Silver has a history dating back centuries, when for a long period it was the currency of choice for global trade before being displaced by gold – which was itself subsequently displaced for the fiat currency system we have today.
Silver achieved its record price of $49.48 an ounce in 1980 and came close to breaking that level in 2011. However, that price spike soon reversed with the price plunging below $35 an ounce in a matter of weeks.
For the bulk of the last 16 years, silver has traded within a broad range of $10-$30 an ounce, albeit with some notable volatile moves within that period. The most famous of these is the silver squeeze of early 2021 when a wave of buying from retail investors in late January, sparked by chats on the Reddit forum, forced institutional investors to exit short positions they held against the metal.
This in turn fed the flames of the price surge with silver breaching $30 an ounce at the start of February. However, the squeeze soon ran out of momentum with the price quickly dropping back a few dollars as a result.
2022 has also proven a volatile year for silver with the price suffering a multi-month slump from its March high in excess of $26 an ounce to trade below $18 an ounce in late August and early September. Having reached its nadir earlier in the year, silver is now enjoying a strong finish to 2022, setting up the possibility of another rally in 2023.
Why should you look at historical silver prices?
While past performance is no guarantee of future success or failure, historic prices help provide a frame of reference of how silver has responded to different market conditions – and therefore how it may react if a similar environment presents itself in the future.
Stop measures are often set up on significant recent levels so if the price breaches its trading range, then it can often trigger further moves. The knowledge of the recent past can therefore be a useful guide to the future.
Silver price explained
Silver is most commonly traded in US dollars per ounce, with that price then translated into the relevant local currency to reflect the global nature of silver trading. As such, the dollar’s moves are hugely significant on silver’s price.
The spot price, or the price at which an ounce of physical silver can be bought or sold at that particular snapshot in time, is the one quoted around the world and used as the benchmark. There is also a highly liquid futures market that can be used as a guide to the medium to long-term outlook for the precious metal.
This globally traded spot price is used by physical dealers to place a value on silver jewellery, as well as investment bars and coins based primarily on the weight of those items. Kinesis Money has recently launched its own range of silver bullion products via the Kinesis Bullion store, with the inaugural series featuring the Greek goddess of justice Themis on Kinesis’ range of silver bullion bars and Kinesis coins featuring the Egyptian goddess, Ma’at.
What has driven changes in the price of silver?
The price of silver is influenced by a wide range of factors, with sentiment on the health of the global economy as significant as the simple supply and demand dynamics of the metal.
2022 has been a useful case study in illustrating the different pull factors affecting silver’s price. The high inflation environment has seen central banks around the world implement a series of interest rate hikes.
In this scenario, silver initially fell out of favour with the physical metal’s lack of yield making other interest-bearing assets attractive in its place. It is worth noting that while physical silver stored in a vault doesn’t yield a dividend, KAG, Kinesis’ silver-backed digital asset, provides holders with the safety of a vault-secured asset with the added benefit of generating a monthly yield based on transactions using the digital coin in that month.
Silver’s fall from favour was so strong that it was unable to benefit from its role as a store of value over time and therefore a good hedge against inflation. As well as being an inflation hedge, silver can also attract demand as a haven asset that can protect investor portfolios at times of equity market dips.
Yet while silver struggled for much of the year, the final quarter of the year has seen the price rise steadily and recover much of the losses. A weakening of the US dollar enabled silver’s strong fundamental case to finally gain investors’ attention.
The metal is set for a record year of demand in 2022 with the trend set to continue into 2023 and beyond with silver a key component of photovoltaics for solar energy and in batteries for electric vehicles. With silver also used widely across the tech sector, including in the rollout of 5G, the outlook for the metal amid the energy transition and tech revolution looks very healthy.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.