The recent rise in silver’s price has attracted attention, but what is really going on? I’ll list some key points as I understand them; and invite further explanations and corrections.
In contrast with gold (prized for its scarcity, and relatively useless given its price) silver is in big demand by electronics and battery manufacturers. It’s no longer used much in photography, but the annual demand by manufacturers is still 40,000 tons!
Is copper really so much inferior to silver as a conductor of heat or electricity? Silver oxides are conductive while copper oxides are not. Is that the reason silver is preferred, despite that it corrodes more easily? Silver wire has slightly smaller diameter than copper with equal conduction; are margins so small that these thinner wires are needed in modern electronics?
Because the world increasingly depends on high-tech electronics, and that high-tech depends on silver, silver has inelastic demand.
There are relatively few silver mines. Instead silver is a byproduct of copper, lead, zinc and gold mines. This makes supply somewhat inelastic.
So silver has both inelastic supply, and inelastic demand – a recipe for wild price fluctuations.
Supply is further exacerbated because most of the world’s mines that produce unrefined silver as a by-product sell that ore to China (because they are expert at refining that ore). Beginning 2026, China is restricting sales of its refined silver.
Commodities are often purchased via forward contracts. Buying a call option not only locks in a price, but provides – in theory – a promise of delivery on a specified date. Of course many of these calls are purchased by speculators who plan to sell them for cash rather than taking delivery.
Call contracts may be sold (“written”) by speculators rather than actual silver producers. IIUC, the contracts (i.e. silver delivery) are guaranteed by COMEX, the big derivatives exchange.
Supposedly many of the silver call contracts are written by JPMorgan and other large banks. Is this correct? (“JPMorgan holds massive amounts of silver, with estimates suggesting they possess hundreds of millions of ounces, possibly over 750 million ounces, acting as a major custodian for COMEX silver.”)
Samsung, the world’s biggest electronics manufacturer, is having trouble meeting its needs. It asked COMEX for 50 million oz and was offered just 5.2 million. Or is this “news” just fake? It seems like physical silver is not being delivered to where it’s needed; despite that COMEX is supposed to fill that role.
A few days ago COMEX suddenly increased the margin requirement on holders of Silver Calls (despite their rising values) and liquidated some accounts.
Meanwhile the big banks, losing money on their Silver shorts, have little to worry about. The FRB has been sending billions to the banks (via repos) whenever requested.
I should have clarified my meaning. Available gold dwarfs industrial needs by orders of magnitude. Industrial use of gold has zero effect on its price.
Silver, on the other hand, seems to have become (similarly to the rare earth metals) a hard-to-get commodity on which modern technology depends.
There is a crazy cult-level group of people really, really, really into “silver stacking” (aquiring the largest possible physical hoard of silver) that are estatic about price increases and hoping they keep going up (some believing it will hit $1000 an ounce). They are probably too small a group overall to make much of a dent in the global market, though. (I would guess.)
Silver has the lowest volumetric resistivity of any metal. Copper has the second lowest. But copper is so much cheaper than silver that it perfectly suffices in the vast majority of applications as an electrical conductor. The only time I have seen solid silver wire being used is in very high-end audiophile systems, and it is only being used due to the ignorance of some audiophiles.
Off the top of my head, here are some of the applications I can think of for silver in electronics:
Many of the lead-free (Pb-free) solder alloys contain silver. The most popular alloy is SAC305, which contains 3% silver.
The contacts inside relays and switches are often made of silver, or of a silver alloy.
Copper wire that is plated with silver has a higher temperature rating than copper wire with no plating. It also has a higher temperature rating than copper wire with tin plating. This is also true for busbars. Fire detection/alarm systems in industrial buildings are required to use copper wiring with silver plating.
Transmission lines, waveguides, and antennas that are used for high-frequency & microwave signals are often plated with silver. This is because almost all the current is confined to the surfaces, due to the skin effect.
But the above has been true for just about forever. Why the sudden demand in silver? Just a WAG, but maybe it’s because of AI and all the datacenters that are being built: there are lots and lots of computer motherboards and circuit boards in those things, and all the parts are soldered to PCBs using lead-free solder that contains 3% silver.
I love the size and look of a traditional silver dollar (I think the Morgan dollar is the nicest US coin ever). Once I almost got caught up in collecting the various silver 1oz rounds available, but didn’t want them enough to pay $8 to $10 each for them…
I used to have some Morgans in my collection and agree with you. I also had silver Kookaburras, Roos and Koalas, South African Rands, Chinese Pandas and Mexican Libertads (which I’d put above the Morgans for beauty). Also had some gold coins. It was a fun hobby, but I got to a point where I rarely looked at them, so packed it all up and took it to a local coin shop in Portland. They wrote me a check for about $7K. The couple of US silver coins I held back are the silver eagle bullion coins that the mint issues. Very pretty and proof quality, and very liquid. I also kept one 1/10 oz. gold eagle for some reason. Even with appreciation over the years, it’s hardly worth getting in the car to go sell it somewhere. I sure wish I’d held on to my gold coins, as I sold them for about $500/oz and now it’s up to over $4K/oz.
