Trade commodities at Plus500 CFD Service. 80.6% lose money. Dismiss

Silver: The Commodity.com Guide


Where Are the Largest Silver Reserves & What Drives the Price of Silver?

Why is Silver Valuable?

Silver is a shiny white metal with several extraordinary characteristics.

It is malleable, pliable and beautifully lustrous. Silver is also highly reflective and conducts electricity extremely well. It even kills bacteria.

All of these features make silver a valuable metal in a diverse array of industries including jewelry, electronics, energy and medicine.

Yet these characteristics only scratch the surface of why silver is important in the global economy.

Silver is very rare and, along with gold and six platinum group metals, belongs to a group known as precious metals. For thousands of years, people have acquired silver as an investment and store of value.

Ready to start trading silver? Read our guide here.

When Did Silver Mining Begin?

Silver mining began when ancient civilizations in Asia Minor first mined the metal over 5,000 years ago.

Almost 1,800 years later, the Greek Empire began mining silver as a currency, and during the height of the Roman Empire, silver became an essential trading commodity along the Asian spice routes.

The Spanish conquest of the New World in the 15th century, however, proved to be the most pivotal moment in the history of the commodity. Dramatic increases in silver mining in Bolivia, Peru and Mexico occurred between 1500 and 1800 AD. These three nations accounted for 85% of the world’s production as the Spanish gained a foothold in the Americas.

Since then, new discoveries in the United States, Australia, Central America and Europe have bolstered production worldwide.

How Much Silver Has Ever Been Mined?

Despite the long history of silver mining, production and reserves of the metal are surprisingly limited.

A 2004 report by the US Geological Survey estimated the total amount of silver mined from antiquity through to 2001 at 1.26 million metric tons (half of that being mined during the last 62 years).

More recent estimates place the total quantity mined in history at 1.5 million metric tons, which equates to only a 52 meter cube of the metal.

All the silver ever mined and lost if it were melted into a cube.
All the silver ever mined and wasted if it were melted into a cube. Demonocracy

Where Does Silver Come From?

Silver is rarely found in the Earth’s crust as a native element. Instead, miners usually find the element as a byproduct of mining for lead, zinc, copper or gold.

Recent production of silver has declined as a result of a drop off in lead, zinc and gold production.

Top 10 Silver Producing Countries

RankFlagCountryAnnual Production (millions of ounces)
#1Flag of MexicoMexico186.2
#2Flag of PeruPeru147.7
#3Flag of ChinaChina112.4
#4Chile FlagChile48.1
#5Flag of RussiaRussia46.6
#6Flag of AustraliaAustralia43.6
#7Bolivia FlagBolivia43.5
#8Poland FlagPoland38.5
#9Flag of USAUnited States of America35.4
#10Argentina FlagArgentina30.0

Which Countries Have the Largest Silver Reserves?

Silver reserves are a measure of economically minable silver that’s in the ground. However, mining is an expensive endeavor, so, ultimately, the price of a metal determines whether it is feasible to mine it.

Top 5 Countries by Silver Reserves

RankCountryReserves (in Thousands of Metric Tons)
#1Peru120
#2Australia89
#3Poland85
#4Chile77
#5China39

Top 3 Uses of Silver

Use of SilverDescription
Jewelry
Silver is beautiful, lustrous and workable. It is, therefore, a popular choice in earrings, necklaces, bracelets and rings. Most jewelry manufacturers use sterling silver, which is 92.5% silver and 7.5% copper.
Technology
Silver is used in a variety of technologies:

Electronics: Silver has excellent electric conductivity, which makes it a natural choice in printed circuit boards, switches and TV screens.

Solar: Ground silver powder is used to produce solar cells.

Catalysts: Catalysts help chemical processes occur. Silver’s unique chemical properties make it an important catalyst in the production of ethylene oxide and formaldehyde.

Brazing and Soldering: Silver is used to strengthen connections of pipes, faucets, ducts and electrical wires.

Ball Bearings: Silver electroplating helps strengthen ball bearings.

Medicine: Silver functions as a biocide and kills harmful germs.
Private Investors
Silver Money
Individuals and investment funds purchase silver to protect their portfolios against losses from inflation and market crises. Investors purchase silver bars, coins and funds that invest in the metal.

What Drives the Price of Silver?

Silver is a volatile commodity that reacts to both industrial and economic data. These factors are the most important drivers of silver prices:

  1. Supply and Demand
  2. Silver Scrap Metal
  3. Industrial Demand
  4. Inflation and the US Dollar
  5. Gold Prices

Read our guide on trading silver here. 

Supply and Demand

The supply and demand equilibrium for silver is an important factor that drives its price.

Silver supply is limited, and production has been declining in recent years. Industry experts expect further declines in the years ahead due to higher mining costs.

At the same time, demand for silver, 50% of which comes from industry, remains stable.

Investors should pay attention to events that impact the supply/demand equilibrium. For example, mining strikes could constrain supply, while discoveries of new silver deposits could increase it.

On the demand side of the equation, changes in trader appetite for silver, which is much more volatile than industry demand, could move prices.

Silver Scrap Metal

Silver scrap metal can play an important role in determining the supply of silver in the market and, therefore, its price.

Historically, one source of scrap metal was the photography industry. However, with the advent of digital photography, silver now plays a minor role in the industry. Scrap dealers recycle large quantities of photographic film for their silver content.

Similarly, jewelry and silverware can be a source of silver scrap. As silver prices rise, more scrap supply comes on to the market, which can put a cap on prices.

Industrial Demand

The demand for silver from industry can have a big effect on the price of the metal.

As previously mentioned, the photography industry no longer consumes as much silver as it did a generation ago. Stainless steel has largely replaced silver in items such as flatware, while many mirrors now contain aluminum alloys instead of silver.

On the other hand, industries such as water purification, circuit boards and solar may continue to require silver due to its unique physical and chemical properties.

Demand for Silver in Circuit Boards
Circuit board manufacturers using silver via Pixabay

Inflation and the US Dollar

Investing in silver is one way to protect against the loss of purchasing power from inflation and a weak US dollar.

Commodities such as silver are priced in US dollar and often have strong inverse correlations with the dollar. In other words, as the dollar weakens, silver prices tend to rise. Buyers purchasing silver in other currencies have more purchasing power when the dollar is weak and less when the dollar is strong.

Silver is also different from most other commodities (the exceptions being gold and perhaps platinum) in that many traders view it as an alternative currency. In times of currency devaluation and inflation, traders often turn to silver as a more reliable store of value.

Gold Prices

Historically gold and silver prices exhibit a strong positive relationship. Many traders pay close attention to the gold-silver ratio and use movements in this ratio as a signal to buy or sell one commodity or the other.

Further Reading

 

Start Trading Commodity CFDs Today at Plus500

CFD Service. 80.6% lose money.

Learn More