Silver is a precious metal that has been used as currency for centuries. It is also used in a variety of industrial applications, such as electronics and jewelry. The price of silver has fluctuated over the years, and as an investor, you're probably wondering if it will ever reach $100 per ounce.
Luckily, we're here to give you a full breakdown.
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The Short Answer
The short answer is a resounding “Yes!” Given a long enough time frame, the price of silver will surpass the $100 mark.
Either hyperinflation will make it so by devaluing the dollar to the point where $100 is equivalent to today's silver price, or prices will rise gradually so that in 20, 50 or 100 years, the price reaches $100.
The Long Answer
For those looking for an answer beyond the obvious, the more appropriate way to tackle this question is to look at whether silver will reach $100 in a reasonable time frame according to the economic circumstances as they are developing today.
The answer, again, is “Yes,” it's certainly possible, but there are a few caveats and moving parts we need to look at. To best answer this question, we have to look at a variety of factors, including the current state of the economy, the supply and demand for silver, and the availability of other investments.
What Does the Price of Silver Depend On?
The price of silver is a balancing act between several factors. Stress on any part of the equation can drive the silver price higher.
Supply and Demand
The primary driver for the price of silver is the simple economic principle of supply and demand. As investor demand increases, the price of silver tends to rise. The same goes for when there is a decrease in supply due to a variety of factors, such as industrial demand, government policies, and risk-averse investors.
The value of the US dollar can also have an effect on silver prices. Since silver is priced in US dollars, a strong dollar can make silver more expensive in foreign markets, while a weaker dollar can make it more affordable.
This is because a strong dollar makes it more difficult for foreign buyers to purchase silver, and vice versa. As the dollar's value fluctuates, so too does the price of silver.
Availability of Other Asset Classes
The availability of other asset classes can also have an impact on the price of silver. When other investment options are readily available, investors may be more likely to put their money elsewhere.
This is especially true when stock markets are doing well and other investments, such as bonds and real estate, offer higher returns. On the flip side, when stock markets are volatile or other investments offer little to no return, investors may turn to silver as a safer option, driving the price up.
Investor sentiment is yet another factor that plays a significant role in the price of silver. If people think that precious metals are a good investment, they may buy more of them, leading to a spike in demand.
On the other hand, if people are pessimistic about silver's future, they may sell off their holdings, driving the price down. Furthermore, investor sentiment in relation to other asset classes influences whether they will seek a safe haven in precious metals or place their funds in riskier instruments.
For example, if the stock market is plunging, silver becomes a safe haven due to capitulation in stocks.
Before moving forward, let's look at what paper silver is.
Paper silver is a term that refers to physical silver that has been converted into a financial instrument. This includes derivatives, such as futures and options, and exchange-traded products, such as ETFs and ETNs.
All of these are ways to own silver without having to actually hold the physical metal. The key difference between owning paper silver and owning physical metal is that paper silver does not entitle the owner to any physical silver. This is a crucial detail you need to always keep in the back of your mind.
When it comes to paper silver, things can get a little tricky. This is because many of these products are backed by physical silver but may not actually have 100% backing. Furthermore, there are concerns that rehypothecation occurs by the large financial institutions that sell paper silver.
Rehypothecation is the practice of taking a silver asset and turning it into a financial instrument that can be used as collateral for a loan. This practice has become increasingly popular due to the historically low interest rates we experienced in recent years, which make it easier for investors to borrow money by pledging silver as collateral.
Rehypothecation also allows investors to increase their exposure to silver without actually taking physical delivery of the metal. While this practice can be beneficial in some cases, it can also be risky.
This is why it's important to do your research when it comes to investing in silver and stick with physical silver unless you can pinpoint a reliable paper instrument.
How Much Silver Is There?
Supply and demand depend largely on an asset's availability. This is especially true for silver, a precious metal that has industrial applications as well as widespread use in art and jewelry.
Industry experts approximate the amount of silver in circulation at three billion ounces. The availability of silver yet to be mined is anybody's guess. However, authority figures in the industry place it at over 500,000 tons.
What Has the Price of Silver Done Historically?
