, there’s still time to buy

Dominic wrote about gold earlier this week, just as it was breaking through $2,000. Since then, it’s risen further.

So what comes next? As Dominic noted, we’ve seen some big-ish calls going about. Bank of America is probably the most noteworthy, with a call for $3,000 gold.

Also, the holdings in exchange-traded funds have surged. The biggest gold ETF in the world (SPDR Gold Shares) now holds more gold than several central banks, including the UK, although it still has a way to go to reach US levels.

This isn’t what you’d call a "stealth bull market" anymore. But are we into irrational exuberance territory? Not really.

For perspective, Adrian Ash over at BullionVault recently reminded me that in 2011, on the very day that the gold price hit its previous peak, he went on daytime telly to talk to Alan Titchmarsh of all people, about gold.

My view is that both gold and silver have further to go, as do the precious metals miners. I also suspect that platinum might have a decent bit of room to play “catch-up” from here.

Platinum lost out badly to palladium after it turned out in 2015 that diesel cars aren’t “green" at all (yet another example of the expert consensus turning on a sixpence without ever acknowledging their earlier errors – see also masks and butter).

Platinum is favoured for diesel catalytic convertors, whereas palladium is preferred for petrol ones. Hence palladium prices took off, while platinum languished. This hasn’t changed dramatically, although the scandal is now quite a while ago.

And make no mistake, platinum is still mainly an industrial metal – it’s certainly not a monetary one. However, it is a precious metal, still popular in jewellery. And this association with gold and silver via the precious metals complex, alongside a likely general pick-up in interest in commodities as a whole, suggests to me that investors, fearful of having missed out on the initial gold rush, will turn to platinum simply because it hasn’t moved up as quickly.

So there’s your short answers.

No, gold isn’t in a bubble, although you shouldn’t be surprised to see pullbacks after a big run-up like this (and unless you’re a day-trader, that shouldn’t really concern you). And yes, there is still time to get in on the bull market – gold might be at a record high but the nature of the rise so far suggests this is more like the middle act (and I’d bet on the early bit of the middle act) than anywhere near the end game.

A gentle reminder – you do have to take profits at some point

I do think it’s worth noting though that none of these assets – except gold, and even then only to an extent – are “buy and hold forever” shots.

Silver will do its thing, but if you own it with the intention of making money, rather than just enjoying having some physical silver (it’s pleasing to look at, etc), then you need to have a plan in place to ensure you take your profits at some point. Read Dominic’s most recent piece on silver to understand why you need to be wary of its volatility.

The gold miners are similar. They’re cyclical. Right now, I still think they could go a good bit higher – even if you do something as simple as looking at where many of them got to in 2011, it’s clear that there’s room to run (and gold prices were lower then and capital discipline far worse).

But at some point, you’ll want to cash in. Sitting on gold miners from 2011 to 2016 was not pleasant. There’s a difference between being a long-term investor, and being so stubbornly wedded to a viewpoint that it classifies as self-harm.

So have a plan. No, you don’t want to get shaken out of the bull market early, as that inspires hideous levels of regret – that’s how Isaac Newton, one of the smartest people in history, lost a big chunk of money in the South Sea bubble. Nor should you be trying to call the top every five minutes.

But do have some idea of what will make you decide to take profits. That could be a technical indicator – something that suggests the trend has changed, or a target price being reached. It could be a certain level of profit that you simply can’t bear to lose. It could be seeing gold on the cover of The Economist or on daytime telly. Whatever it is, have a plan.

As for gold itself – at MoneyWeek, we believe that you should always have a chunk of gold in your portfolio as a form of portfolio insurance and diversification. In effect, there should be a permanent allocation there of some level (we usually suggest between 5% and 10% depending on the individual).

But as the bull market continues, and the gold you hold starts to account for an increasing proportion of your asset allocation, you will also want to take some of those profits at some point.

The easiest way to do that is via rebalancing. As your gold allocation moves out of line with your desired allocation, then you sell some and move it elsewhere in your portfolio. In other words, if you want to have 7.5% of your portfolio in gold, say, and it goes up to 10%, you sell some to bring it back down.

Just to be clear – I very much agree with the old Jesse Livermore saying that you make most of your money in a bull market by just sitting still. If you’re already invested, keep calm and enjoy the rise. But also use this time to formulate a plan for the day that you decide to get up, get out, and crystallise your well-earned profits.

If you haven’t already, I’d suggest you subscribe to MoneyWeek, as this is something we’ll be discussing regularly over the coming months and years. Oh, and Dominic is writing about precious metals miners again this month, so you’ll want to read that for some potentially exciting ways to play the gold rush. Sign up now and you’ll get your first six issues free.

Given the run that it’s been on, it’s hard not to write about silver in today’s Money Morning.

It’s up almost 100% since its March lows, and over the past few days has gone into one of those parabolic moves that it goes into from time to time.

We have been here before.

Silver – so much potential, so much disappointment

Regular readers will know my long-held cynicism towards silver.

I own the metal – quite a bit of it in fact, though not as much as I once did, when I was a true believer. I also have shares in a couple of silver mining companies that have finally woken up after a long slumber.

I recognise silver’s enormous two-pronged potential. On the one hand, like gold, it is a monetary metal. The word for “silver” and the word for “money” are identical in umpteen different languages. So it’s a play on all the things that governments and central banks are doing to debase your money – printing it, suppressing interest rates and all the rest of it.

Silver goes up (and down) for all the same reasons gold does. Not only is it a play on this theme, it is a geared play. It tends to rise a lot more than gold does – and fall by a lot more too.

On the other hand, it is an industrial metal which gets used in a gazillion different products: computers, smartphones, jet engines, solar panels – they all contain silver. You’ll find silver, if you look hard enough, in batteries, detergent, deodorant, wart treatment, antimicrobial lab coats, 3D printers, plastics, jewellery, cameras, photography, wood preservation and water purification, among other things.

