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All That Glitters Is Not Gold
The Case for Silver
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/8cce040c-5211-468f-b91d-c62203db4eb4/HX_Daily_Email_Header.jpg?t=1719544306)
Back in early May, we published a full week of notes arguing that Bitcoin would hit $100,000. It rallied that month to a recent high of around $70,000 but has since struggled…
That doesn't change our view, though. We still think it breaches $100,000. In fact, we think it could go much, much higher.
Cathie Wood of Ark Investment Management has argued that it could eventually reach $1.5 million, and we agree.
Our series of notes received a great response, and we encourage you to revisit them if you get the chance.
The most surprising response to any of the notes was to Part Four. It was titled “A VERY Brief History of Gold.”
We were a little nervous about writing this note. As we said in the note, there are a lot of folks out there who are passionate about gold. We were worried that they would nitpick and point out all the parts we didn't mention.
Instead, we received the opposite response! Many investors came out and thanked us as they knew little about its history, although they had traded and owned gold. None of this is taught in our schools.
One of the most interesting aspects of that history is that gold was NOT the most common and popular form of currency and store of value for much of human history.
That distinction belonged to its shiny cousin – silver.
This is likely because silver was much more common and used more often than gold.
We find this interesting because, from an industrial perspective, silver is also much more useful.
As we said in the gold note, only about 10% of gold is used for industrial purposes. It is used in various industries, including electronics, medicine, automotive, and aerospace. Still, only a tiny amount is used.
Silver, on the other hand, is used for industrial purposes in about 50% of its production. Silver has high conductivity, sensitivity to light, and antibacterial properties.
It is beneficial in anything involving electricity.
Silver's ability to conduct electricity with minimal resistance makes it a key component in electronics manufacturing. It helps devices operate efficiently and save energy. Silver is used in electrical and printed circuit board contacts, as well as in the automotive industry for electrical system contacts.
Silver is much more plentiful than gold. Scientists think it is about twenty times more common in the Earth's crust, and about nine times more silver is mined than gold every year.
Interestingly, supply growth is similar to gold—low single digits. Supply is expected to grow between +3% and +4% over the next few years.
Like gold, it has similar constraints in that mining is capital intensive, and the large deposits are often geographically hard to access.
Recently, silver has had a great run.
The easiest way to buy silver is through the iShares Silver Trust (Ticker: SLV). This trust was formed to invest in silver, and the trust's assets consist primarily of silver held by the custodian on behalf of the trust. The objective of the trust is for the shares to reflect the price of silver.
Here is the chart…
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/0358298e-adf1-481e-ac90-86a4a59f56c5/z1.png?t=1721067502)
This monthly data goes back to the start of the trust in 2006.
Here is a much longer-dated chart going back over a century.
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/f640b6ec-1385-4107-84e4-acf5d3222280/z2.png?t=1721067506)
In both charts, silver hit its most recent level of over $45 in 2011.
On the longer-term chart, you can see that it went as high as $140 at one point in the early 1980s. That occurred when some wealthy brothers—the Hunt brothers—attempted to corner the silver market.
It is a fascinating story, and you can read about it below -
What is silver worth?
If you read our notes about gold and bitcoin, you know that our view is that the “perception” of value is most important when trading these assets.
Year-to-date silver is +27%, gold is +23%, and bitcoin (even after falling) is +38%. We think the asset markets are starting to tell us something about concerns about the value of the US dollar.
We don't believe we are at a tipping point, but we might be at the beginning of a giant wave of investors looking for safety.
One interesting point of value to look at with silver is the ratio of the price of gold to silver.
Throughout human history, an arbitrary ratio of thirty-to-one was considered "correct." Here is the chart of that ratio going back to 1950…
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/bf9aa359-f9be-4439-a0bf-d14af11e0244/z3.png?t=1721067512)
You can see that the ratio held around forty-to-one before going much higher as gold gained greater value.
Silver is attractive. The recent break-out in silver prices is due to a long-term consolidation pattern and its industrial use in some of the hottest areas of the economy.
We wouldn't be surprised if it revisited its old highs or continued to make progress against gold.
While it may not have the same upside as Bitcoin, we think that silver can make a lot of sense as a small part of a diversified portfolio.
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