I appreciate your reasoned analysis of silver as a commodity; it just it has little to do with its recent price movements.
Silver’s move has been almost all in the past half year. That’s not sudden increases in demand for the physical stuff.
It’s alternative class investing as individuals and institutions are nervous of dedollarization and wanting to move a little out of equities but don’t want to throw more into a fairly long gold run, with others then chasing the hot returns.
The contrast as investment with gold is that silver really is more fuller time commodity while gold is more increasingly full time in its currency role, part of a basket of hedges in foreign exchanges against the dollar.
Annual production of silver is 35 - 40,000 tonnes which seems to be used very roughly in the following proportions:
60% industrial use (gold; 8%)
20% silverware and jewelry (gold: 40%)
20% precious metal hoarding (gold: 52%)
Corresponding estimates for gold are shown in parens.
I’m sure that, to some extent, I’ve been deluded by “fake news.” Still my argument that silver, with inelastic demand AND inelastic supply, might be especially prone to large price fluctuations seems interesting, if valid.
This thread prompted me to look up the current price of silver, which is about $70 per ounce, which is higher than I remember. I was curious so I Googled the price when the Hunt brothers tried to corner the market in 1980. I think the price topped out at about $50 per ounce so using an inflation calculator, it would still need to triple from today’s price to reach that inflation adjusted amount.
(BTW, I remember when they were trying this and the network news showed people taking their family silver to dealers to cash in. Good for them, though it’s a bit sad that so many heirlooms and just nice silver art was melted for a short-term gain.)
I’m pretty sure that is what happens to a large amount of these things today. Few actually want their grandparents’ silver serving sets.
@Gordon_G just be clear - what you label “precious metal hoarding” is for gold generally called by others its use as a currency, especially in foreign exchange contexts. Not sure that silver is considered as a currency by anyone?
I do think that that silver industrial demand and the supply of physical stuff are fairly inelastic. Use for jewelry may be more elastic. Which is indeed I suspect why the increase in hoarding (as an alternative investment, and critically not by central banks like gold but by institutions and private investors and speculators) can lead to this outsized price swing … and of course then hot money moving out of it can potentially lead to an outsized drop.
I don’t think gold is used as a “currency” although central banks do hold it as “foreign reserves.” (Some pessimists may think gold might be resurrected as a currency if there is a catastrophic global financial collapse.)
I prepared the three percentages for silver (with the help of ChatGPT), then decided to add gold for comparison, using the same labels. For gold I could have separated private “hoarding” from central bank “reserves” but the distinction is blurry. What about gold owned by private banks or big wealth funds? (JPMorgan has several thousands of tons of gold in its vaults, mostly stored for clients.)
Some gold is used as a form of currency. One reason the New York Fed holds so much gold for so many groups is to make payments simple. They just move gold bars around.
That “although” is the point. Gold’s day job is that function for central banks, and with investment by private banks, wealth funds, and private investors (in physical gold, and via ETFs) using it similarly, diversifying in the face of and hedging against various risks. It is its major role in monetary policies across the globe (and the investments that follow that) that you lump as “hoarding” …
Silver has no similar monetary policy use by governments. And as you note it has fairly inelastic supply and demand for its day job in industry. But in the face of high gold prices and an extended goid run some investors and turning to it as a gold alternative with outsized price impacts.
In electronics, the precious metals, gold and silver, are typically used as plating. When the price of gold went up, they started making the plating thinner. Would that not count as elasticity in demand?
As was noted in an earlier post, silver is now used in solder. That change occurred when the industry phased out is use of lead.
That, and during WWII, copper was an essential strategic resource for various weapons-related systems, but the Manhattan Project wanted cyclotrons, and what the Manhattan Project wants, they get. So the Powers that Be asked if there wasn’t anything else they could use for all the wiring instead of copper, and hey, the government had all of this silver lying around it wasn’t using anyway…
Even granted that silver has practical uses, though, it surprises me that the practical uses would be large compared with its decorative use in jewelry and the like.
Honestly “thrifting” like that seem like examples of relatively little elasticity. According to this source at least by November ytd cost of silver was up 67%, but global mined sliver production was expected to end flat and industrial demand was only down 2% (with solar panels using less silver per unit produced leading the decrease but offset by AI center build outs and also EVs increase). Jewelry and silverware demand was down more (4 and 11% respectively).
But wait … if demand for those categories is even slightly down, and supply is flat, what is driving the price up? There is one aspect of demand that varies the most:
Exchange-traded product holdings are up by roughly 18% through to November 6, generating a year-to-date rise of 187Moz. This reflects investor concerns over stagflation, the Federal Reserve’s independence, government debt sustainability, the US dollar’s role as a safe haven, and geopolitical risks.
Again, the same things that have been driving the rise in gold with some seeing silver as a less expensive way to hedge than gold is right now .
This was 40 some odd years ago but, IIRC they changed the plating on PC board edge connector fingers from 20 um to 5. The reduced it by a factor of four.. The price of gold had gone way up about then. It was worthwhile to figure out what they really needed. The earlier value had probably been a ‘brute force’ selection.