Just about every new technology, from medical to electrical seems to have silver in it, so owning silver is like a picks-and-shovels play on new tech.

My brother-in-law is trying to import “the best masks there are”, specially designed in Vietnam for the Vietnamese government, apparently – and when you get him talking about it, they do actually sound pretty cool – and these masks contain nano-silver particles. Thus it may be that silver is a play on solving the coronavirus problem.

On the supply side, you will constantly hear warnings (usually from silver-mining companies) of a looming supply shortage. Pure silver plays are rare – silver is mostly produced as a by-product of mining for other metals, especially zinc. I think the world’s largest silver producer is BHP Billiton, and you have to look really hard if you want to find silver on its inventory.

What’s more, rumours about manipulation of the silver price on the futures exchanges having been going on for decades. One day this is all going to unwind, the bad guys will get found out, they won’t be able to deliver the silver they’ve sold – and silver will go to da moon (where, legend has it, it originated).

So there’s plenty of potential in silver!

Silver will go to $100 one day. But it could bankrupt you in the meantime. Yet here we are in July 2020, silver is $22 an ounce – not even half the price it was in 1980, not even half the price it was in 2011 when it went to $50 – and everyone’s going nuts about it.

You wait years for silver to make a move and then when your back is turned, off it goes to the races. What can I say? There are lots of powerful narratives to propel silver higher. The fact that it’s cheap relative to its all-time highs is yet another of them.

There’s also the fact there there is about 15 times more silver than there is gold, yet the gold price is about 85 times the silver price. It should be just 15 times. For that to happen, silver should be over $100 – that is the true value of silver.

Silver will go to $100 one day, of that I’m sure. Maybe that is where it’s going on this move. Silver to $100 will just be another episode in the insane year that is 2020.

But when you’re dabbling in silver, just remember this: it is utterly unreliable. It always reneges on its promise; it goes down a lot faster than it goes up; it’s your friend, the alcoholic, with untold potential, if only they could get off the booze. They’re off the booze, they tell you; they’ve got their life back on track – they’ve got a fantastic new job, they’ve re-married. Then they show up at your important job function hammered, insult your boss and the next thing you know they’re wandering round the park with a plastic bag shouting at trees.

Silver’s going up. Enjoy the ride. When it rockets there’s no feeling like it, and these parabolic moves can go on a lot longer than you think. But they can also end a lot quicker than you think. We might see $50. We might also see $15. Don’t be scared to take some profit off the table. And above all – manage your risk!

Until next time,

Dominic

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is available at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

PS If you haven’t already registered to watch Merryn’s upcoming webinar with James Dow, co-manager of Baillie Gifford’s Scottish American Investment Company (Saints), all about where to find the most resilient dividend payers around the world right now, then make sure you do – sign up here (it’s free).

A friend sent me a screenshot from his phone earlier in the week. It showed the gold price at $1,666/oz and silver at $16.66/oz. In other words an ounce of gold is 100 times the price of an ounce of silver. Or, to use the correct terminology, the gold-silver ratio has gone above 100 – which is almost unheard of.

According to my data, the gold-silver ratio has only ever gone above 100 once before. It didn't happen in the financial crisis of 2008, the dotcom crash of 2000, or the Long Term Capital Management Fund Crisis of 1998. It happened in 1991. Silver was $3.50/oz at the time and gold was, of course, $350. (Actually, it was closer to $370 and the ratio touched 105).

Apart from 1991 the ratio has never been as high as it was on Monday. Not once in history. It’s one of the extraordinary extremes that the coronavirus panic has caused.

The obvious trade here is to sell gold and buy silver. But on the basis of ratios alone, you should also be selling gold and buying oil, base metals, stocks, just about anything. To be clear, now is not the time to be selling gold, particularly with all the fiscal stimulus that’s coming.

A gold-silver ratio of 15 is but a distant memory

The gold-silver ratio is an odd one. Really, it should be somewhere around 15. Silver is only 15 times as abundant as gold – there is about 15 times more silver in the earth’s crust as there is gold.

And, historically, the relative price of the two ranged between around 15 and 20. Until 1875 the USA was a bi-metallic standard – both silver and gold were money, in other words – and the exchange rate between the two metals was 15, more or less.

However, in the 20th century, as we all know, countries abandoned their ties to gold and silver and so money and metal went their separate ways. That ratio of 15 has become an ever-more distant memory.

It did hit 15 briefly in 1981 as the Hunt Brothers tried to corner the silver market. But this was an extraordinary situation. It wasn’t typical. The typical broader trend is that silver is losing its value relative to gold.

One day we will get back to 15, say the most diehard silver bugs. This was something I was convinced of in the ardent silver-fanatic days of my investment youth. I’m not so convinced today.

In fact, you could go one stage further. The gold-silver ratio should be lower than 15. Silver gets used, gold does not – all the gold that has ever been mined, pretty much, still exists somewhere. But silver, with its numerous industrial applications, gets consumed. The ratio between the two should be closer to ten. And yet here we are with that ratio ten times higher – and silver ten times too cheap.

The sad fact for silver bugs is that since silver no longer has any official monetary use, its relative value has plummeted. Some blame shenanigans on futures exchanges for the low price of silver – I blame the evolution of money.

Is the world going to go back to some sort of metallic standard as a result of coronavirus? I doubt it. Money is getting more and more digital; metal is too physical. But I can see one scenario where it might.

Get ready for epic debasement

The authorities’ reaction to the crisis will be to debase currency: slashing rates (we got a dose of that from the Bank of England just this morning), bailouts, money printing (which will be given some new name that is even more obfuscatory than quantitative easing), infrastructure spending (I gather the chancellor is to announce plenty of that in his Budget later today).

