Investment decisions based on the Silver Institute's supply and demand data can turn out badly.

In a previous article we have discussed that gold trades more like a currency than a commodity. An approach of a gold market balance, which produces a surplus or deficit, is therefore not appropriate nor indicative of price direction. Because silver is both a monetary metal and an industrial commodity its supply and demand dynamics require special attention. My conclusion is that silver, just like gold, trades more like a currency than a commodity.

Silver Is a Currency

In ancient Sumer, roughly 5,000 years ago, silver was a unit of account, a medium of exchange for large purchases, and a store of value. Silver has been used as money in countless civilizations ever since. Because silver is durable and valuable very little gets lost. More than 90% of all silver ever mined is still above ground.

Since the 19th century silver is also being used for industrial applications. Currently, CPM Group estimates that half of all above ground silver is in industrial products, and the other half is in coins, jewelry, silverware and investment bars. The total above ground amount of silver is about 1.6 million metric tonnes.