Most people who think about precious metals think about gold. That’s reasonable — gold is simpler, more visible, and backed by central bank buying that gives it institutional legitimacy silver doesn’t have. Gold is the first chair.
Silver is the overlooked one. It trades at a fraction of gold’s price, gets a fraction of the media coverage, and occupies an awkward analytical space between commodity and money that makes it difficult for institutional analysts to categorize. Most financial advisors don’t mention it. Most portfolio models ignore it entirely.
And yet, if you look at the structural picture — the supply constraints, the accelerating industrial demand, the monetary history, the current pricing relative to gold — silver’s setup is arguably more interesting than gold’s. Not because silver is guaranteed to outperform anything. It isn’t. But because the combination of factors converging on this market is unusual, and unusual setups deserve serious attention.
This piece lays out the case. It also lays out the counterarguments, because any honest assessment of silver has to include the reasons it might disappoint you. If you only want to hear the bull case, you’ll find plenty of that elsewhere. This is meant to be the piece you’d hand to a smart, skeptical friend who’s never thought about silver and wants to know why you have.
The Supply Problem
Start with where silver comes from, because this is the structural feature that most people — including many silver investors — don’t fully appreciate.
Roughly 70–80% of the world’s silver is mined as a by-product of copper, zinc, lead, and gold mining. This is not a minor detail. It is arguably the single most important fact about silver supply.
What it means is this: when demand for silver rises, the world cannot simply “mine more silver” the way it can mine more copper or drill more oil. Silver production is largely determined by the economics of other metals. If copper prices don’t justify expanding a copper mine, the silver that would have come out of that mine as a by-product doesn’t get produced — regardless of what silver prices are doing.
Primary silver mines do exist. Companies like First Majestic Silver, Pan American Silver, and Hecla Mining operate mines where silver is the principal output. But these represent a minority of global production, and even primary silver miners face the same challenges every mining operation faces: permitting timelines measured in years (often a decade or more), rising energy costs, declining ore grades, and the geopolitical risk that comes with operating in jurisdictions like Mexico, Peru, and Bolivia.
Global mine supply has been essentially flat to declining over the past decade, hovering in the range of roughly 25,000–27,000 metric tons per year according to the USGS and the Silver Institute’s World Silver Survey. This isn’t because nobody wants to produce silver. It’s because the geology and economics of silver mining make rapid supply increases extraordinarily difficult.
Above-ground stockpiles provide a buffer — silver held in vaults, ETFs, and private hands can be sold into the market. But these stockpiles are finite, and unlike gold, a meaningful portion of the silver that gets consumed by industry each year is effectively destroyed. The silver in your smartphone’s circuit board isn’t coming back. The silver paste in a solar panel is embedded there for 25–30 years. Industrial consumption removes silver from circulation in ways that gold consumption — which is overwhelmingly jewelry and bars that can be melted down — does not.
The Silver Institute has reported structural supply deficits in recent years, meaning total demand has exceeded total mine supply plus recycling. Whether these deficits are being filled by drawdowns from above-ground inventories, unreported Chinese supply, or other sources is debated. But the direction is clear: demand is growing, mine supply is not, and the gap is real.
The Industrial Demand Floor
Twenty years ago, silver’s industrial demand profile was dominated by photography (silver halide film), jewelry, and a relatively modest electronics sector. That world is gone.
Today, silver faces a demand floor created by technologies that didn’t exist at scale two decades ago — and that floor is rising.
Solar photovoltaics are the most visible driver. Each solar panel requires silver paste to form the conductive grid that collects the electrical current generated by the silicon cells. The solar industry consumed an estimated 140–180 million troy ounces of silver in recent years, and that number has been growing as global solar installations accelerate. China, the United States, India, and Europe are all expanding solar capacity, driven by a combination of economics (solar is now cost-competitive with fossil fuels in many regions) and policy mandates. The International Energy Agency’s projections for solar installations through 2030 and beyond imply continued growth in silver demand from this sector.
There’s a counterargument here — the solar industry is actively working to reduce silver loading per panel, using techniques like thinner busbars and alternative materials. This is real and worth monitoring. But so far, the increase in total panels installed has more than offset the decrease in silver per panel. Whether that continues depends on the pace of both trends, and I don’t think anyone can project that with confidence.
Semiconductors and electronics represent another major demand stream, typically consuming 150–200 million troy ounces per year across die attach materials, multilayer ceramic capacitors (MLCCs), PCB finishes, electrical contacts, and connectors. The AI buildout, 5G infrastructure deployment, and the electrification of vehicles are all growing this category. (For the detailed semiconductor story, see the separate piece on silver in the chip economy.)
Electric vehicles use substantially more silver than conventional cars — not just in batteries and power electronics, but in the thousands of additional MLCCs, connectors, and contacts that EV architectures require. As EV adoption grows globally, so does per-vehicle silver consumption.
