Category Archives: Silver

We generally think of gold as a safe haven asset.

But what about silver?

Since the silver price tends to be more volatile than gold, and because more than half of silver demand comes from industrial use, you might not think of silver as a haven. But historically, silver has outperformed gold during periods of geopolitical and financial uncertainty, as shown by a recent report by Capitalight Research prepared for the Silver Institute.

What do we mean by safe haven?

Investors prefer a safe haven asset during times of political or economic uncertainty. They expect haven assets to maintain their price and possibly rise during chaotic times, even as most traditional assets fall in price. A safe haven’s performance during these periods tends to hedge a portfolio, minimizing overall losses.

During periods of geopolitical uncertainty such as war, terror attacks, and significant political shifts (like the recent presidential election in the U.S.), investors tend to shun risk due to the high levels of uncertainty. They turn to safe-haven assets to preserve the overall value of their portfolios until the crisis passes.

Assets with little counterparty risk tend to make the best safe havens. Counterparty risk is the possibility that the party on the other side of a transaction might not fulfill its obligation. As the report points out, “This risk is critical in financial markets as it can lead to significant disruptions, especially in interconnected systems where the failure of one entity can trigger a cascade of defaults.”

Silver and Geopolitical Tumult

According to the analysis by Capitalight Research, silver has performed well during times of geopolitical chaos. For instance, safe haven demand as Ukraine tensions escalated reversed the previous downward trend in the silver price that occurred during the second half of 2021 as investors anticipated Federal Reserve rate hikes.

Capitalight analyzed silver’s performance during several geopolitical upheavals dating back to 1979.The events in red represent those that had a noticeable impact on the silver price.

One-day events, such as the Oklahoma City bombing in 1995 and the terror attack on the Boston Marathon in 2013, didn’t have much effect on the silver price. 

Several military conflicts also failed to drive safe-haven buying in the silver market, including the U.S. bombing of Libya in 1986 and the 1989 invasion of Panama.

“Although these were conflicts between countries, the perception was that these events would not escalate to the point of significant negative impact on overall economic conditions and/or did not present a significant increase in counterparty risk.”

However, the 12 highlighted events in the chart did drive significant safe-haven demand for both gold and silver.

As you can see by the following chart, the percentage increase in the silver price was generally bigger than gold’s: Excluding the Iranian hostage crisis, the average increase in the silver price was 15 percent. Gold’s price increase averaged 12 percent.

Silver During Financial Crises

Silver has also historically provided a safe haven during financial crises.

We saw this most recently during the 2023 banking crisis precipitated by the Federal Reserve’s rate increases. During that time, Silicon Valley Bank and Signature Bank went under, and other banks struggled as bond portfolio losses wrecked their balance sheets. The Federal Reserve managed to paper over the crisis with a bailout. During that time, gold charted a 23.7 percent gain.

After the 2008 financial crisis and through the Great Recession, silver rose by $40. That was a 495 percent increase from the underlying trend. Through the same period, gold rose 238 percent. 

Capitalight summed it up succinctly.

“Investors seek silver for its safe haven quality during periods of political and economic uncertainty.”

It’s clear from this analysis that silver’s role as a safe haven is underappreciated in the investment work. Investors should consider holding silver in their portfolio to take advantage of its hedging properties. 

You can download the full Capitalight report HERE. Continue reading →

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“Silver is a reliable hedge against inflation, currency devaluation, and systemic financial instability.”

This is the conclusion of a new report by Toronto-based Capitalight Research Inc. commissioned by the Silver Institute.

“Institutional investors seeking to strengthen their portfolios through diversification should consider the compelling benefits of investing in silver.”

According to the report, silver “offers a unique blend of stability and growth potential as a tangible asset with significant safe-haven appeal and growing use in industrial applications.”

Silver has a low correlation with equities and bonds, making it an excellent portfolio diversifier. 

The report focuses on increased fragility in the geopolitical environment and deteriorating government fiscal positions. 

For instance, the United States ran the third-largest budget deficit in history in fiscal 2024, and there is no sign that borrowing and spending are going to slow down. And the U.S. isn’t alone. The world is buried in government debt. According to the report, this enhances silver’s allure “as an investment to hedge against inflation and currency devaluation.”

The report also delves into the bullish supply and demand dynamics for silver, noting its “critical role in advancing green technologies such as solar energy, electric vehicles, and electronics.”

Industrial demand for silver is on track for a new record high in 2024, and the silver market is on pace for its fourth consecutive annual supply deficit. 

Industrial demand is expected to rise by 7 percent this year and surpass 700 million ounces for the first time. Industrial demand for silver set a record of 654.4 million ounces in 2023. As was the case last year, silver offtake for green energy applications is driving the increase in industrial demand.

The solar energy sector is using increasingly large amounts of silver. Silver is the best conductor of electricity of all metals at room temperature, making it a vital input in the production of solar panels. 

“The global transition toward renewable energy and electrification is driving a sustained increase in industrial consumption of silver. In contrast, supply constraints contribute to a persistent supply-demand imbalance (projected market deficit of 182 million ounces for 2024). This combination of rising demand and constrained supply could amplify price volatility and lead to significant upward pressure on silver prices.” 

The report concludes that “silver stands out as a highly strategic asset for institutional investors due to its dual role as an industrial metal and safe haven asset during market instability.”

“Historically, silver has proven its value during economic and geopolitical crises, serving as a reliable hedge against inflation, currency devaluation, and systemic financial instability. Silver’s role has become even more pronounced in the modern global landscape and warrants a position in investment portfolios.”

You can download the complete report HERE. Continue reading →

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