Ned Naylor-Leyland, Head of Gold & Silver, discusses the growing demand for silver and its traditional role as the populist monetary metal.


I have noted before that gold is said to be the money of kings and queens, while silver is the money of gentlemen and gentlewomen. I would add that silver at times has also been the preferred legal tender of a slightly less salubrious crowd.


By virtue of its relative affordability versus gold, silver has plebian roots. In folklore, silver was also thought to have mystical powers. For example, a bullet cast from silver is said to be the only effective deterrent against a werewolf or witch – thus the “silver bullet,’’ or infallible solution. Silver is even seen in mythology to facilitate passage into the realm of the fairies.


I would not know about that, but silver’s traditional role as real money is evident in pound Sterling notes and silver coins in circulation around the world. Real people buy things with silver not gold. It is an affordable and a natural store of value. Like gold, silver has been used throughout history as protection against inflation.


Silver, by the way, tends to be more volatile than gold – like gold on steroids. It typically increases in value faster than gold when precious metal prices are rising and declines faster when prices are falling.

Populism and bubbles

I think we are living in an era of populism that makes the outlook for this populist metal particularly intriguing. Populism is evident in the leadership of some countries; Donald Trump is seen as a populist leader. I would argue that populism can also be seen in demand for cryptocurrency, valuation bubbles, digital finance, and the steady drift toward decentralisation of the global financial system. This reflects a view that we do not need traditional trusted third parties, including banks, or global reserve currencies such as the dollar.


The most dramatic recent example of populism impacting the populist monetary metal was the unprecedented, Reddit-related surge in demand in late January and early February, when retail investors piled into the silver market. We expect the silver squeeze movement to continue. What happened in January was just the first visible iteration.

Silver and green

Of course, silver isn’t just a monetary metal. It is a widely used industrial metal – and a key ingredient in the modern green economy. Every electric vehicle contains around three ounces of silver, and the white metal is used in solar panels, 5G infrastructure, medicines and medical equipment.


I referred to a silver squeeze. In March, the LBMA, the independent precious metals authority, produced a report in which it suggested that if that period of high demand for physical silver had been sustained, London’s stock of the metal would have been exhausted in a matter of weeks.


It has long been my view that there is a fundamental supply and demand mismatch in the physical silver market and that supplies are a lot tighter than some industry analysts claim. We saw this in the Reddit-related surge. Silver mining production is limited to around 800moz a year with around 70%-80% going to industrial use. I struggle to see how the silver market can continue at anything like current price levels if we see continued growth in investment and industrial demand.

Spending and stimulus

The macro-economic backdrop is also favourable for silver in my view. The extraordinary level of government spending and central bank stimulus for the ailing global economy suggests to me that falling real yields are inevitable. Declining real yields tend to push up silver and gold prices because monetary metals are seen as offering protection against a loss of purchasing power. And bear in mind that silver trades nearly 80% below its all-time inflation-adjusted high of $120/oz reached in 1980.


I see momentum for silver from a powerful combination of factors including demand from professional and retail investors, the burgeoning green economy and constrained supplies. In my view, this populist metal is set to become considerably more popular.


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