Silver has experienced some breathtaking highs and dizzying lows over the years. You might be aware of the fact that the price of silver per ounce was as low as $4.57 in 1964 and as high as $50.41 in 1980. Since then, it has experienced several periods of volatility but has been relatively stable over the past decade. In January 2021, the average price of silver was $25.59 per ounce.
So, what does the price of silver do in relation to the economy's condition?
Well, although the performance of silver during recessions can be slightly unpredictable, there’s no denying that it's seen as a safe haven asset.
During the Great Recession of 2008-2009, for example, the price of silver rose dramatically. This was due to investors seeking safety in precious metals and increased industrial demand.
However, the price often fluctuates during a recession. Its overall trend is more nuanced than considering whether the economy is booming or tanking. Even during a bear market, there are often relief rallies that see silver metal prices rise.
When Could Silver Reach $100 per Ounce?
Peeking at our crystal ball, the exact time silver could hit the $100 price point doesn't come up. However, an educated guess can give you the tools you need to look for opportunities in the market.
If the supply of silver becomes limited, and if the US dollar continues to depreciate relative to other currencies, the price of silver will rise. Which factors determine whether these conditions are setting up to occur?
However, if the Fed pivots from interest rate increases to money printing, this could also trigger a silver bull market. Provided the new influx of low-interest dollars into the economy doesn't keep investors in the stock market, people may seek out precious metals.
This last scenario is more likely in the event that interest rate cuts lead to an accident in the economy. And by accident, we mean the popping of overinflated bubbles when few expect it.
When could these scenarios play out?
Keep a close eye on what the Fed is doing. Interest rates are expected to climb further but the Fed may decide to slow hikes down or even pivot at some point. Crucial developments may come over the coming months.
Next, keep your focus on industries that use silver in their products. Renewable energy, smartphone and other digital device manufacturing and healthcare all use silver. These industries could drive demand, forcing the price higher.
Finally, watch over geopolitical events like a hawk does a worm. China is the second-biggest silver producer in the world and Russia is in fifth place. If tensions between the West and BRICS nations come to a head, you can expect silver to be more scarce in the open market.
Is Now a Good Time to Invest in Silver?
Whether or not now is a good time to invest in silver is up to you. However, it’s important to note that silver prices are currently low, which could be attractive to investors looking to diversify their portfolios.
Furthermore, given the current economic climate, there are a few factors that could cause the price of silver to rise in the near future. This includes increasing industrial demand, geopolitical tensions and the potential for currency devaluation.
If you want to take a more prudent approach, dollar-cost averaging is always a good idea. This method involves buying a fixed dollar amount of silver at regular intervals regardless of the current price.
Taking this approach helps average out the price of silver over the long term, reducing the risk of investing heavily in one go and taking a big loss. It also prevents you from missing out on potential gains due to hesitation. By dollar-cost averaging, you can ensure you are making the most of the current market conditions and that your investment is well-rounded.
Those with a more risk-taking attitude might want to wait for the current economic conditions to play out. A hint at a Fed pivot may cause a short bull market in stocks. This would mean people's attention being taken away from precious metals, allowing for silver to dip lower.
However, those of you who are risk-averse should avoid trying to catch a falling knife. Guessing the absolute bottom of an asset is almost never as far as you can get from an exact science.
What Are Precious Metals Experts Saying?
Precious metals analysts are unable to agree on a consensus about the near-term prospects for silver. Some say it has plenty of room to fall, while others believe silver has already bottomed out and expect a bullish run.
Silver bugs are always praising the shiny metal's potential, so it's essential to see overly bullish talk through your own lens. Contrasting silver experts' views against those of fiat and cryptocurrency proponents is the best way to get a balanced assessment.
Given enough time, silver will almost certainly reach $100 an ounce. However, predicting the exact timing is difficult. The economy is in a transitionary phase from years of quantitative easing to tighter monetary policy.
Silver's strong fundamentals and tight supply point to a bright future for investors. These factors also give silver the potential for an explosive upward move in the case of a global financial calamity. With geopolitical and economic conditions as they are, such a scenario cannot be ruled out.
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