Welcome back to The Deep Dive. Today, we've got
a really interesting stack of market research
in front of us, all centered on the precious
metal sector. And one metal in particular, right?
We're talking about silver. We are talking about
silver. And it's fascinating because it has this
kind of dual identity. It's a precious metal,
an asset, but it's also a critical industrial
component. Well, that's the conflict, isn't it?
It's one of the most vital industrial inputs
on the planet. Exactly. So when you think of
silver, I bet you probably think of these wild,
massive price swings. You know, volatility that
makes even gold look, well, look pretty tame.
That's the common perception for sure. Our mission
today is to really cut through that perception.
We're going to use these sources to separate
the myth of silver's instability from the reality
of what's driving its price right now. And the
main takeaway from all this research is pretty
powerful. It suggests that idea of extreme volatility.
It's mostly based on a couple of historical anomalies.
If you look at the modern market, silver's price
movements today are, well, they're mainly a reflection
of real industrial demand and, you know, broader
macroeconomic conditions. That is a huge reframing.
Yeah. We're basically saying silver isn't defined
by speculation anymore. It's defined by its actual
utility. I think that's a perfect way to put
it. So today we're going to unpack those two
big historical events that created the volatility
myth. Then we'll get into the industries that
are consuming most of the silver today. And finally,
we have to talk about the gold silver ratio.
It's a key valuation metric. Let's do it. So
let's start with busting that myth. Where does
this idea that silver is just too volatile really
come from? It really comes down to two extraordinary
periods where speculation just completely took
over and distorted the price. You have to understand
them to, you know, kind of put them aside. OK,
so the first one is the big one, the one everyone's
heard of, the Hunt Brothers. We're talking 1979,
1980. Yes, the Hunt Brothers saga. For anyone
who might not know the details, just how big
was this? What was the scale of what they were
trying to do? Oh, it was. I mean, it was almost
biblical in scale. The Hunt brothers, they genuinely
believed that paper money was failing and that
gold and silver were the only true stores of
value. OK. So they decided to try and corner
the entire global market for physical silver,
not just a few contracts, the whole thing, using
massive, massive leverage. The whole thing. So
at their peak, how much did they actually control?
Get this. At their peak, they effectively controlled
an estimated two -thirds of the world's privately
held physical silver. Two -thirds? That's...
That's almost unbelievable. It is and this huge
speculative push It just artificially drove the
price from around $10 an ounce to nearly $50
an ounce in just a few months It's just two months
and that $50 peak had nothing to do with the
real economy. You know, there wasn't a sudden
explosion in demand for Electronics in 1980 is
pure speculation purely and when all that leverage
came crashing down on what they call silver Thursday
in March 1980 the price just plummeted. That
spike and that crash, it left a permanent scar
in the market's memory. So that's anomaly number
one. A completely artificial leveraged event.
What about the second one? It happened much more
recently. Right, that takes us to 2010 -2011.
And the spike happened during the first big wave
of quantitative easing. QE. The Fed was pumping
huge amounts of liquidity into the system after
the financial crisis. Exactly. And silver jumped
dramatically again. So for our audience, why
does an action like QE cause so much speculative
interest in a metal like silver? It really comes
down to fear. I mean, quantitative easing, this
big expansion of the money supply, it brings
up the fear of really high inflation, of currency
debasement. People get worried their dollars
will be worth less. Precisely. And when investors
get scared about that, they rush into hard assets.
They buy gold. They buy silver to protect their
wealth. But again, that price jump in 2011 wasn't
because factories suddenly needed more silver.
It was driven by sentiment. So if we just mentally
take those two events off the historical chart,
the Hahn Brothers corner, and the QE fear spike.
What does Silver's price behavior actually look
like? It looks much, much steadier. It's really
fascinating. When you remove those anomalies,
silver's long term price action, it actually
shows patterns that are pretty consistent with
the broader market. It tracks economic cycles.
This is why we have to focus on what's driving
it today. And that means looking at industrial
consumption overwhelmingly. So let's talk about
that utility. What is the actual structural need
for silver in the economy right now? OK, this
is the most important number to remember from
this whole deep dive. Brilliant. Current analysis
shows that industrial demand now accounts for
about 60 % of all global silver consumption.
