Gold | Silver | Platinum | Palladium | US Dollar

Silver, like gold, has enjoyed a long history of use for adornments and currency. On Earth, silver can be found in a native form or combined with gold or other minerals. It has high electrical conductivity; however, its susceptibility to tarnish was an impediment to widespread use in electrical purposes. White and highly reflective when polished, silver has been used as currency and ornament for centuries. When alloyed with other metals such as copper, this precious metal is known as sterling silver and is harder than pure silver.

Silver was likely mined through ancient times, with evidence of mining in islands of the Aegean suggesting that separation from lead was occurring nearly six thousand years ago. Silver can be extracted from ore via smelting or chemical leeching. Large deposits of silver were discovered in the New World - and today, many of the top producing countries are part of the Americas.

The following chart illustrates production of silver from some of the top silver mining nations:

Throughout history, silver coins were, and still are in many places, essential for internal and international trade. The Spanish reales (also containing 0.8 oz.. silver), minted in Mexico and Peru, were used throughout the Americas for generations. And nearly 400 million of the 1780-dated Austrian Maria Theresa thalers (containing 0.8 oz. silver) have been struck over the past two hundred years to serve as trade coins in Europe and Asia.

In 1792, Alexander Hamilton, then the U.S. Secretary of the Treasury, proposed the adoption of a gold and silver based monetary system. Silver remained in circulating U.S. coins until the supply of silver could not meet the demand for coins and the face value of the coin fell below it's bullion, or meltdown value. The U.S. government eliminated silver from quarters and dimes in 1965 and half dollars were reduced to 40%. In the U.S. today, silver is used only in bullion, commemorative and proof coins. Mexico is the only country currently using silver in it's circulating coinage.

During the past decade, the United States, Canada and Mexico began issuing pure silver coins with nominal face values sold at a small premium over their bullion value (not their face value). In 1982, Mexico began minting a 999-fine (99.9% pure)silver Libertad ranging in weight from 1/20 oz. of a ounce to 5 ounces. Over 20 million of the coins have been sold. The U.S. Mint issues a 999-fine Silver Eagle bullion coin (a one ounce bullion coin with a face value of $1). Over 165 million have been sold since 1986. The Royal Canadian Mint issues a 5 dollar 9999-fine silver bullion coin, the silver Maple Leaf. Over 13 million have been sold since 1986. Australia issues a 5-dollar, 1 ounce 999 fine silver bullion coin, the Kookaburra. Over 8 million have been sold since 1990.

For the average investor, silver can be an effective means of diversifying investment assets and preserving wealth against the ravages of inflation.

Although the value of silver may vary, it has an intrinsic value that is immutable and permanent. Accordingly, many experts suggest that investors should include it among their investment assets.

Why? Because silver can be an important store of value. For example, between 1971 and 1981, the U.S. dollar lost more than half of its value, while silver prices rose nearly five times.

But what about the future? No one knows for certain; but many financial planners still suggest including silver among the investments of their clients.

Like other metals, silver can be recovered from scrap, but mining remains the main source of supply for fabricating silver products as illustrated in the following chart:

Silver, like gold, can play host to a variety of fundamental concerns which are closely tied into the global economic situation. Since a large portion of use is dedicated to industrial applications, demand for electronic components and other manufactured goods can be tied into the price of silver. Trade of world currencies as well as investment demand for silver bullion can also be important issues to watch.

On the supply side of fundamentals, the concentration of much of the mining of silver in Peru and Mexico can be of importance if there are any political or social events in either of those countries.

Besides the designation of precious metal and the investing demand which may go with that, silver enjoys application in a variety of industries including dentistry, electronics, soldering, mirrors, nuclear reactors, chemical catalysts, and even medicine. Silver was once widely believed to be a ward against disease and has shown significant broad-spectrum antimicrobial properties. This metal was once used to kill germs prior to the widespread use of antibiotics. It has also recently been applied to clothing to inhibit bacterial growth. Research into this side of silver usage is ongoing.

Total fabrication demand grew by 12.8 percent to a 10-year high of 878.8 Moz in 2010; this surge was led by the industrial demand category. Last year, silver's use in industrial applications grew by 20.7 percent to 487.4 Moz, nearly recovering all the recession-induced losses in 2009, and is now seeing pronounced advances in 2011. Jewelry posted a gain of 5.1 percent, the first substantial rise since 2003, primarily due to strong GDP gains in emerging markets and the industrialized world's improving economic picture. Photography fell by 6.6 Moz, realizing its smallest loss in nine years, as medical centers deferred conversion to digital systems. Silverware demand fell to 50.3 Moz from 58.2 Moz in 2009, essentially due to lower demand in India.

World Silver Demand

Key Terms

Gold-Silver Ratio - nan expression of the number of ounces of silver it would take to buy an ounce of gold. Can be used as a basis of certain trading strategies. For example, in the 1980s the ratio was about 1:17 and at its peak in the 1990s, it was around 1:100.

Electroplating -a process which deposits one metal on the surface of another electrically

Fine Silver - pure silver that is at least 999.5 parts per 1000