Gold bugs have long been waiting for that loss-of-faith moment when faith in fiat money will be lost. Might all the monetary manipulation that is already in place be the long-awaited trigger? The ensuing loss of faith sees us going back to metal.

It’s a possibility, I suppose, but I think I’m too long in the tooth to see that really happening.

I own some silver. I love silver. I don’t think it’s a bad thing to be holding in this time of crisis. If it wasn’t so “precious” it would have been dragged down a lot more – like energy and base metals. It’s certainly cheap. But so are a lot of other things at the moment.

The gold-silver ratio hit a low at 30 in 2011 when silver touched $50. It has been in an uptrend ever since. Plenty of us – me included – have tried to call the top in the ratio and it has kept grinding higher.

The likelihood is that it will pull back a little from the extremes, perhaps even as far as the 80s. But the reality of our modern fiat age is that, as far as the gold-silver ratio is concerned, it will take a fairly extreme change in circumstances for us even to get back to 50. 50 is the new 15.

Sell gold and buy silver as a trade, by all means, but make sure you reverse the trade – or at least start moving up the stops if we ever get back to the 80s, 70s or 60s.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is available at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere. If you want a signed copy, you can order one here

Silver is the most frustrating of metals. I’ve said it before and I’ll say it again: never was there a metal, or even an investment class with so much potential – and yet never was there one that so consistently disappoints. But one day, Rodney, it will go to its rightful place on the moon.

I think everybody knows someone like this; someone to whom life seems to have handed all the best cards. They’re tall, good looking, they never seem to have to worry about things that blight the rest of us like their weight, they’re well spoken, they are likeable, they dress well, they’re comfortable in company, they’re bright, they’re articulate, opportunities always seem to come their way.

And yet, somehow, they always make a mess of things. It’s never their fault. And their lives never work out. Yet the bad luck is as often as not the result of poor choices. You look at the person in question and all you see is masses of untapped potential. And so you want to help, and you send some kind of opportunity their way. Again. And they mess that up as well.

Silver’s like that. It’s the investment equivalent of that person. It’s beautiful. It’s cool. It’s got a certain mystique. It’s niche. It’s easy to buy and invest in. It’s easy to talk about. It’s got a great story

Silver is the metal of tomorrow – and perhaps it always will be

Think of all the reasons you buy a monetary metal. You want an asset that’s nobody’s liability. That gets you out of the financial system. That’s insurance. That hedges against the debasement of currency. Those are all valid reasons to buy silver.

It has umpteen industrial uses, too. It gets used in so many new technologies, from medical to electrical. Every smartphone has silver in it. Every computer. Every jet engine. Every solar panel.

All the best batteries contain silver. It’s used in detergent, deodorant, wart treatment, antimicrobial lab coats, 3D printing, plastics, jewellery, wood preservation, water purification. Is there anything that doesn’t contain silver, one wonders?

They say that the way to get rich in mining is not through mining, but by selling picks and shovels. If you want a picks-and-shovels play on the amazing world we are living in, the extraordinary technologies that are emerging, the expanding middle-classes of Asia, Africa, Eastern Europe and South America, then surely silver is the picks-and-shovels play. It’s a picks-and-shovels play on the 21st century.

And here we are today. Silver is $17.50 an ounce. It was $17.50 an ounce in 1979. I was ten years old in 1979. I am 50. Forty years of buy and hold – and nothing. Is that all I have to show for 40 years of prescience?

Silver famously went to $50 in 1980. After 31 years of waiting, it went to $50 again in 2011. And here we are in 2020 and silver is $17.50 – 65% off its all-time highs. Was ever there a metal so woeful?

Silver is glorious and you should own some, but don’t expect to get rich

On the other hand was ever there a metal so cheap? Most silver mining companies can’t even make money at today’s prices. They explore for the metal, they find some, everyone gets excited, they develop the property, the raise hundreds of millions, they build a mine. And then the mine doesn’t make money.

So they have to raise more money to keep the mine open until the silver price is high enough to make money. How long will they be waiting? Another 40 years?

“It’s manipulation! The futures exchanges are rigged! They’re suppressing the silver price because they know they’ll go bust if they ever have to deliver the silver they’ve sold short!”

Maybe. But you and I, we are just little guys who want to invest and grow our capital a little bit so we can look after ourselves and our families. We don’t want to go to war with big banks and futures exchanges. We don’t have the time. We don’t have the appetite. We aren’t going to win.

Silver’s in a bull market. Sort of. Not like US stocks or bitcoin or anything like that. But it’s going up. Sort of. In 2018 it was $14. It went up in 2019. Almost got to $20. Yup. $20. Just 60% off its high. Here we are in 2019. It’s $17.50. It’ll probably go to $20 again. If things really get cooking we might even hit $22.

Everyone should own some silver. There’s something about silver that’s good for the soul. All that magical lunar stuff – there’s something to it. It does kill vampires and nobody wants vampires in their life.

Wear some silver jewellery. Have your morning tea in a Georgian silver tea set. Have some silver bars and use them as door stoppers. Get burgled and have your burglar trip over them, but not steal them (believe me it’s happened). Have some silver coins. Show them to your friends. Have your kids handle the silver and explain to them that this used to be money. An ounce of this stuff – a silver dollar – was once a day’s wage for a working man.

Cowboys, knights, ancient Athenian oarsmen – they were all paid with this stuff. It’s the best way there is of measuring relative historical wages. A pound was once a pound of sterling silver, don’t you know. The words silver and money are interchangeable in something like 100 different languages. There is so much history to this metal.

