Description

Silver is a white, lustrous metallic element that conducts heat and electricity better than any other metal. In ancient times, many silver deposits were near the earth's surface. Before 2,500 BC, silver mines were worked in Asia Minor. Around 700 BC, ancient Greeks stamped a turtle on their first silver coins. Silver assumed a key role in the U.S. monetary system in 1792 when Congress based the currency on the silver dollar. However, the U.S. discontinued the use of silver in coinage in 1965. Today Mexico is the only country that uses silver in its circulating coinage.

Silver is the most malleable and ductile of all metals, apart from gold. Silver melts at about 962 degrees Celsius and boils at about 2212 degrees Celsius. Silver is not very chemically active, although tarnishing occurs when sulfur and sulfides attack silver, forming silver sulfide on the surface of the metal. Because silver is too soft in its pure form, a hardening agent, usually copper, is mixed into the silver. Copper is usually used as the hardening agent because it does not discolor the silver. The term "sterling silver" refers to silver that contains at least 925 parts of silver per thousand (92.5%) to 75 parts of copper (7.5%).

Silver is usually found combined with other elements in minerals and ores. In the U.S., silver is mined in conjunction with lead, copper, and zinc. In the U.S., Nevada, Idaho, Alaska, and Arizona are the leading silver-producing states. For industrial purposes, silver is used for photography, electrical appliances, glass, and as an antibacterial agent for the health industry.

Silver futures and options are traded at the CME Group and the London Metal Exchange (LME). Silver futures are traded on the Tokyo Commodity Exchange (TOCOM). The CME silver futures contract calls for the delivery of 5,000 troy ounces of silver (0.999 fineness) and is priced in terms of dollars and cents per troy ounce.

Prices - CME silver futures prices (Barchart.com symbol SI) rallied sharply to a 9-year high in February 2021 of $30.35 per troy ounce. Expectations that industrial metals demand would improve as the global economy recovered from the pandemic sent silver prices soaring. Also, the passage of President Biden's $1.9 trillion pandemic relief package was supportive of silver prices. In addition, a short-squeeze helped push silver prices higher after posts on Reddit forums sparked buying of the IShares Silver Trust, the world's largest silver exchange-traded fund. Fund buying of silver in ETFs soared to an all-time high of 1.021 billion ounces in February. Silver prices traded sideways into mid-2021 before tumbling to a 1-1/2 year low in September of $21.41 per troy ounce. Expectations for tighter Fed policy undercut silver prices after U.S. consumer prices soared to a three-decade high. Also, fears that industrial metals demand in China would collapse from the default of China Evergrande Group, the world's most indebted property developer, undercut silver prices. Silver prices finished 2021 down by -11.6% yr/yr at $23.35 per troy ounce.

Supply - World mine production of silver in 2021 rose by +2.1 yr/yr to 24,000 metric tons, down from the 2016 record high of 27,900. The world's largest mine producers in 2020 were Mexico with 22.4% of world production, Peru with 13.6%, China with 12.8%, Russia with 7.2%, and Poland, Chile, and Australia each with 5.2%. U.S. production of refined silver in 2020 (annualized through October) rose by +42.6% yr/yr to 6,796 metric tons, a new record high.

Trade - U.S. imports of silver bullion in 2020 (through October annualized) rose +53.3% yr/yr to a record 5,810 metric tons. The bulk of U.S. silver imports come from Mexico and Canada.

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