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Some investors view silver as a currency substitute. After all, Britain and the United States were on the silver standard until the end of the century. But the silver standard was eventually replaced by the gold standard. As a result, silver went through a lengthy bear market. Later in the 3-year period, silver prices reached . cents/ounce, which was an all-time low for silver prices.
In the following years, the price of silver tripled as investors actively flocked to silver as a substitute for gold as it was illegal to own gold.
Since the beginning of the year, the price of silver has risen rapidly. Factors driving up prices include a falling dollar, financial instability and a bull run in commodity markets. Of course, another key factor is the increase in industrial demand, with silver becoming a key raw material for high-tech products.
Government Silver Reserves
Few governments currently have silver reserves. In , the U.S. government sold all of its remaining silver reserves, totaling approximately 100 million ounces. This actually affects those mints that strike American Silver Eagle coins. Traditionally, silver comes from government reserves. But now, when the government needs to mint silver coins, it must buy silver in the spot market. As a result, silver prices are typically higher and minting is often delayed.
But considering the history of silver, some believe that silver may become part of the new monetary system. Because the production of silver is very considerable. If the world economy chooses to replace the U.S. dollar as its reserve currency with a basket of currencies and commodities, then silver could serve as a great complement.
Gold and Silver Price Comparison
Like other commodities, the price of silver is also affected by supply and demand. However, there is an interesting metric to work out the relative price of silver. This is the use of gold and silver price comparison. Throughout history, the relative relationship between gold and silver has been relatively stable. If the price of gold and silver deviates, it is a buying opportunity.
Essentially, the gold-silver ratio is the price of gold divided by the price of silver. To facilitate understanding, let us give an example. If the price of gold is US$/ounce and the price of silver is US$3/ounce, then the gold-silver ratio is 3.
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