But don’t expect it to make you rich. You’ll think it will, but it won’t. And then you’ll think it will again. But it won’t. As I say, it’s like that person you know. The one with all the potential. Who’s now a drunk.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is available at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere. If you want a signed copy, you can order one here.

Was there ever a metal with as much potential as silver? On the one hand it's a monetary metal, so its price will rise for all the same reasons that gold's will. Currency debasement, suppressed interest rates, inflation, political instability all should benefit silver. Silver is an asset outside of the financial system. Like gold, it is nobody else's liability.

On the other hand, it's an industrial metal that has myriad uses, particularly in new technology. Its uses will only increase as the world gets more "electronic". Computers, mobile phones, batteries, cars, engines, media storage, engines, explosives, plastics, cameras they all require silver.

New uses for silver are being discovered

New discoveries are being made all the time about its ability to combat infection, fungi, bacteria and even bad smells. As a result, demand is increasing from medicine, biotechnology and clothing. The metal is used in everything from treatment of warts and bad breath to purifying water. It is also an ingredient in hospital paint. Coating walls with paint containing silver particles should help fight infection.

There is also a particularly exciting source of demand, as far as potential growth is concerned: solar power. Demand for silver on photovoltaic cells has gone from one million ounces in 2000 to around 50 million ounces last year about 5% of silver's annual supply. Assuming solar power usage grows, demand for silver will increase. Then there is jewellery and demand from investors. These two areas jointly accounted for roughly 400 million ounces last year.

At the same time there could be a shortage of supply. About 80% of silver's billion-ounce annual demand comes from mining, the rest from scrap. There has been a paucity of major new discoveries. Many of the pure-play silver miners have struggled to make money in recent years and investment in exploration is minimal.

Meanwhile, a great deal of silver is produced as a by-product of lead and zinc mining, another area where investment has disappeared. Silver runs an annual supply-demand deficit. There has been a surplus in only one of the past five years. Last year's deficit was 30 million ounces.

Silver is in the bargain basement

What's more, silver is cheap. At $17.50 an ounce, silver now sits some 65% off its all-time high of $50 (set in 2011). And it's not just cheap when looked at in absolute terms. Relative to gold, it is cheap. One ounce of gold is 85 times the price of an ounce of silver. A geologist will tell you that ratio should be closer to 15: there is only 15 times as much silver in the earth's crust as there is gold. Indeed, 15 is the historical monetary ratio between the two. Even in recent decades, with silver's monetary status long gone, the long-term average sits closer to 50 than 85. Sell gold and buy silver is the message.

Relative to other assets, such as the stockmarket, silver is cheap too. If silver returned to its long-term average ratio against the FTSE or the Dow in other words, if there was some kind of historical reversion to the mean then silver would have to rise to the $50, $100, or $200/oz regions.

In 1980 you could buy the average UK house (currently over £200,000) for about 1,000 ounces of silver (currently $17,500). Silver would have to rise 15-fold to something over $200 for that particular ratio to be achieved again. In short, what's not to like? Silver seems to have so much going for it.

Every silver lining has a cloud

I'll tell you what's not to like: silver. The silver story has been about for as long as I can remember. It just never seems to deliver on its potential; not for any extended period anyway. For years it doesn't move, or worse, it sinks.

Then, no doubt at the one time you're not invested, it suddenly goes on a bull-market run to $50 or something, before collapsing and doing nothing for another ten years. Don't own any silver and you are doomed to watch it rise. Own it, however, and you are doomed to watch it slide and stagnate.

It's supposed to give you leverage to the gold price. But sometimes gold goes up and silver doesn't move. Other times it takes your breath away. There is no metal more frustrating than silver. Bipolar silver.

I'm surprised the ancient Greeks don't have a myth for the frustrations born out of investing in silver. Silver is doomed to be compelling, alluring, irresistible and beautiful. It is doomed to entrap you with its vast potential. Yet, once trapped, you are doomed to disappointment by its never-ending failure to deliver. Every cloud has a silver lining, runs the old saying. There is an exception to this, however, and that is silver itself. Every ounce of silver has a cloudy lining.

Today, we consider the investment case for the precious metal, platinum. I've identified platinum as "cheap" on these pages before and that is an adjective that still applies. In fact, now it is "even cheaper". So should we be buying, selling, holding what to do now?

Why does anyone need platinum?

Let's start with some basics. What is platinum actually used for? The answer is: lots of things. As much as one fifth of all manufactured objects contain platinum, according to some estimates, although such an assertion is hard to substantiate. Take a deep breath.

It's used in the chemicals industry (as a catalyst); in electronics (in hard drives); in glass manufacturing (particularly fibreglass); in petroleum refining; in medical equipment (stents, catheters, guidewires, neuromodulators, defibrillators and pacemakers all contain platinum); it has uses in the treatment of cancer; in medical implants; in fertiliser; in many different types of industrial sensors (thermocouples in furnaces, exhaust-gas control systems, carbon monoxide detectors); it coats jet-engine blades and high-performance spark plugs; and it finds use in fuel-cells.

Now breathe out.

Platinum's two biggest uses are in jewellery and in the automotive industry, and these account for 76% of annual demand, as the pie chart below courtesy of the World Platinum Council shows.

Annual platinum demand was down slightly in 2017 at 7.8 million ounces, with supply at about eight million. Current projections from the World Platinum Council for 2018 are that supply will fall a little, and demand rise, with the two remaining more or less in equilibrium.

Roughly 75% of supply comes from mining and 25% from recycling. Of that mined supply, a good two thirds comes from South Africa. Platinum's fate is determined by one country in a way that no other commodity, except perhaps cobalt, is.

The decline of diesel has hit platinum hard perhaps unjustifiably so

The thorn in the platinum story has been the change in attitude towards diesel engines in Europe, for which we have Volkswagen and other manufacturers largely to thank.