Antimicrobial and medical applications continue to expand as silver’s antibacterial properties find new uses in wound care, water purification, medical device coatings, and even textiles. This is a smaller demand category but a growing one.
The critical point is not any single application — it’s the aggregate. Silver’s industrial demand is now distributed across multiple sectors, each of which is growing for its own structural reasons. Solar demand isn’t going away because people stop building chips. Semiconductor demand isn’t going away because EV sales slow. The diversification of silver’s industrial demand base makes it more resilient than it was a generation ago, when photography’s decline could wipe out a major demand category almost overnight.
And here is the feature that distinguishes silver from gold in the most fundamental way: industrial silver gets consumed. It doesn’t sit in a vault waiting to be sold. It gets embedded in panels, soldered into circuit boards, coated onto medical devices, and dispersed into applications from which recovery is uneconomical. Every year, a significant portion of the silver that enters the industrial supply chain effectively exits the above-ground inventory permanently.
The Monetary Argument
Silver was money for longer than any fiat currency has existed. That’s not nostalgia — it’s a statement about the revealed preferences of human civilizations across 4,000 years, multiple continents, and radically different political systems.
The monetary case for silver rests on several pillars.
The gold/silver ratio. The ratio of the gold price to the silver price — how many ounces of silver it takes to buy one ounce of gold — has historically averaged somewhere around 15:1 to 20:1 over long stretches of monetary history. The U.S. Coinage Act of 1792 fixed it at 15:1. For most of the classical period, ratios in the range of 10:1 to 16:1 were common.
Today, the ratio sits around 85:1 to 90:1. Silver advocates argue this represents a massive undervaluation of silver relative to gold. If the ratio were to revert even partially toward historical norms — say, to 50:1 or 40:1 — the implied silver price at current gold prices would be dramatically higher.
Is this argument valid? Partially. The historical ratio reflected a world in which both metals served as money. In that world, the ratio was anchored by the relative abundance of gold and silver in the earth’s crust (roughly 1:17.5 by mass) and by the needs of a bimetallic monetary system. We no longer live in that world. Neither gold nor silver is official money, and central banks buy gold but not silver. The ratio should be different than it was in 1800.
But “different” and “85:1” are not the same claim. The current ratio is extreme by any historical measure, and the question of what a “fair” ratio looks like in a world where silver has massive industrial demand that gold doesn’t — demand that consumes the metal — is genuinely open. I don’t know the answer. I’m skeptical of anyone who claims they do.
Central bank gold buying creates a rising tide. Central banks — particularly in China, India, Turkey, Poland, and other nations diversifying away from dollar reserves — have been buying gold at record or near-record rates in recent years. This has been a powerful tailwind for gold prices. Silver is not being bought by central banks, but silver prices have historically correlated with gold prices, especially during periods of monetary stress. If gold continues to rise, silver tends to follow — often with a lag, and often with greater volatility.
Retail accessibility. Silver is sometimes called “poor man’s gold,” and while the term is slightly dismissive, it captures a real dynamic. At $42 per ounce, silver is accessible to buyers who cannot afford gold at $3,700+. In periods of monetary anxiety — inflation, currency instability, loss of confidence in institutions — retail demand for silver can surge because it’s the precious metal ordinary people can actually buy in meaningful quantities. This retail bid is unpredictable but powerful when it appears.
The Honest Counterarguments
If the above were the whole story, silver would be an obvious allocation. It isn’t, and here’s why.
Silver has no yield. A bar of silver sitting in your safe generates no income. In a world where Treasury bills yield around 4% and dividend-paying stocks compound wealth over time, holding silver carries a real opportunity cost. Every year you hold silver instead of a yielding asset, you’re forgoing income. Over long periods, this compounds into a significant drag relative to productive assets.
Storage costs and premiums erode returns. Physical silver is bulky relative to its value — $10,000 worth of silver weighs roughly 15 pounds (at $42/oz). Storing it securely costs money. Buying it at retail involves premiums over spot price that can range from 5% to 30% depending on the product and market conditions. Selling it incurs a spread. These transaction costs mean silver needs to appreciate meaningfully just for you to break even. Paper silver (ETFs, futures) reduces these costs but introduces counterparty and structural risks of its own.
Volatility is brutal. Silver’s dual identity as commodity and monetary metal, combined with its relatively small market, produces extreme price swings. Silver dropped from nearly $50 in April 2011 to under $14 by late 2015 — a decline of more than 70%. It fell from $18 to below $12 during the COVID crash of March 2020 before recovering sharply. If you cannot stomach a 50%+ drawdown lasting months or years, silver will test you in ways that most conventional assets will not. This is not theoretical. It has happened repeatedly, and it will happen again.
