ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Investing in Stocks, Bonds, Real Estate, More

Silver Fundamentals - History, Supply, and Demand

Updated on August 24, 2016

.

A Pile of Silver Bullion
A Pile of Silver Bullion | Source

Introduction

Silver has been a useful medal since the dawn of recorded history. Silver mining began around 3000 B.C. and continues to this day. Silver has become indispensable the modern world. Uses for the metal permeate virtually every phase of our lives. Silver is in our cars, our homes, our computers, our medicines, our investment portfolios, and the list goes on and on. Want the best conductor of electricity – then silver is the element of choice. In this Hub I go over a brief review of the history of silver, where it comes from, and how we use it in our everyday lives.

History Of Silver & Its Uses As Money

Silver has been an essential part of human civilization for thousands of years. Apart from its significance as an extremely valuable precious metal, it has also been a very popular form of currency. Silver is known as argentum in Latin and finds some of the oldest mentions in the Book of Genesis. As far as the usage of silver as a form of currency is concerned, the ancient Greeks have been known to use silver ingots for trading purposes approximately 4000 years ago.

The Old Testament of the Bible makes reference to surface mining of silver and its separation from lead in the islands of Aegean Sea as well as areas around Asia Minor. This indicates that silver was known to these ancient civilizations as old as 4th millennium BC. Moreover before the discovery of the New World and its vast silver reserves, the miners of the Roman Empire were engaged in massive production of silver due to the fact that Roman currency’s stability was heavily depended on silver bullion supply.

There have been various instances throughout history where the importance of Silver as a form of monetary system has been showcased. For example, historians believe that around 10,000 tons of silver stock was in circulation in mid second century AD in the Roman economy. Even the Chinese Empire used silver to trade silk, opium, tea and porcelain etc. with the western world. Later on, the influx of Spanish bullion from the New World led to the establishment of Silver Standard that remained a form of monetary system till the coming of 19th century.

Silver coins have been one of the oldest and most popular forms of coinage produced on a huge scale. Although there is a difference between the currency coins and silver bullion coins (used as a form of investment) yet they both form an important part of history of currency and monetary system around the world.


Silver Mine Production

Primary silver mining production is up approximately six percent when comparing 2012 to 2013 and accounts for nearly a third of the total mining production for silver. Most silver coming from the ground is a by-product from mining other metals. Mexico is the leading producer of silver. Peru, China, Australia, and Russia are next four countries that are the top producers of silver. The United States in the ninth on the list of silver producing countries. The cost of mining silver is slightly below $10 an ounce.

Top Five Silver Producing Companies in 2013

  1. Fesnillo plc. In Mexico. Largest producer of silver ore (primary silver) and Mexico’s second largest producer of gold. The company operates three gold and silver mines in Mexico.
  2. BHP Billiton plc in Australia. This is a multi-national mining, metals, and petroleum corporation that is the world’s largest mining company based on 2013 revenues.
  3. KGHM Plska Miedz S.A. in Poland. This company is a major producer of copper and silver with operations in Poland, Chile, United States and Canada.
  4. Clencore Xstrata plc. Based in Switzerland is a multi-national corporation specializing in commodity trading and mining.
  5. Goldcorp Inc. is a Canadian based mining company. The company has gold and silver mines in Canada, U.S.A., Mexico, Central America, and South America.

The largest United States based producer of silver is Coeur Mining. Coeur ranks tenth in the world and is involved in mining of gold and silver in the United States, Mexico, and various countries in South America.

A working silver mine

Smuggler Mine, Aspen, CO
Smuggler Mine, Aspen, CO | Source

Silver Supply

In addition to mining the supply of silver comes also from recycled silver in the form of scrap. 2013 saw a large drop in the above ground supply of scrap silver. This was due to the lower silver price and an exhaustion of the scrap supply. This supply comes from the melting of old coins and jewelry being sold for their bullion value. As a result of the decrease in scrap silver the total from this source has dropped to below 20 percent of the total supply of yearly silver. Another lesser source of silver comes from government selling portions of their silver supply to raise money. This is a small portion of the above-ground silver supply. The change in the supply form governments increased slightly from 2012 to 2013. Based on all the source of silver, there was a small drop in the available silver supply from 1,052 million ounces to 1,019 million ounces. This decrease in supply lead to a small physical silver deficit during the year of 2013.

