Silver: An Insight Into a Undervalued Metal
Disclaimer: This is NOT financial advice. I am NOT a financial adviser and everything in this article should be taken as my own personal opinion. This is a speculative article based on some of my findings and current research conducted in a relatively short time frame.
1. Introduction
I must first let the reader know that this post was written based on my experience in the stock market, commodities/rare metals and the currencies. This is a pure speculative/opinionated post in which I reflect upon some of my own experiences and try to share lessons learnt and try and chuck in a few cool facts and some analysis along the way. This should not be taken as financial advice and in no ways will this article be tailored to everyone’s needs. I say this given the fact I will be talking about a speculative topic and I acknowledge the fact that everyone is entitled to their own opinion, and not everyone always agrees.
I started writing this as a way to keep track of my learning and hopefully help others learn as well. In doing so I have tried to keep this at a fundamental level so that hopefully anyone can understand what I have published.
I will start by first introducing the motivation behind the research and the reason for writing this piece. Any investor that had been watching the market over the
As I mentioned previously, I had been involved in Cryptocurrency investing and all that came with it, including the massive hype through December — January, followed by the large pull back that happened and has continued to happen throughout majority of 2018. Like many of the ‘Crypto’ investors I have ridden this wave down and have continued to catch the gnarly as dips and troffs that have played out in this market.
Now for my fellow surfers, the ones that have ridden this wave with me, I would like to point out something that a few may have picked up, but some may have missed. It wasn’t just crypto that was bleeding in the streets throughout early 2018, it was the Stocks and the ETF’s market. It was as if everything simultaneously decided to screw over every investor. This sparked an interest in me to do further research into exactly was it a safer investment to hedge into in the long run. Along with diversification for the portfolio and the reduction of risk, I also was looking to find something that would stand up when others fell down. I say this in respect to, when the crypto market/stock market decided to fall over again (almost in such a way you would think there was quiet a correlation at the time 😉) that I wouldn’t get burnt.
This lead me to the interest in Gold and Silver (no duh right?). My initial research into the rare metals was as expected, stable returns and long term uptrend, but then I started reading blogs and doing research on a particular area of interest- How undervalued Silver actually was. A lot of research I had found pointed me to the fact that Silver offered potentially one of the highest ROI in the rare metals markets and it was considered undervalued by a lot of more knowledgeable people then myself. As such in this post I look to present my findings and hopefully a thought or two here and there. I hope you enjoy the read😊
2. Background On Silver
A little background research I did on Silver before carrying out anymore analysis. Just thought I would list these here for the ease of reading and save other researchers time when considering investing.
2.1 Different Kinds of Silver:
This was just some of the different types of silver sourced from [6]. Now whilst I understand this does not include all silver types, I thought it important to mention some of the different types:
- Fine Silver — 99.99% Silver
- Sterling silver — 92.5% Silver and 7.5% Copper
- Britannia Silver — 95.84% Silver and 4.16% Copper
- Mexican Silver — 92.5% Silver and remainder Copper Alloy
- German Silver — 80% Silver and remainder Copper Alloy
- Coin Silver — 75~80% Silver and remainder Copper Alloy
2.2 Types of Silver Bullion:
- Cast Bar — The most affordable bar. Often just a simple poor into a mold, normally does not require any additional treatment/polishing etc.
- Minted Bar — Come in protected packaging, are much more aesthetically pleasing then Cast Bars, normally the surface is then polished, cleaned and dried. They are also treated and pored differently then Cast Bars.
- Extruded Bar — A mix between the cast and minted bars
Each have their own pros and cons and I encourage the reader to look further when deciding which is best suited for them. You can find additional info here [13].
2.3 Properties of Silver:
- Silver holds the characteristic of being so ductile that when stretched to the limit, will be finer than a strand of human hair.
- It is also the most lustrous of all metals and also the whitest and can achieve the finest shine of any metal.
- It is extremely corrosion resistant only tarnishing once in contact with Sulphur.
- It also has antibacterial properties being able to break down bacteria’s cell walls.
- Silver is able to endure extreme temperature ranges.
- It has exceptional electrical conductivity properties.
2.4 Use cases for Silver:
- Silvers Medical properties — Silver can be used for multipurpose medicinal properties including as an anti-bacterial agent, purification of water electrified silver and copper filtration systems for water purification
- Silver as a currency — The most widely used material for coinage in history. Was once considered a currency in America until the realisation of inflation rates due to other nations following suit.
- Silver in industry — includes various use cases including electrical conductors given the non-corrosive nature it can be found in various appliances/apparatuses, Alloyed with aluminium to produce a strong and durable allow now used with avionics engineering, used in photo-voltaic cells as a conductor.
3. General questions I had when researching Silver
These are some of the general questions I had when first investigating silver. It started as quiet a small list, but the more I looked into Silver and the more questions I curated (and naturally the longer the research took me). Some of the more general questions I listed here in which I think anybody researching Silver might also want answered.
