Gold 0.21%
£3,218.49 OZ
Silver -2.37%
£48.61 OZ
Platinum -0.49%
£1,360.89 OZ
The Silver Britannia is capital gains tax free in the UK, making is a very popular choice with UK investors
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When discussing precious metals, gold often takes the spotlight, revered for its value and historical significance. However, silver, often considered gold’s “little brother,” plays a crucial role in both industry and investment. Yet, silver’s price is significantly lower than gold’s. As of September 2024, the price of gold hovers around \$1,900 per ounce, while silver trades at approximately \$24 per ounce. This stark difference raises the question: Why is silver less expensive than gold? Understanding this discrepancy requires exploring several key factors, including supply and demand, industrial uses, and historical perceptions
These facts highlight the contrasts between the availability of Silver and Gold:
Global stock of Gold above-ground is estimated to be about 201,000 metric tons
Silver’s above-ground stock is approximately 1.74 million metric tons
In 2023, 50% of gold demand came from jewelry, while central banks and investors accounted for around 30% of the demand
Silver’s demand is more diversified, with about 50% of its demand stemming from industrial applications, including electronics, solar panels, and medical devices. The remainder is divided between jewelry, silverware, and investment
Gold is estimated to be about 0.004 parts per million (ppm) in the Earth’s crust
Silver is more abundant, with an estimated concentration of 0.075 ppm
This means that silver is roughly 18 times more abundant in the Earth’s crust than gold
The global annual production of gold is approximately 3,000 metric tons
For silver, the annual production is much higher, around 25,000 metric tons
The above-ground stock of silver is about 8.7 times larger than that of gold.
Gold has been treasured by civilizations for millennia, often seen as a symbol of wealth, power, and divine favor. This historical and cultural reverence has elevated gold to a status beyond its material value. Throughout history, gold has been used as currency, a standard for monetary systems (such as the Gold Standard), and a store of value in times of economic uncertainty.
Silver, while also valued historically, has never reached the same level of cultural or financial significance as gold. It has been used as currency, but more as a standard for everyday transactions rather than as a reserve of wealth. For example, the term “silver standard” was used in the 19th and early 20th centuries to describe a monetary system where the value of currency was directly tied to the value of silver. However, silver was eventually replaced by gold in most monetary systems due to gold’s superior ability to store value over long periods
Silver’s extensive industrial applications are a double-edged sword when it comes to its pricing. On the one hand, industrial demand ensures a consistent market for silver, particularly in sectors like electronics, solar energy, and medicine. For instance, nearly 10% of all silver demand comes from the photovoltaic (solar panel) industry, which is crucial for the transition to renewable energy sources
On the other hand, this industrial reliance can suppress silver’s price. Unlike gold, which is primarily hoarded or worn, silver is often consumed in industrial processes. Once used, it can be challenging and expensive to recover. This means that a significant portion of mined silver is not available to re-enter the market, unlike gold, which is rarely “used up” and can be recycled indefinitely. Consequently, while industrial demand supports silver prices, it does not drive them up to the same level as gold, which is more heavily influenced by investment demand
Another factor that affects the price difference between silver and gold is the market structure and the potential for manipulation. Silver markets are smaller and less liquid than gold markets, making them more susceptible to price swings due to speculative activity or manipulation by large traders.
Historically, there have been instances where silver prices were artificially suppressed or inflated due to speculative actions by large market players. One of the most famous examples occurred in the late 1970s when the Hunt brothers attempted to corner the silver market, driving the price from $6 per ounce in early 1979 to a peak of nearly $50 per ounce in January 1980. However, such actions are not sustainable in the long term and often lead to significant price corrections
Gold is often viewed as a hedge against inflation and currency devaluation, which increases its demand during economic instability. Central banks and investors flock to gold as a safe haven during times of economic uncertainty, driving up its price. Silver, while also considered a hedge against inflation, does not benefit as much from this status. During periods of high inflation or currency devaluation, the demand for gold spikes much more dramatically than for silver, further widening the price gap.
The cost of mining precious metals like gold and silver varies depending on several factors, including the location of the mine, the type of deposit, and the mining company’s operational efficiency. However, we can provide approximate averages for the costs of mining gold and silver as of recent years:
The average all-in sustaining cost (AISC) of mining gold, which includes not only the direct production costs but also expenses like exploration, sustaining capital, and mine closure costs, is approximately $1,200 to $1,300 per ounce.
Some of the most efficient mines can produce gold at a lower AISC of around $900 to $1,000 per ounce, while less efficient operations might see costs exceed $1,400 per ounce.
The average AISC of mining silver is generally much lower than that of gold, typically ranging between $14 to $18 per ounce.
Like gold, the costs can vary; some low-cost operations might produce silver for as little as $10 per ounce, while higher-cost operations could see costs approaching $20 per ounce
These figures illustrate why gold is more expensive than silver, not only due to its rarity but also because it is more costly to mine. Additionally, the market prices of these metals are typically higher than the AISC, allowing mining companies to profit from their operations
Auronum stocks some of the finest Gold coins available in the market with new stock added to our website daily. Our team also benchmark prices against other top-tier bullion companies to ensure that our prices are always competitive
