Why silver is now a bargain

Silver bars © IStockphoto

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.