3.1 A Monetary System, FIAT currency, Inflation and what does this have to do with Silver ?
Some pretty big questions there hey? Well I will try to keep it short and sweet for the reader.
- A Monetary system — is a set of institutions by which a government provides money in a country's economy. Examples consisting of Mints, central banks, commercial banks and reserves.
- FIAT — A legal tender whose value is backed by the government that issued it. Examples: AUD, USD.
With those definitions out of the road, I will explain how this impacts the price of Silver. Most of this is taken straight out of ‘Mike Maloneys Top Ten reasons I buy Gold and Silver’. The Debt based global monetary system is currently being threatened by the credit debt and the derivatives bubbles that exist.
Everything moves in waves and cycles, every 30 to 40 years the world has a new monetary system given the last one collapses. As of now we are currently on the US Dollar Standard which has been around since 1971. During these transitions and market cycles the US dollar has gone from having been backed by gold, to partially being backed by gold, to no gold backing at all. This puts US at a large risk when relying on the current monetary system as a storage of wealth.
3.2 Why a Monetary System is not necessarily a good thing?
There have previously been three emergency meetings held in which new monetary systems were created as recorded here:
February 9, 1922- Congress established the World War Foreign Debt Commission.
July 1, 1944- Delegates from all 45 Allied nations gathered at the United States Monetary and Fiscal Conference.
December 1, 1971 -The US ended the fixed exchange rates that had been enforced since the Bretton-Woods Conference.
- The ‘Silver Standard’ is a monetary system in which the standard economic unit of account is the fixed weight of Silver.
- Owning gold was declared illegal in 1917 under Roosevelt [14] and the US ended the US dollar backed ‘Gold standard’ in 1933.
These have all been emergency meetings in which a new standard has been decided to tether the USD to. In interest of debate, I will refrain from giving my opinion on this however I suggest you continue your research and decide for yourself and come up with your own hypothesis.
3.2 Why is Silver undervalued?
Perhaps one of the most important questions for any new/old investor looking to acquire some/more Silver. Some are found here [15]:
- Silver has diverse uses, and some believe that the metal is undervalued given how many different applications it has. In total, the white metal has four main sources of demand: industrial applications, jewelry, coins and bars and silverware.
- When investigating the current price to mine/produce silver it was noted that the mining price varied depending on country. It was found here [9] that the mining prices were said to be $11.5 USD/ounce and here [10] that the worlds top Silver companies averaged $10.56 in production costs per ounce of Silver.
- The gold-silver ratio refers to how many ounces of silver are needed to buy one ounce of gold. A high gold-silver ratio typically shows that silver is a good buy since it is considered cheap relative to gold.
3.3 What is Silver use cases?
Covered in the previous section 2.4.
3.4 Choosing Silver Bullion over a Silver ETF?
The US Commodity Futures Trading Commission with the Gold Anti Trust Action Committee, reports there is now one hundred times more ‘paper gold and silver’ in the world than physically exists above ground [5].
Owning Silver ETF mean that share holders don’t actually own title to the metal itself, unless they are an authorised participant. When owning the physical bullion, this acts as a insurance in case something crazy happens like a post apocalyptic economy crash/zombie outbreak/Monetary system collapses etc etc…
3.5 What is the Silver to Gold Ratio?
The long-term average Silver/Gold Ratio runs around 56, which means it takes 56 ounces of silver to equal the value of one ounce of gold. Silver is really under-performing gold so far in 2018. So silver is overdue to catch up with gold [11]. The past record highs/lows have been 83.46 and 51.13 respectively.
3.6 What is .999 fine Silver?
This is important to note, for investment grade silver two things should be recognised on the bar/coin — the purity of silver should be 99% or 9999 and a specific weight in grams, kg or ounces.
3.7 How much Silver is in circulation vs how much Gold is in circulation?
To my surprise when investigating the amount of silver that is currently in circulation vs the amount of gold currently in circulation I found (according to the reliable sources, ‘cough cough’), there is currently estimated to be 3 to 3.5 billion ounces of 0.999 fine silver in the world. Roughly ½ troy ounce per living human being.
4. Buying Silver
So where and do you buy it?
There are many reputable sources for purchasing rare metals directly from a distributor in Australia (as I am an Australian buyer), some include:
- Ainslie Bullion ~ Brisbane.
- Perth Mint ~ Perth.
- Gold Bullion Australia ~ Melbourne, Sydney, Brisbane, Gold Coast.
- Australian Bullion Company ~ Melbourne.
- Australian Mint ~ Canberra.
It is important to make sure you are purchasing Silver which will be recognised by other bullion companies when in event you want to sell your silver. An example can be pictured bellow:

For my first purchase given this was an initial experiment to see the transaction and shipping as well as included costs for the bullion, I decided to stick with something relatively cheap and lightweight. These purchases are available for local pick up however or you can also test out their delivery for an additional cost.