Platinum's main use is in catalytic converters, and this is projected to fall in the coming years as regulations change and electric cars rise in popularity. It has basically meant that platinum has struggled to find a bid.

On this point of diesel usage, I should point out that western European diesel demand only accounts for about 15% of overall platinum use. If the diesel engine really is on its way out (and I would say that is by no means a certainty I can remember the "death of diesel" being a narrative in the 1990s too, which died as technology changed), then it is not quite the disaster for platinum that it has been perceived to be.

Yet, in terms of its price, rather reflecting the supply-demand equilibrium and the anti-diesel narrative, platinum has spent the last 18 months trading between about $1,040 an ounce and just below $900. While other assets have moved, platinum has been range bound.

Over the last three months it's been an utter dog. While the prices of most assets have been volatile, at least they've seen ups as well as downs. Platinum, on the other hand, has been tramping inexorably lower although it's rebounded a little this week. The current price is $925 an ounce.

Is platinum due a rally? Maybe even a 700% one?

OK. Here's where it starts to get interesting. First, courtesy of Nick Laird at goldchartsrus.com, is a chart of the platinum price since 1970. Nick has drawn a green "prediction" band around the price. As you can see, we are at the lower end of the range.

The last time we were in this "buy zone" was the late 1990s, when platinum was $350. It rose over 700% over the next decade.

Is $900 the new $350? A 700% rise from $900 would be very welcome chez Frisby.

Platinum is more expensive than gold, right? Everyone knows that. Well, normally it is. The historical average is that platinum is somewhere around a third more expensive than gold. That isn't the case now though. Gold, at $1,335 an ounce, is more than 1.4 times as expensive as platinum.

On a relative basis, gold is the most expensive it has ever been, or platinum as cheap as it has been. Here, again courtesy of Mr Laird, are the visuals. (The blue line at the bottom shows the price of gold divided by the price of platinum.)

A collapse in the gold price to take this average back to normal levels is possible, but I would say a rise in platinum is the more likely.

Assuming no change in the gold price, a return to the historical average of 1.3 would see platinum rise to more than $1,700. A return to the levels we saw in the 2000s with platinum at more than twice the value of gold would see it north of $2,500.

These are the kind of longer-term targets I am looking at, but we won't see them until there is some kind of change of narrative within the platinum space. At the moment, it's all about declining catalytic converter demand.

But narrative begets price and price begets narrative. We need some new essential use for platinum to be found, some technology that the world can't do without, to which platinum is essential or some such story to get the market excited.

It could just as easily be something as banal as insatiable jewellery demand, due to some actor hailing platinum in some film. But we need something to get the narrative going. For now we are range-bound, hopefully towards the end of a bear market.

On a short-term basis, we are entering a seasonally strong time of year for platinum, and most momentum indicators are at extremes, pointing to some kind of relief rally, at least.

If nothing else, $750 must surely be the bottom for platinum

Longer-term I think we need to consider the long-term price action. Here is platinum over the last 15 years, with price labels.

You can see the incredible run-up it had in the 2000s, the crash of 2008, the rebound, the post-2011 bear market and the range in which it has been trading over the last three years.

I would suggest that the 2016 low at $810 is a major area of support, as are the 2004 and 2008 crash lows at $750. My inner pessimist fears we will test $810, and if things get really horrible, $750.

My trader friends all say I'm being ridiculous and it will never get that low. But if it does, it will be trading at well below its cost of production and many mines will close. Many are surviving only on diesel fumes with platinum at $925.

So the risk of buying at current levels is maybe 15%. Many forecasters have said stupid things that have come back to bite them, but I can't see how platinum goes below $750. And it's unlikely even to get there, though never say never.

The other risk, of course, is opportunity cost that platinum remains in its current range, while party after party goes on elsewhere.

This is a market nobody cares about. Such markets are good to buy into. One day a lot of people will care. But patience – a lot of it – is required.

Silver has been treading water for the past two years. But the outlook for the white metal is auspicious, says Myra Saefong in Barron's. Last year 60% of demand came from industry, a reflection of an increasingly buoyant global economy, and this figure may rise over the long term. Silver is an excellent conductor of electricity, which is why it is a key component in electric vehicles as well as in photovoltaic cells designed to exploit solar energy. Demand for silver in the latter field has reached a new record. Silver is also often used in medicine, as it has antibacterial properties.

Silver is also a monetary metal, however, like gold, so the current environment should suit it well: jitters over protectionism and mounting evidence of inflation making a comeback. Silver tends to mimic gold's movements. In the past 50 years the two metals have gone in the same direction on 71% of trading days, according to Adrian Ash of BullionVault, a precious metals investment platform. Another bullish sign is that silver is currently undervalued compared with gold. It usually costs around 60 ounces of silver to buy an ounce of gold, but now the figure is 80.

Today we look at the wages paid to oarsmen on warships in ancient Athens in 450BC.

Why on earth would I want to do such a thing?

Because it tells us a great deal about the silver price today

How wages in ancient Athens compare to today

The Economy of Ancient Greece

A kilo of silver today is about £460, so nine years' skilled labour would amount to about £12,000 in today's money. That makes a year's skilled labour about £1,333, and a day's £5.29.

Fast forward to today. The average wage in the UK construction industry, which I'll use as an equivalent, is about £30,000 per annum, or £120 per day. It seems that today's British labourer is earning considerably more than his ancient Athenian counterpart.

We must, however, factor taxation into our calculations in order to appreciate what the worker actually took home with him. Enlightened souls that they were, there was no direct taxation on income in ancient Greece. The large part of the expenses of the city were shouldered by the rich, who made their donations voluntarily sort of through the system of liturgy.

