Why silver is used as a store of value
Silver has been used as a store of value and a form of money for thousands of years. Today, many still view silver as an excellent way to preserve wealth. This article explains why silver continues to be valued as an investment and store of value.
Key Properties of Silver
One key reason silver works well as a store of value is its intrinsic value and useful physical properties. Silver is rare, durable, divisible, fungible, and hard to counterfeit.
Rarity
Silver is a rare precious metal. It is found underground in ores and has to be mined. The global supply is limited. Silver’s rarity means its value does not decline much over time.
Durability
Silver is very durable and lasts a long time without rusting or decaying. Silver bullion and coins can retain value for decades or centuries. The silver itself doesn’t degrade.
Divisibility
Silver is easily divisible into smaller quantities and weights like ounces, grams, and troy ounces. This makes it sound like a medium of exchange for commerce and trade. You can price things in silver.
Fungibility
Silver is fungible, meaning any two identical units of silver are interchangeable. One ounce of 0.999 fine silver is equivalent to and can be traded for another ounce. Fungibility is an essential trait for a store of value.
Hard to Counterfeit
Real silver is difficult and expensive to counterfeit or duplicate. Creating fake bullion and coins that appear to contain .999 pure silver is not easy at scale. The fact that silver can’t readily be faked boosts confidence in its value.
These properties – rarity, durability, divisibility, fungibility, and hard to counterfeit – make silver a reliable value store that preserves long-term purchasing power. An ounce of silver today will likely buy you similar goods and services decades in the future.
Historical Use of Silver as Money
Silver has a 5,000+ year history of being used as money and a store of value. Since ancient civilizations, silver has been valued, traded, and functioned as a currency.
Ancient Mesopotamia and Egypt
In ancient Mesopotamia, silver was used as a form of money as far back as 3,000 BC. The Mesopotamian shekel was a unit of weight equivalent to 11 grams of silver. Ancient Egyptians crafted silver bars as a medium of exchange as far back as 3100 BC.
Ancient Greece and Rome
Some of the earliest silver coins came from ancient Greece, around 500 BC. The Greeks, Romans, Byzantines, and many other Western civilizations used silver as coinage and a form of money.
Spanish Silver Coinage
The Spanish real, a silver coin, was widely used for global trade from the 16th to 19th centuries. Many other cultures around the world, from the Ottoman Empire to Colonial America, have prized silver as a store of value.
U.S. Silver Standard
The American dollar was initially defined as a weight of silver (and gold). So, for millennia, silver has repeatedly demonstrated its ability to function as money and retain purchasing power. This long track record as a store of value gives people confidence in silver as an asset.
Beyond its use as money and a store of value, silver is a rare metal with very useful properties for industry and manufacturing. Its unique properties make it valuable and important for many products.
High Electrical Conductivity
Silver is the most electrically conductive metal. It is used in electronic components, batteries, photovoltaic cells, touchscreens, RFID tags, and LED chips. Electronics is the most significant industrial use of silver.
Reflectivity
Silver is also the most reflective metal. This property is used in mirrors, telescopes, microscopes, glass coatings, and optical filters. Silver reflectivity is also utilized in solar panels.
Antimicrobial Properties
Silver has antimicrobial properties. It is used in medical devices, bandages, fabrics, water filters, and as a germ-killing coating. Nanosilver is a new technology with antimicrobial applications.
Other Industrial Uses
Silver is also used in soldering, brazing, jewelry, silverware, photography, cloud seeding, wood preservation, and nuclear reactors. New uses and applications of silver continue to be found.
Silver’s unique properties make it extremely versatile and useful. This means there is ongoing industrial and commercial demand for silver. Silver is not just a shiny metal—it serves vital manufacturing needs.
The industrial consumption and use of silver means it is a commodity with inherent value. Silver’s value as a commodity contributes to its ability to be a long-term store of value. The metal is needed and valued beyond investment purposes.
Silver as an Investment
Silver is often used and viewed as a store of value for investors looking to preserve wealth and purchasing power. The investment case for silver is based on its ability to retain value over time.
Safe Haven Asset
Silver is a haven asset that can maintain value during economic distress and uncertainty. People often turn to hard assets like silver when they lose faith in currencies or financial systems.
Hedge Against Inflation
Silver can act as a hedge against inflation and currency devaluation. As a currency’s purchasing power declines due to inflation, silver’s value and purchasing power tend to remain more stable long-term.
Speculative Potential
Silver is sometimes bought as a speculation or bet on future price appreciation. Because silver has industrial uses and limited supply, some investors anticipate the price will rise with demand over time.
Portfolio Diversification
Like gold, silver can be used to diversify an investment portfolio. As a tangible hard asset and precious metal, silver’s price often does not move in tandem with paper financial assets like stocks and bonds.
Affordable Precious Metal
Silver is called the “poor man’s gold” because it is much cheaper per ounce than gold. This allows people to get exposure to precious metals and have a store of value even with limited funds.
While silver’s price can be volatile in the short term, many view it as a way to preserve wealth in the long run. Investors buy silver to hedge against economic risks and bet on its ongoing use and value.
Reasons for Silver’s Ongoing Use
Despite the rise of complex financial systems and digital assets, silver’s use as a store of value and investment continues into the modern era. There are a few critical reasons for silver’s staying power.
Mistrust in Fiat Currencies
Faith in fiat currencies remains shaky. Paper currency used to be backed by physical silver and gold. Today, dollars are backed by nothing tangible. Many people still want the safety of owning hard money.
Currency Devaluation Concerns
Governments can devalue their currencies through money printing and deficit spending. These policies reinforce the perceived stability of silver’s value compared to paper money over time.
Limited Supply
There is a finite supply of physical silver in the world. While fiat money can be created out of thin air, silver must be mined, and the supply is scarce. This limits how much the global quantity of silver can grow relative to economic output.
Portability
As a small and portable store of value, silver is attractive as a form of emergency money or wealth that can be easily transported. Silver coins and bars are easy to carry and store securely.
So, despite the digitization and abstraction of modern finance, physical silver continues to be seen as a universal and trustworthy store of value. Holding silver is a way to preserve capital outside the formal financial and banking system.
Silver’s Enduring Value Proposition
The world has changed immensely over the last few millennia, but silver’s use as a store of value and a form of money continues. People still view silver as an asset for preserving purchasing power and hedging against economic uncertainty.
Built on Usefulness and Scarcity Silver’s
value proposition is built on a foundation of inherent usefulness, scarcity, and a track record of reliability over time. Its unique properties make it vital to industry, while its long monetary history gives it credibility as an investment.
Ongoing Perception as a Stable Asset
While silver’s price may fluctuate in the short term based on supply and demand dynamics, many still regard it as a stable long-term store of value. The factors that have historically made silver a trusted form of money persist even in the modern financial landscape.
Appeal of Tangible Assets
Silver remains a compelling option for those looking for a time-tested way to preserve wealth in a tangible asset. Its use as a store of value endures as a haven for capital and an alternative to fiat currency.
Future Outlook
Silver’s reliability, scarcity, and inherent value will likely be relevant as an investment and store of value for a long time in an uncertain world. Its use as an asset to preserve wealth appears to persist well into the future.