60%. That's not a small piece of the pie. That
is the pie. It is the dominant factor. It's not
a marginal use case anymore. Compare that to
gold, where it's still mostly about jewelry and
investment. So this huge industrial demand, it's
because of silver's unique properties, right?
Its conductivity is off the charts. Unparalleled
conductivity, yes. And also its antimicrobial
qualities. So what are the big engines consuming
all this silver? Where is it all going? Well,
the list is basically a roadmap for the 21st
century economy. The number one driver, and it's
growing exponentially, is renewable energy. You
mean solar panels? Specifically solar panels.
Silver powder is absolutely crucial for photovoltaic
cells. Without it, they just can't conduct electricity
efficiently. How much silver are we talking about
per panel? It's about 20 grams per panel, which
doesn't sound like a lot. But when you multiply
that by the sheer global scale of solar installation,
It's massive. So as the world keeps pushing towards
net zero goals and this energy transition gets
faster, silver demand is basically locked in.
It has to grow. It's structurally locked in.
Then you have electric vehicle manufacturing.
Where is it in an EV? Electrical connections,
battery management systems, even in the glass
for defrosting. You also have 5G infrastructure,
which needs higher conductivity. And then you
have medical tech. data centers. So these aren't
just, you know, passing trends. These are huge
generational shifts in our infrastructure. Exactly.
But all this demand runs into a really interesting
supply problem. A bottleneck. That's right. And
this is a key point from the World Silver Survey
for 2025. It highlighted a major constraint.
Silver is mostly mined as a byproduct. Okay,
explain what that means in practical terms. If
a huge new solar project needs, I don't know,
a thousand tons of silver, why can't a mining
company just go open a new silver mine? Because
dedicated primary silver mines are actually quite
rare, geologically speaking. Most silver is extracted
alongside other metals like lead, zinc, and copper.
It's the secondary thing they pull out of the
ground. So the supply of silver isn't really
driven by the demand for silver. Exactly. The
supply is inelastic. If demand for solar panels
suddenly doubles, the mining industry can't just
decide to produce more silver. They have to wait
for the demand and the price for zinc or lead
to go up first. So if the global economy slows
down and, say, zinc demand falls, silver production
could actually fall with it. Even if EV and solar
manufacturers are screaming for more silver,
yes, it creates this natural supply squeeze whenever
tech demand is high. That dual identity again.
An indispensable modern metal whose supply is
tied to these older industrial metals. It's a
fascinating dynamic. It really limits how quickly
the supply side can respond, which puts natural
upward pressure on the price. So that 60 % industrial
use provides a strong demand floor. But silver
is still a precious asset. What drives the investment
side of things? That brings us right back to
the macro picture. The investment appeal is still
heavily influenced by, well, economic uncertainty,
geopolitical stress, and most importantly, monetary
policy. The Federal Reserve. Central banks, but
especially the Fed. And when we're talking about
the Fed's impact. We really need to talk about
real interest rates. Can you just quickly break
that down for us? Sure. It's a simple but crucial
concept. The real interest rate is just the nominal
interest rate, the one the Fed sets, minus the
current rate of inflation. So it's the real return
you get on your cash. It's the real return. And
the key thing is that precious metals like silver
and gold are non -yielding assets. They don't
pay you interest. Right. Your silver bar doesn't
send you a dividend check. Exactly. So if real
interest rates are high, if you can get a great
safe return from a treasury bond, then holding
a non -yielding asset like silver becomes less
attractive, there's an opportunity cost. Which
pushes the price down. It tends to. But when
real interest rates fall or even go negative,
that opportunity cost disappears. Suddenly, holding
a hard asset that preserves value becomes much
more attractive. And when these macro shifts
happen, How does silver typically move compared
to gold? It often shows correlated moves but
they're usually more pronounced, more leveraged.
Why is that? It's a smaller market, for one,
and because of that dual identity we keep coming
back to. It's part industrial, part monetary
asset. So when gold moves up on falling rates,
silver tends to move up further and faster. And
we've definitely seen some of that this year
in 2025. The sources point to some pretty big
gains. We have. The rallies in 2025 have pushed
prices to levels we haven't seen in over a decade.
