Is silver undervalued?  

Is silver undervalued? Silver has behaved exactly how it’s supposed to during a crisis. 

When you have a financial crisis, silver is often one of the first metals to take somewhat of an initial hit, with a quite sharp downward trend along with the rest of the base metals and commodities in general. 

Gold on the other hand can act differently. 

Gold would usually take a small hit as a means to create liquidity for individuals or institutions, but then will often quite quickly start to move up. 

As gold is a purely monetary metal, this is a reaction to the actions and measures made by governments and central banks to try and bring confidence back to the economy via low interest rates, quantitative easing etc. 

Silver is unique. 

Silver has two very unique personalities. 

It is not only an industrial metal, it is also a monetary metal as well.

Once silver finally starts to stabilise and gold starts to continue its trend upwards as a monetary metal, silver more often than not starts to rally and ends up surpassing gold on the upside. 

This is pretty much how it played out during the 2008 financial crisis, where silver bottomed out at around $9 per ounce at the end of 2008, and then hit a peak around $48 per ounce in 2011. 

This pattern seems to have repeated itself in 2020 when in March silver bottomed at around $13 an ounce and has now sprung back like a rubber band, now surpassing $27 an ounce (Jan 2021). 

Silver price chart
Silver chart by GoldBroker. All rights reserved.

Back in March 2020 the same old scepticism of silver kicked in, with many investors thinking silver was dead. To be fair, who can blame them? As human nature simply takes over and people begin to panic. 

Back in March when Covid began to pick up pace, naturally investors were most likely more concerned with protecting their health, their businesses or their family, than focusing on the price of silver. 

But then, true to form, silver followed its destiny in its role as a safe haven asset, moving towards the upside and continuing its upwards trajectory until this day. 

Silver is often undervalued. Silver is always more volatile than gold. 

However, are we in the same repeated cycle? Is this just the beginning of a major silver bull market? 

Silver will play a major role in the push for green energy. 

Silver undervalued
Image by StockSnap from Pixabay

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Silver is starting to gain more attention in the wider media, as silver is now seen as a ‘green’ metal to tie in with the new green initiatives being introduced by governments across the globe. 

Silver has industrial properties that are extremely beneficial to this so called ‘green new deal’. 

Silver is the most conductive of all metals, it is extremely malleable, it is the most reflective of all metals, it has anti-bacterial qualities, the list goes on. 

Silver is used in solar panels, electric cars, batteries, glass coatings, water purification, touch screens, LED lighting etc. 

Industrial demand for silver will have to continue to rise. 

Silver plays a key role in our modern lives as it is a major component for the technology and green energy sectors. These sectors are set to explode in 2021 and beyond as investment continues to pile in, not only from the private sector but also from government green initiatives.  

If industry and governments want to continue to expand their green energy goals, then there is no other way around it. They have to buy silver!

Industrial buyers will simply have to pile in as the price of silver continues to go up, they will need silver to produce these green products such as electric vehicles. 

There is also an added problem in the fact that physical supply has been declining due the operational shutdowns of gold and silver mines in response to the pandemic. 

The majority of silver is mined as a by-product of other metals such as gold, which is the main source of revenue for many silver producers.

Silver is a monetary metal. 

Is silver undervalued

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During the pandemic there has been a sense that people have been questioning, where exactly does all this money come from? 

With easy access to information online about the history of money and where it actually comes from, it seems more and more people are finding out that indeed currency can be printed. They may then start to question how this affects the economy and them as individuals. 

As people tend to dive deeper into the subject of money, many may even stumble across sites like this one, that can provide the key information that  gold and silver is real money, and these precious metals could well be a better store of value than currency. 

The ongoing debasement of fiat currencies is making more and more people turn to the safety of precious metals such as gold, and particularly silver. 

In fact, silver has been used more as a monetary metal throughout history than gold. 

Silver has been used as a form of money for thousands of years as fiat currencies seem to come and go.

Silver simply acts like money, it is a store of value, it has no counterparty risk, it has no default risk as silver has value in itself. 

One of the biggest benefits of silver being used as money, is the fact that it can’t be created out of thin air like fiat currencies. 

The gold/silver ratio. 

The gold/silver ratio is still very much in favour of more upside for silver. 

Gold and silver ratio
Chart by GoldBroker.com All rights reserved.

The current ratio (January 2021), is around 70 to 1. That means it takes 70 ounces of silver to buy 1 ounce of gold. In historical terms this ratio is actually a quite high ratio. A ratio of 20 to 1 for example, would be considered a very narrow ratio.

The gold/silver ratio actually peaked to an all-time high, over 115 to 1 at the end of March 2020, which would be the highest level in the ratio’s history.

Read more about the gold/silver ratio here:

Is silver undervalued in 2021?

As gold continues to rally in 2021, there is now little reason why silver could not slingshot past previous all-time highs. 

Silver has already had a great 2020, up over 40% YTD and it is still nowhere near previous all-time highs. 

You could argue that because of the global restrictions, silver has regained its status as a safe haven asset. 

Is silver undervalued? In this current environment, silver could easily outperform many asset classes in 2021 and beyond.

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Gold and Silver UK
goldandsilveruk is a precious metals enthusiast who wants to give authentic, clear, simple, transparent information and opinion to readers.