It’s not gold. Gold has central bank buying, sovereign reserve status, and a deep institutional market. Silver has none of these. The silver market is smaller, thinner, and more susceptible to large players moving price. The COMEX silver futures market has been the subject of persistent allegations of price manipulation — some credible, some conspiratorial. Whether or not manipulation is occurring, the structural reality is that a small number of large short positions can have an outsized effect on silver’s price discovery. This is a risk that gold, with its deeper and more diverse market, faces to a lesser degree.
Industrial demand cuts both ways. The same industrial demand that provides a floor under silver prices also exposes silver to economic cycles. In a recession, manufacturing slows, construction declines, and consumer electronics sales drop. Solar installations can be delayed by policy changes or economic stress. Silver’s industrial demand, which is a strength in expansion, becomes a vulnerability in contraction. The 2008 financial crisis took silver from $20 to below $9 in a matter of months — precisely because industrial demand collapsed alongside everything else.
Substitution risk is real but often overstated. Industries have economic incentives to reduce silver usage, and they do — silver loading per solar cell has declined over the past decade, and base-metal alternatives exist for some electronic applications. The question is whether substitution outpaces demand growth. So far, it hasn’t. But it’s a risk that compounds over time, and dismissing it entirely would be intellectually dishonest.
So What’s the Verdict?
Silver is not a get-rich-quick scheme. It is not a guaranteed hedge against inflation (its correlation with CPI is weaker than many advocates claim). It is not a substitute for a diversified portfolio of productive assets. And it is absolutely not appropriate as a large percentage of anyone’s net worth, because its volatility can and will destroy your conviction at the worst possible moment.
What silver is, in my assessment, is a strategic allocation for people who understand what they own and why they own it.
The structural case is straightforward: mine supply is constrained and cannot respond quickly to demand. Industrial demand is diversified, growing, and increasingly embedded in the technologies the world is building. Unlike gold, silver gets consumed — permanently removed from above-ground supply. The monetary optionality (the possibility that silver re-rates as a monetary asset in some future scenario) provides a free call option on top of the industrial fundamentals.
That structural case is stronger than it has been in decades. The combination of flat mine supply, expanding industrial demand across multiple sectors, structural deficits, and extreme gold/silver ratios is unusual. It doesn’t guarantee a price increase. Markets can remain irrational — or, more precisely, can reflect dynamics that aren’t captured by supply-demand fundamentals — for longer than most people can remain patient. But the setup is real.
If you’re considering silver, here’s what I’d suggest:
Size your position honestly. Silver should be a complement to a broader portfolio, not its foundation. The exact percentage depends on your circumstances, risk tolerance, and time horizon, and I’m not going to pretend there’s a universally correct answer. But “enough to matter, not enough to ruin you” is a reasonable heuristic.
Choose your form deliberately. Physical silver (coins, bars) gives you direct ownership with no counterparty risk, but comes with premiums, storage costs, and illiquidity. ETFs (like SLV or PSLV) offer liquidity and convenience but introduce their own structural considerations. Mining stocks offer leverage to silver prices but add company-specific and operational risk. Each form has tradeoffs. Understand them before you commit.
Set realistic expectations. Silver can sit flat for years and then move 50% in months. If you need steady returns on a predictable timeline, silver is the wrong asset. If you can hold a position through drawdowns and wait for the structural thesis to play out, the risk-reward is reasonable.
Stay honest about what you don’t know. Nobody knows when silver will move, how far it will go, or whether the structural thesis will play out on your preferred timeline. Anyone who tells you otherwise is selling something. The best you can do is understand the fundamentals, size your position appropriately, and let time do its work.
Silver is not the answer to everything. But it’s a serious answer to a specific set of questions — about supply constraints, about industrial demand in a world being rebuilt on electrification and computation, about what happens when a 4,000-year-old monetary metal trades at historically extreme discounts to its sister metal. Those questions deserve serious attention, and silver deserves a place in the conversation.
Sources
[1] The Silver Institute / Metals Focus, World Silver Survey (annual) — supply, demand, and deficit data. silverinstitute.org
[2] U.S. Geological Survey, “Mineral Commodity Summaries: Silver” (annual) — mine production, by-product ratios, global output. usgs.gov
[3] London Bullion Market Association (LBMA), silver price data and vault holdings reports. lbma.org.uk (URL unverified)
[4] CME Group / COMEX, silver futures market data and warehouse stock reports. cmegroup.com
[5] International Energy Agency (IEA), solar PV deployment projections and energy transition scenarios. iea.org
[6] CPM Group, Silver Yearbook (annual) — independent precious metals research and supply/demand analysis.
[7] U.S. Bureau of Labor Statistics, Consumer Price Index (CPI) data — for inflation comparison context. bls.gov
[8] Roy W. Jastram, Silver: The Restless Metal (John Wiley & Sons, 1981) — long-run silver price history and monetary role.
[9] U.S. Coinage Act of 1792, establishing the dollar/silver/gold ratio at 15:1. (Primary historical source.)