I think the year to date increase was something
like 45 percent. And that momentum is really
supported by. data. We're seeing inflation fears
recede a bit and the market is pricing in fewer
Fed rate hikes. That's effectively lowering the
expectation for real interest rates. So the macro
tailwinds are there sitting on top of that rock
-solid industrial demand floor. That's the picture.
This all leads us perfectly into a really critical
valuation tool that analysts use all the time.
the gold -silver ratio. Let's really unpack this.
Absolutely. It's a simple idea, but it's a very
profound metric. So what is it? It's just a measure
of how many ounces of silver it takes to buy
one single ounce of gold. It gives you a sense
of relative value. And where is that ratio sitting
right now in 2025? Today, it's floating around
80 to 86. So you need about 80 to 86 ounces of
silver to buy one ounce of gold. OK, 80 to 1.
Is that high or low? What's the context? It's
very high, historically speaking. term historical
average, going back centuries, is much lower,
typically somewhere between 50 and 60 to 1. So
why is that historical average so important?
Does the ratio always try to get back to that
50 or 60 mark? It's a powerful tendency. It's
a classic case of mean reversion. When the ratio
gets stretched really wide, like it is now, it's
often a signal that one metal is getting ahead
of the other, or one is lagging. And historically,
the relationship between the two just sort of
pulls it back toward that average. It acts like
a magnet, yeah. So an elevated ratio of 80 to
1 suggests that silver is basically undervalued
relative to gold. That is precisely the implication.
Historically, when we see the ratio this high,
it has often preceded these big catch up rallies
for silver, where it gains ground really fast
against gold and the ratio tightens. But analysts
don't just look at this number in a vacuum, right?
How does it connect back to that industrial demand
story? Well, that's what makes it so compelling
right now. The fact that the ratio is so high,
80 to one, in spite of the intense structural
and growing industrial demand for silver, it
just underscores the potential undervaluation.
the market still hasn't fully priced in the reality
of these supply constraints and the demand from
the green energy and tech transitions. The high
ratio basically confirms the fundamental story.
Okay, we have to keep a balanced view here. The
fundamental drivers seem really strong, but what
are the short -term risks? What could still create
instability? You always have to monitor the external
factors. I mean, an unexpected move from the
Federal Reserve on rates could still shock the
market. Because it would instantly change that
real interest rate calculation. Instantly. And
currency fluctuations are still key. A much stronger
U .S. dollar typically puts pressure on metals
prices. And what about on the industrial side?
Are there any risks to that 60 % demand figure?
The big one, the one you always have to keep
in the back of your mind, is technological substitution.
Someone invent something better? Right. We have
to watch for advancements in material science.
If, for example, a cheaper, more abundant material
was developed that could replace silver in solar
cells with the same efficiency, that would be
a game changer. Is there anything on the horizon?
Right now, no. There's no viable substitute that
can match Silver's performance, but you can never
stop watching innovation. This has been an incredibly
thorough deep dive. So let's bring it all home.
What's the main takeaway for someone trying to
get a clear picture of this commodity? I think
the main takeaway is this. Silver today is a
mature market. Its price is shaped by two very
real anchors, fundamental industrial need on
one side and a clear macroeconomic policy on
the other. And the old story, the shadow of speculative
madness from the Hunt Brothers. It's brief for
headlines, but it really doesn't define how silver
behaves today. So understanding that the volatility
myth comes from a couple of historical outliers,
while 60 % of today's demand comes from these
essential growing high tech industries. That's
the key. It forces you to stop thinking of silver
as just this old archaic asset and start seeing
it as a critical piece of our future infrastructure.
And that leads us to our final provocative thought
for you to think about. If 50 percent of silver's
demand is structurally locked into the global
energy transition, we're talking solar, EVs,
5G, what does that ongoing non -negotiable need
imply for silver's long term behavior compared
to a purely monetary asset like gold? Its path
forward might have less to do with fear and more
to do with fundamental global growth. The utility
is the anchor now. A lot to think about there.
We'll see you on the next Deep Dive.