In the UK today, on the other hand, somewhere between 40% and 55% of the average worker's income is taken, one way or the other, to pay for the state, depending on whose figures you use (and that's before you factor in inflation taxes).

For the sake of simplicity, let's use a 40% figure and go with an after-tax income of £72 per day or £18,000 per annum. So even after taxes, the modern labourer would seem to be earning considerably more than the ancient over ten times as much.

As Greece was the most advanced civilisation in 450BC, perhaps we should only be comparing it to the developed world. But even if we factor in less developed nations, the modern worker appears to be earning more than the ancient.

Globally, according to the United Nations International Labour Organisation (ILO), the average salary is $18,000 say £14,000, or £56 per day. That would be £34 after 40% taxes.

An Athenian warship, the trireme, cost about a talent to build (£12,000). A trireme's unskilled oarsman would be paid 4.3g of silver each per day (£2). The cost of building the Parthenon was 469 talents, according to Professor Thomas Sakoulas. That works out, according to my maths (469 x 26 x 460) at about £5.6m. The cost of building the Shard, by way of comparison, seems to have been around £435m.

Silver is dirt cheap compared to the past few thousand years

The Babylonian worker might have been looking at 2g of silver (92p). The Roman unskilled worker, like the Greek, might have been on around 4.2gs of silver, at least until Romans started chipping their coins.

The wages of the mediaeval English worker seemed to have fallen back towards Babylonian levels by 1300. He got 2.8g, while a skilled city craftsman might have expected 5.6g about half what an Athenian was paid.

That would grow, however, over the next 500 years, until by the 19th century the skilled labourer might be looking at around 24g of silver per day, according to author David Zucherman, and an unskilled between a third and half that. The labourer in the 19th century was getting around double the pay of his 450BC Athenian counterpart. It's more, but it's not that much more.

Compare that to today. I used the figure of £30,000 earlier the average wage of a construction worker £120 per day. That amounts to 260g of silver, compared to 11.5g for that Athenian worker. Todays pay dwarfs that of any pre-20th century worker in history.

Wages have risen, of course they have but not by this much relative to the cost of living, status and so on within a society.

The issue is not that wages have soared. It's that silver now that it no longer has any monetary role has fallen to absurdly cheap (on a historical basis) levels. (It's also absurdly cheap on a geological basis, as I argued here).

If today's wages of £120 were to equal the Athenian equivalent of 11.5g (say 12g for simplicity's sake), you could make the argument that silver should be £10 per gramme (currently 46p per gramme). That's over 20 times higher than today's silver price of $18.50 an ounce more like $400 per ounce.

At $400 per ounce, not only do wages correspond, but so does the cost of building a ship or a landmark city building.

One day we will get some kind of silver reversion to its historical mean. Does that mean we should all go out and buy shedloads of silver with the expectation of making 20 times our money?

Not really. That day of historical mean reversion probably won't come in our lifetime and most of us invest within three to five year time frames. But you should all own a little bit, just in case it does.

A slowdown in Europe may temper demand for cars with diesel engines, in which platinum is used for catalytic converters.The market is set to be in deficit this year, but above-ground stocks look ample.

High prices in recent years have encouraged recycling of the metal, which has added to supplies and helped make up for production declines in South Africa, the biggest producer. No wonder the latest rally has faded.

Viewpoint

Neil Collins, Financial Times

Silver is often written off as a cheap version of gold, says Andrew Critchlow in The Daily Telegraph. But while it is often overshadowed by the more famous precious metal, and usually follows it up or down, there's a lot more to it than that. Like gold, it is a monetary metal, and is therefore seen as a traditional store of value and a safe haven in rough times. But it is also an important component in a wide range of industries, which jointly account for over 50% of overall demand; in gold's case, the figure is a mere 10%-15%.

Silver is an unusually flexible and useful substance, making it "indispensable" in sectors ranging from electronics to medicine (it has anti-bacterial properties). The advent of digital photography reduced the use of silver in photographic paper, but this development is being more than offset by new uses, more and more of which are being "invented, discovered, and, importantly, commercialised", says The Silver Institute, which forecasts a 27% increase in industrial demand from 2013 to 2018.

Take the rapidly growing solar energy sector: silver is a key component of the photovoltaic (PV) cells used to generate power from the sun. IHS, a consultancy, thinks global PV market demand will rise by 30% to 57 gigawatts this year, with China alone set to install 17 gigawatts of capacity. The industry could get an additional boost from an international climate change agreement this year.

In the meantime, supply looks set to deteriorate. HSBC expects less scrap to reach the market this year and is also pencilling in a slight fall in mined supply following almost a decade of increases. And a lack of investment "could see production plateau over the next few years", notes Critchlow.

However, on the monetary front, silver could struggle as US interest rates rise, making precious metals, which pay no interest, look less appealing. Higher rates would also allay fears of inflation taking off. The market is also very small, which makes it extremely volatile, and it is impossible to predict whether the industrial or the monetary outlook will affect prices most.

Given all this, we would recommend sticking to gold to insure your portfolio. But those intrigued by silver's industrial future and willing to stomach wild price gyrations can gain exposure with through an ETF tracking the spot price, the ETFS Physical Silver (LSE: PHAG).

With no background in diamonds or mining, Philip Manduca, executive chairman of Aim-listed Paragon Diamonds (Aim: PRG), admits to being an unusual boss for such a company. Indeed, he seems to revel being an outsider in an industry he reckons is headed for a big shakeup, an upheaval that Paragon is busy positioning itself to take advantage of.

Manduca is a seasoned, successful City veteran who helped pioneer the hedge fund industry in Europe in the 1980s. Over 25 years in the financial industry he has founded, managed and sold a number of asset management businesses. His family background is steeped in business and finance. His father set up a security firm that was subsequently sold to Securicor. One brother, Paul Manduca, is chairman of Prudential. Another, Frank Manduca, is a fund manager at UBS.

