What Is Silver?

The term silver refers to a precious metal commonly used in the production of jewelry, coins, electronics, and photography. It has the highest electrical conductivity of any metal and is, therefore, a highly valuable substance. Silver is used in many global cultures and religions in traditional ceremonies and worn as jewelry during important occasions. Investors may hold physical silver or other investments that are backed by the precious metal itself.

Key Takeaways

  • Silver is a precious metal.
  • It has historically been used for coinage and jewelry and is also highly conductive, which gives it many industrial uses.
  • Investors and traders buy physical silver through commodities markets.
  • Most of the world's silver production in 2018 came as a byproduct from lead-zinc, copper, and gold mines.

Understanding Silver

Precious metals are metals that are highly valued because of their scarcity. This group is generally comprised of platinum, gold, and silver. Although gold is favored by most investors, silver is also a highly sought-after metal because of its price and its application. As mentioned above, silver is commonly used in the production of jewelry and coins and was also commonly used in the photography industry. It is also a key element of electronics since it has the highest conductivity of any other metal.

Many silver companies own and operate their own mines, where they mine for silver and other precious metals. The majority of these companies are also involved in the actual production of silver itself. More than 26,600 tons of silver were excavated in 2018. China, Mexico, and Peru mined the most silver in that year. Around 870 tons of silver came from the United States. Most of the world's silver production came as a byproduct from lead-zinc, copper, and gold mines.

Investors and traders buy silver through commodities markets. Common commodities markets for precious metals exist in Japan, London, mainland Europe, and the United States. Individuals can buy silver in bars, coins, and bullion. Investors can also purchase assets that are backed by the precious metal without having to hold the actual commodity, such as exchange-traded funds (ETFs), stocks in silver companies, and mutual funds.

Consider an investment backed by silver like an ETF, which is easier to sell and doesn't require you to find a place to store your silver.

Special Considerations

Silver's spot price is the amount that an investor pays to purchase a single ounce of the metal for immediate delivery. Investors are normally charged an additional premium on top of this price for any purchase they make. The value of silver is priced per ounce.

While the majority of attention is given to price movements of gold in the global marketplace, silver is also viewed by many to hold key importance in understanding the potential movements of commodities markets and the overall marketplace as well. This is due to the fact that many buyers and sellers trade silver based on global-macro trends.

Silver prices move based on a variety of factors including supply and demand, inflation, and the strength of the dollar. Prices rise when the supplies are low, pushing up demand from consumers and manufacturers. When the dollar weakens, investors begin to look to more stable investments like precious metals, such as silver, as a safe place to park their cash.

The per-ounce price of silver reached highs in the early 1980s of more than $20 per troy ounce, before dipping back down in the 1990s. By 2014, the price rose to around $19 per ounce for the year. The average closing price for silver in 2020, as of Dec. 17, 2020, was $20.49 per ounce.

History of Silver

Evidence of the first silver mines dates back to 3000 B.C. in Anatolia, a site in modern-day Turkey. Most of the silver mining in that part of the world shifted east to Greece by 1200 B.C., as that civilization expanded. In 100 A.D., Spanish silver mines fed the Roman Empire's economy.

Silver's popularity increased in the years 1000 to 1500, thanks to improved technology, more mines, and better production techniques. The quest for silver and other precious metals gave rise to Spanish fleets that sailed all over the world, seeking wealth and new lands to conquer. It was a vital part of the mercantile system.

Silver production in the United States peaked in the 1870s with the Comstock Lode in Nevada, and by the end of the 19th century, humans produced more than 120 million troy ounces every year. One of the most iconic ways humans used silver was as a form of currency.

In the early 1960s, supplies of silver in the United States dwindled to all-time lows. Therefore, the U.S. government decided to stop using silver in its coins after 1964. Any American dimes, quarters, half dollars, or dollar coins with a date of 1964 or earlier contain 90% silver. If the price of silver is $20 per ounce, these silver coins are worth approximately 14 times their face value in the precious metal content alone. A silver dime is worth $1.40, whereas a silver dollar is worth $14 at a $20-per-ounce price.