5. Trader Trend and Market Talk -Blah, Blah, Blah.
5.1 The Manipulation of the Markets
The reason I have included this in this post is I would like to somewhat mention all contributing factors when understanding the value of silver and its market. The manipulation or otherwise known as price suppression of the rare metals markets is no secret in the widespread silver community and is one of the most talked about topics when investigating the long term trends/market cycles of Silver. Various reasons are speculated for the price suppression of silver/rare metals, some include:
- Bullion banks hold massive short contracts against silver [7].
- The discrepancy between paper silver and physical silver [8].
- Volatility of the market suppression.
- The cost to produce gold and silver are parallel in market price.
Whilst these all offer different insights, some more noteworthy then others a lot of this is speculation amongst the community and this should always be considered as such.
5.2 Silver vs Gold Charting and Long-Term Trend
At the time of the beginning of this blog raw metals such Gold and Silver’s charts be bellow (courtesy of trading view ~6/07/2018). Now this is not intuitive for anybody that does not look at charts on a regular basis, so I will do my best to simplify/explain this and keep the charting to a minimum.
I must quickly note that I am NOT a full time trader or a Financial ad visor so what I have speculated and charted must be taken with grain of salt.


Now I have added some standard trend lines just for the ease of interpretation for the reader, how ever it is important to note here that when looking at the graphs , I have plotted the Exponential Moving Averages (EMA’s) for the 50, 100 and 200 days.

When looking at the trend lines plotted with the EMA’s. Two things I quickly notice
- The flag formation on Silver as it reaches its long term uptrend.
- The convergence of the 50, 100 and 200 EMA’s
What do I mean by these two points? To answer this I will provide a more zoomed in capture.

Although technically the EMA’s still look to be in a downtrend, its the rate of change that I am interested in the most in which indicate the market divergence . As indicated by the capture you can not only see the divergence of the EMA’s but also a flag formation forming as increased market movement that is driving the price of Silver which looks to be forming a bull flag. On top of that it is currently approaching its long term uptrend which is acting as a support level.
A report on Silver recently found here reported that they are expecting to see silver hit some targets as low as $15.64/oz as Silver then shows indicators looks to rally for a push up. They have gone long on Silver with stop losses in place!
What does this mean?
The flag is a result from a downtrend as seen in the parallel- white channel with the market now having buyers step back in purchasing silver. This is resulting in a overall ‘flag formation’ which represents a period of consolidation before more significant price movement.
Keep your eye on the price of Silver for a breakout either side. Note, traditionally it takes a period of days/months or even years to see large price action with rare metals.
6. Pro’s Vs Con’s
Now it would not be a completed blog if I didn’t try an offer some sort of list to say that I’m not completely pro Silver, so I will do my best to offer some cons as well.
Pro’s:
- Insurance plan for if the FIAT system falls over.
- A physical measure for ‘wealth’ in comparison to FIAT.
- Holds up in value over time.
- Has more use then just a currency.
- There is currently less of it in the world then there is Gold.
Cons:
- Doesn’t provide any returns/income/dividends etc
- Heavily manipulated by larger bullion firms, investment derivative etc
7. Reflection
As mentioned, this post was done out of interest and in the hope that it would maybe save other readers much like myself some time in researching, as-well as pointing out some of the important things to consider when thinking about investing in Silver. This was purely done as part of my own research and as such I encourage all readers to continue on from my research and see what conclusions you can draw!
My personal reflection on Silver — I like the long term term prosperity of Silver and with the ongoing demand for it to be used in industrial applications I think I will be taking positions at these lower prices. I will be looking to Dollar Cost Average (DCA) into the Silver market. This offers me continuous investment and hedging my current wealth into a more stable investment whilst also minimising the amount of risk I take. An example of this would be buying a 10oz/100oz Silver Bullion every month/quarter. Of course like most rare/precious metals, this investment will be a long term play.
Thank you for reading and I wish everybody happy investing!
7. References
[1] http://www.ainsliebullion.com.au/
[2] https://www.bbc.com/news/magazine-21969100
[5] https://www.moneymorning.com.au/20111210/how-to-buy-gold-and-silver.html
[6] https://sciencestruck.com/types-of-silver
[7] https://www.moneymetals.com/news/2017/11/27/examining-silver-manipulation-001284
[8] https://www.sunshineprofits.com/gold-silver/dictionary/silver-manipulation/
[9] https://seekingalpha.com/article/4121312-aisc-silver-miners-2017-show-divergence
[10] https://www.americanbullion.com/what-is-the-current-cost-to-produce-an-ounce-of-silver-today/
[11] http://www.mining.com/web/silver-miners-q417-fundamentals/
[12] http://www.perthmintbullion.com/au/About-The-Perth-Mint/Government-Guarantee.aspx
[13] https://www.goldbroker.com/investing-guide/cast-bars-minted-bars
[14] https://www.treasury.gov/about/history/Pages/1900-present.aspx
8. Further Research
For further research and insights into some highly respected opinions I have listed some newer you-tube videos in which I recommend watching.