As well as being executive chair of Paragon, Manduca is the chief executive of Titanium Capital, a private equity investment group focused on hard-asset investment. He was appointed executive chairman of Paragon last August following Titanium's acquisition of a near 30% stake in the company.

Manduca's enthusiasm for diamonds as an investment really took hold three years ago. He was a fan of gold during its long bull market, and as far back as 2008 he predicted that it would reach $2,000 an ounce (it eventually peaked at not far off that level $1,930 in September 2011). But not long after the peak, he came to the conclusion that gold "was actually no longer fit for purpose". Instead, when it came to hard assets, diamonds were the way to go.

What drove Manduca's conversion to the merits of diamonds? "You are better off talking to historians than economists these days. Nobody knows what's going to happen next, including the chairman of the Federal Reserve. And they haven't for some time. What they do know is what can go wrong how apocalyptic things can be in terms of social strife, de-globalisation, and domestic and international politics when things go wrong."

He argues that the spate of QE programmes since the crisis have led to money becoming debased: "We've got central banks printing money to buy government debt, for goodness sake. That is every banana republic's mantra! I'm not into the rights and wrongs of it I couldn't care less, frankly. I know money is getting debased, that cash is in a bear market because no one wants it. What I am doing is observing and understanding, coming to a view as to what to do about it."

Even worse than the debasement of cash for Manduca is what he see as the "politicisation" of banking systems. "The US government knows where every major dollar transaction is going on in the world. Banks are having to report everyone who is their client now, as a matter of course. Offshore-ism is being brought onshore. And the tax authorities are jumping into the pie."

Rise of the first generation' economies

Among those most greatly affected by these developments is a group of mega-rich individuals who have emerged from what Manduca describes as first generation' economies. He believes they deserve special attention. "These individuals are now generating the largest quantum of money ever in the history of mankind and for them these developments are all rather scary. Ukrainian billionaires, Russian billionaires, Chinese billionaires, Indian billionaires, Middle Eastern billionaires there are tonnes of them."The sums of money these guys represent is just staggering. Staggering. And it is a major driver of the wealth divide we see in many parts of the world. That money is, typically, originating from political affiliations. That's their business, not ours. If they've been, say, under the communist yoke for 90 years, who are we to tell them what they should do now? "

What he is far more interested in is the behaviour of the colossal volumes of money that these first generation' economies are generating: "The sum is massive, it's unstable, and it has considerable velocity it's moving around a lot. It is scared' it does not want to get trapped inside a bank, within a border, be visible to a government or a tax authority: it wants mobility.

"In the real world, it isn't so much the quantum of people, it's the quantum of money that finds itself in that position."

One big question for the ultra-rich first generation-ers' is which store of value to plump for. The key conditions are that it must be easily accessible, highly portable, and with minimal costs for storage at any point. "Even better would be if it is something that has diminishing supply and rising demand, with supply that will not increase if the price goes up. It definitely mustn't be visible to anybody because these guys don't trust anyone."

The case against gold and bitcoin

Manduca immediately rules out bitcoin: "People say it will be proven in the future. To me it's unproven so I don't care about it. Don't need to take a bet, don't want to take a bet."

How about gold? For Manduca there is a very good reason that, despite the increasingly stressed geopolitical and macroeconomic environment, gold has remained stubbornly soft at around $1,200 an ounce. "It is not fit for purpose. It's the wrong investment to achieve the purpose of having access to one's money wherever and when one wants.

"Gold can't be moved physically across borders and outside of the banking system, doubts in which would be the major reason not to own it. It is wholly visible to governments and tax authorities while it resides within the banking system and so is subject to seizure or being frozen. It also has a high level of elasticity to price production can be significantly increased when the price rises."

Manduca believes that as it has had to be more closely examined because of a deteriorating global financial and political environment, "gold has partially failed its own stress tests".

He adds: "There is a huge investment demand out there for mobile hard assets and it's being metamorphosed, as you can see quite clearly, in central London property, Manhattan property, in prime property everywhere, and in the wine market, the art market, the vintage car market, and many other such things."

None of these, however, quite offer the invisibility and mobility of Manduca's favoured hard asset: diamonds. "I could have walked into this interview with $100m worth of diamonds, although, trust me, I haven't! You will not need to see much of a shift in asset allocation from cash to diamonds going forwards, given the quantum of [first generation] money we're talking about, to see an astronomical change in price. I do think it will happen. "

There are three broad diamond market categories. First, there are the flawed "substandard" industrial diamonds, used for polishing other diamonds and in the production of electronic chips, information processors and laser technology components. Then there are the stones used for jewellery. Finally, there are the flawless or near-flawless investment-grade stones.

While investment-grade diamond prices have been on a broadly rising long-term trend, there have been blips, most notably in the years following the financial crisis. As financing dried up for diamenteries the diamond cutters and polishers they were forced to reduce their purchases of diamonds from the producers and sell at lower prices.

2014 was not a great year either, with rough diamond prices falling nearly 7% in the final three months of the year the biggest quarterly decline in more than two years. This time it was the result of the Antwerp Diamond Bank closing down in September 2014 after its sale to a Chinese company collapsed. ADB was a major source of finance for 80 years to diamond traders, cutters and polishers in the Belgian city, the world centre for the industry.

But now things are looking up for the market. De Beers, one of the world's largest rough-diamond producers, predicted a couple of weeks ago that prices will recover during the rest of this year.

Diamonds: the billionaire's best friend

Manduca is not terribly worried about the recent price weakness. Investors in investment-grade stones are not looking at short-term fluctuations, he says. "They want to come out the back end of any crisis, of any situation, and have a store of value. So a better metric of a store of value is to take a three [year] by three [year] or, even better, a five by five trend line. That cuts out the short-term fluctuations which actually don't have anything to do with the intrinsic asset.