Silver Demand

The demand for silver is broken down into three parts: industrial, jewelry, investment. These three categories represent 95 percent of the annual silver demand. In 2013 the total physical demand for silver was a record 1,081 million ounces. The largest component of this demand came from the industrial sector. In 2013, this demand was slightly down at 586.6 million ounces. The second area of demand for silver is for jewelry and décor. There was an increase in the use for silver in the jewelry industry. This was a result of an increase of retail sales for jewelry. The third area of demand comes from silver being used as an investment vehicle. Some examples from this are include: Exchange Traded Funds, silver coins, and medallions.

Uses of Silver

Whether you know it or not silver plays a part of your life. As you will see in the sections below, silver enters our lives in various forms in many areas of our lives.

Electronics and Automobiles:

The electronics and electrical industries have taken broad advantage of the fact that silver has the highest electrical conductivity of any metal. Silver is used in brazing and soldering of electrical components together allowing both a mechanical and electrical connection. Because silver doesn’t corrode the way many other metals do it is used in electrical switches. For example look at all the electrical switches that are in an automobile – you turn on and off the radio, air-conditioner, and heater; the electrical windows go up and down, you open the trunk lid from inside the car, plus many more. Even certain high-end ear phones utilize silver for better music quality. The use of silver in mobile phones has greatly increased the demand of silver. Just about every electronic device you see has silver in it being used in some manner.

Jewelry:

Silver jewelry has been very common since ancient times. Silver being very ductile and pliable, it is highly apt for jewelry. Being a goldsmith or a silversmith was an active profession since medieval times as women, noble and low born, desired well-made silver jewelry. It is in demand even today as silver jewelry is very fashionable.

Silverware:

Although the term silverware can be quite generic, being used to describe kitchen utensils such as spoons, plates and knives, the term was generally used for those implements that were coated with silver. Such was the popularity of the use of silver for making cutlery, a practice still commonly used. Due to the introduction of new materials the use of silver in flatware has decreased.

Photography:

Photography utilizes silver in photographic films. This is usually in the form of silver salts with halogens or silver nitrates. The silver facilitates the development of the photograph on the film. However, with the advent of digital photography, its use in this field is dwindling.

X-rays and other radiographic diagnostics:

X-ray films also utilize silver halides. These silver salts upon processing impart the black color to an X-ray. The salt in the places on the film not exposed to radiations washes away during processing. Again, with digital X-rays becoming more and more commonplace, its use had drastically reduced in radiography.

Batteries:

Silver has replaced the lithium commonly used in batteries. Lithium had hazardous effects if it leached out of the batteries and hence a substitute for it was necessary. Most silver batteries of recent times completely eschew flammable liquids making them much safer. Solar powered batteries also utilize silver. Silver has even replaced the glass mirror ubiquitous in solar appliances.

Chemistry:

Silver and silver salts are used for a variety of experiments taught to students in high school. It is used as a catalyst that hastens many other reactions without itself interfering in the reaction. The electrodes for electrolysis are usually silver plated. Its ease of deposition makes silver ideal for electroplating. A size of about one seven microns is used depending on the end-use of the object.

Windows:

The reflective properties of silver keep out more than 60 percent of heat from sunrays which would have entered rooms without the silver coated windows. This eases the energy spent by air-conditioners to cool these rooms.

Medical:

Silver has been used extensively in medicinal remedies from China and other parts of the world. It is used in antibacterial creams in the form of silver sulfadiazene, a sulfur compound. It is also used to coat endotracheal tubes and urinary catheters. Silver stains are used to view many bacteria under the microscope such as spirochetes.

Coins:

Another area where silver has been used since the earliest of times is its use as a medium of financial exchange. Silver has been used in coinage since 400 BC and still continues. Nearly all government monetary systems until the 1960’s were based in some fashion around silver and gold. Today silver is hoarded all over the planet as a form of protection from economic disasters and world crisis. It’s universal acceptance all over the globe has made it a form of transportable wealth. There are thousands of coin collectors, called numismatists, all over the world that collect and invest in old silver coins for their beauty and history.

Comments

    0 of 8192 characters used
    Post Comment

    • dougwest1 profile image
      Author

      Doug West 3 years ago from Raymore, MO

      I have been looking into the supply/demand picture for silver and I hope to post a Hub on the subject next week. From what I have seen so far, a silver deficit in the next few years is a real possibility.

    • WritingInRichmond profile image

      WritingInRichmond 3 years ago

      Great information. Learned a lot about silver. Never knew silver was so integral to things we use in our daily life. Thanks for teaching me something new! How do you see supply/demand playing out on the future price of silver? Would seem with all the uses of silver, this could become a real factor in the price somewhere in the future.