Hi YXI friends,

Today, we are going to analyse Silver and SLV (the iShares Silver Trust).

In the first half of the article, we go through the fundamentals of Silver as a commodity and as an investment asset. We dive into its behaviour in a variety of macro environments.

In the second half of the article, we closely examine the Gold versus Silver and the Gold/ Silver ratio. They may offer us clues on how to trade silver profitably.

Finally, we have the chart analysis as well as a fresh trade setup for Silver and SLV. 

Let’s dive in!

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Part commodity, part precious metal

The way I think about Silver, is that it’s like Gold, but not quite the same.

First, let’s go through the demand and supply factors of Silver.

The majority of the global Silver demand comes from industrial uses, with 40% being electrical and electronics.

Unlike Gold, only 17% of the global demand for Silver is for making jewellery (45% for Gold).

18% of the silver demand is for physical investment, similar to Gold’s 21% in bars and coins. The physical investment demand for Silver firstly comes from the US and secondly from India. Countries like China and Russia, where Gold buying has intensified over the past 10 years are quiet on Silver.

In the past decade, Silver’s demand has increased substantially for industrial uses, but declined in Photography and Physical Investment. Jewellery uses have been largely stable. Because Silver is a lot cheaper than Gold, jewellery and silverware demands are less price sensitive.

Finally, the most important difference between Gold and Silver is the lack of central bank demand for Silver as a reserve asset.

Overall, the demand picture puts silver in a slightly awkward spot between commodities and an investment asset.

On the supply side, Silver suppy comes from Mining Production and Recycling in a rough 80%-20% split. It should be noted that Silver is often a byprodcut of mining for other metals such as gold, lead and copper. Therefore, the Silver’s supply is also linked with them.

2. Is Silver less recession proof than Gold?

Here is a chart between Gold and Silver, through various US recessions in the past half-century.

Silver vs Gold vs US Recessions (expand here)

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