"What you want to know at the end of that five year period is, have I got the store of value that I thought I had?' You will not be able to say that about cash, for instance, because it's getting so heavily debased. Put yourself in the place of a Russian, Ukrainian, Indian, Chinese, a Middle Eastern billionaire what would you do? Investment grade diamonds not any other type, you can't mix a Mini with a 1960 Ferrari can you? tick all their boxes."

Options for gaining exposure to diamonds remains very limited. Buying shares in diamond mining companies remains the most popular route for retail investors. Paragon itself is in the process of developing a promising flagship kimberlite diamond project in Lesotho, southern Africa, an established and extensive high value diamond producing region. Lemphane is just 27 miles from London-listed Gem Diamond's world class Letseng mine.

Lemphane is headed for initial production in the second quarter, with a further ramping up planned for 2017. Manduca is confident the mine will deliver: "We've got the best diamond address in the world a quarter of world's largest diamonds have been sourced from Lesotho."

Paragon's break-even for the project is $610 a carat, but sampling to date has already indicated that the mine holds a minimum of $1,000 a carat. He is confident that further, planned bulk sampling will indicate a minimum of $1,500 a carat for Lemphane. Internally, management believes it could reach $2,000/carat. Open pit mining is envisaged for the first 15 years followed by potentially ten years of underground operation.

In about 18 months, Paragon hopes to have in hand an independently assessed, defined resource that will enable it to secure further funding for development of the project. Fully funded, Manduca reckons the company will be worth $100m versus just £16m currently. House broker Northland currently has a buy rating on the stock with a 12.9p target versus 6.07p earlier today.

The company has several other licences in Lesotho, Zambia and Botswana but plans to sell them off with funds generated being used to acquire a proven diamond resource. An acquisition target has already been identified: "It would be sensible for us to maximise the economies of scale, which means that it has to be geographically quite proximate to Lemphane. If we are able to secure a suitable mine that, say, would double our production, be a proven reserve, I think that would be a big asset for the company. It's not so much about securing cash flow, it's about getting the company properly valued."

Paragon Diamonds to control its own destiny

An important part of Manduca's strategy for Paragon is that as well as diamond production it will be in control of distribution. He explains why: "The diamond chain goes from mining through polishing and cutting to wholesaling and retailing. Miners take the greatest risk, spend the most across the chain and yet sell the production very quickly because often they are undercapitalised and all they want to do is mine, prove they are right on the geology to help secure the next load of funding.

"The diamond industry is one of those very rare industries that is actually back to front, because the guys at the end of the stream, the traders and retailers, make the most money and have the most power."

Paragon's ambition is to be vertically integrated, thereby securing maximum exposure to the underlying asset's value. There have been one or two similar attempts to combine all the various operations in the past without success. "The people that have tried it have done so through joint ventures, which are not partnerships and have divorce written into them, at some point or other, in the future."

Manduca plans not to be pressured through underfunding to sell Paragon Diamonds quickly. He'll hire experts to process the diamonds. And he'll find his own markets, Dubai being one of them.

In January, the company secured a $12m package from Dubai-based finance house International Triangle General Trading in exchange for a 30% stake in the company. ITGT, which has strong connections with Middle Eastern royal families, will help distribute the company's diamonds.

Manduca adds: "Paragon is not a mining company. We've shifted it to becoming more of a diamond company, with the money to afford to be just that. It always takes money to be what you want. ITGT is an investor and my partner because it has a similar size stake in Paragon as I have.

"Every great business needs great distribution. There's no point in having a great product that you don't know how to sell the British car industry from long ago reminds me of that. It's very important if we are going to vertically integrate, that we've got some great distribution structures. Paragon's distribution structure is going to be through Dubai and we very much believe that Dubai is going to become the major diamond centre in the world, within the next three-to-five years."

He believes Antwerp's position as the global capital for the diamond industry is "becoming more and more tenuous, less and less stable, and being sustained with less and less rationale. With ADB having gone, financing there is in a total mess.

Diamonds in Dubai

"I think that diamonds have gone global. Markets tend to move to money. It's becoming less and less about just two major centres: New York and Europe. There is a shift south and east, and Dubai makes total sense from that perspective. All I need is that Dubai grows in importance and I don't have any doubts in my mind that it's going to do that."

If Manduca's form is anything to go by you would not want to bet against his predictions. Back in 1981, at Merrill Lynch, he was probably the first person in Europe to engage in financial futures, now commonly called derivatives. In so doing he helped lay the foundations for the European hedge fund industry: "I wouldn't say I contributed to its growth, that's ridiculous but yes I did help pioneer in it in the European context."

By the early 1990s he was setting up and managing his own hedge funds, including one that became heavily exposed to emerging eastern European countries. Things were going swimmingly for Manduca until the Russian financial crisis of 1998: "You would never have thought that a major country and Russia was and is undoubtedly one of those could default and devalue on the same day and get away with it. That taught me a lot about emerging markets.

"One lesson is that people with no traditions, and the Russians did not have what I call financial market traditions, feel they can do anything they want. The second thing I learnt from it is how quickly the West appeases and forgives erratic behaviour. Which now means anything is possible.

"It also taught me that politicians will do anything they have to, to stay in power. Which is why, in the current context, anyone who calls, apocalyptically, for the end of the world and the collapse of the money system doesn't understand. It's not going to end because the people in control don't want it to end.

"There is no question we are building a [global economic] sandcastle here. And it will keep growing because the people growing it own the dice, they make the rules. Nobody wants this to end, other than some erratic bears out there. The thing that will stop it will be a geopolitical torpedo."