Silver has been attracting renewed attention as a safe haven as COVID-19 continues to spread.
Although the price of silver continues to display its hallmark volatility, many silver-focused investors believe that a bull market for the precious metal is on its way.
Experts are optimistic, and as a result, some market watchers are beginning to price forecast and ask themselves, “What was the highest price for silver?”
The answer to that question reveals how much potential there is for the silver price to rise. Read on for a look at how historical silver prices have moved, and what that means for both the current silver price and the white metal’s price in the future.
How is silver traded?
Before discovering what the highest silver price ever was, it’s worth looking at how the precious metal is traded. Knowing the mechanics behind historical silver prices in terms of how the metal changes hands can be useful in understanding why and how its price changes.
Put simply, silver bullion is traded in dollars and cents per ounce, with market activity taking place worldwide at all hours, resulting in a live silver price. Key commodities markets like New York, London and Hong Kong are just a few locations where investors trade the metal. London is considered the center of physical silver trade, while the COMEX division of the New York Mercantile Exchange, or NYMEX, is where most paper trading is done.
There are two popular ways to go about investing in silver. The first is through purchasing silver bullion products such as bullion bars, bullion coins and silver rounds. Physical silver is sold on the spot market, meaning that in order to invest in silver this way, buyers pay a specific price for the metal — the silver price per ounce — and then have it delivered immediately.
The second is accomplished through paper trading, which is done via the futures market, with participants entering into futures contracts for the delivery of silver in the future at an agreed upon price. In such contracts, two positions can be taken: a long position to accept delivery of the metal or a short position to provide delivery of the metal.
Paper trading might sound like a strange route to take when one wants to invest in silver, but it can provide investors with flexibility that they wouldn’t get from buying and selling bullion.
The most obvious advantage is perhaps the fact that trading in the paper markets means silver investors can benefit long term from holding silver without needing to store it. Furthermore, futures trading can offer more financial leverage in that it requires less capital than trading in the physical market.
It’s worth noting that supply chain disruptions caused by the coronavirus have recently made it very difficult to buy physical silver — travel restrictions and other factors have left dealers with limited product to sell, and have pushed up premiums on physical silver. That means even those who can find silver bullion products for sale may see much higher markups than usual.
As a final point, market participants should be aware that they can also invest in silver through an exchange-traded fund (ETF). Investing in a silver ETF is similar to trading a stock on an exchange, and there are several silver ETF options to choose from. For instance, some ETFs focus solely on physical silver bullion, while others focus on silver futures contracts.
Still others focus on the silver-mining market itself or follow live silver prices. It is important to keep in mind that you will not own any physical silver when investing in any ETF platforms — even a silver ETF that tracks physical silver cannot be redeemed for tangible white metal.
Historical silver price action
Silver hit US$48.70 per ounce, the highest silver price to date, towards the end of the 1970s.
However, the purchase price didn’t exactly reach that level by honest means. As Investopedia explains, the metal’s bid price was driven by the Hunt brothers, two wealthy traders who attempted to corner the market by buying not only physical silver, but also silver futures. They then took delivery of that silver instead of taking legal tender in the form cash settlements. Their exploits ultimately ended in disaster: On March 27, 1980, they missed a margin call and the silver market price plunged to US$11.
Despite that price action, silver wouldn’t test that high again until 2011. The commodity price uptick came on the back of very strong silver investment demand, and was more than double the 2009 average silver price of US$14.67. The chart below from Kitco spans from the start of January 2011 to late August 2021. It shows that the silver price reached US$47.94 in April 2011 before plummeting in the years that followed.
The chart also shows the current upward trend in the silver price, which has been spurred on by the economic uncertainty surrounding the COVID-19 pandemic. The price of silver breached the key US$26 level in early August 2020, and soon after tested the US$30 level.
Although the silver price has fallen to the US$23 level as of August 2021, market watchers are still curious as to when the silver price wil continue its upward trajectory? Only time will tell, but Collin Plume, CEO of Noble Gold Investments, is confident silver bugs in are in for a treat. In a July 2021 interview with the Investing News Network (INN), Plume said that he wouldn’t be surprised to see silver break through the US$40 level in the next 12 to 18 months on rising investment demand and industrial supply shortages.
David H. Smith, senior analyst at the Morgan Report, had even more bullish sentiments in an interview with INN. Smith said many people he respects think the price of silver could rise above US$50 in 2021.
Silver price chart via Kitco.
Like other metals, the silver spot price is most heavily influenced by supply and demand dynamics. However, as the stats above illustrate, the silver price can be very volatile. That is partially due to the fact that the metal is subject to both investment and industrial demand within the global markets.
In other words, it’s bought by investors interested in using it as a store of wealth as well as by manufacturers looking to use it for different applications. Those applications are incredibly varied — silver has diverse technological applications and is used in devices like batteries and catalysts, but it’s also used in medicine and in the automotive industry.
In terms of supply, in 2020, the world’s three top producers of the metal were Mexico, Peru and China. Interestingly, even in those countries the white metal is usually produced as a by-product — for instance, a mine producing primarily gold might also have silver output.
Beware silver price manipulation
As a final note on the price of silver and buying silver bullion, it’s important for investors to be aware that manipulation of bullion prices is a major issue in the space.
In 2015, 10 banks were hit in a US probe on precious metals manipulation. Evidence provided by Deutsche Bank (NYSE:DB) showed “smoking gun” proof that UBS Group (NYSE:UBS), HSBC Holdings (NYSE:HSBC), the Bank of Nova Scotia (NYSE:BNS) and other firms were involved in rigging silver rates in the market from 2007 to 2013.
JPMorgan Chase (NYSE:JPM) has been long at the center of silver manipulation claims as well. For years the company has been in and out of court for the accusations. In a recent case, JPMorgan settled a lawsuit over alleged precious metals “spoofing” for an undisclosed amount, The bank agreed to pay US$920 million to resolve federal agency probes regarding manipulation of multiple markets, including precious metals.
In 2014 the London Silver Market Fixing stopped administering the London silver fix, which had been used for over a century to fix the price of silver. It was replaced by the LBMA Silver Price, which is run by the LBMA, CME Group (NASDAQ:CME) and Thomson Reuters (TSX:TRI,NYSE:TRI), in a bid to increase market transparency.
Furthermore, market watchers like Ed Steer have said that the days of silver manipulation are numbered, and that the market will see a significant shift when the time finally comes.
While there’s a concrete answer to the question, “What was the highest price for silver?” it’s anyone’s guess whether it will reach those heights once again. Even so, many market watchers say prospects are bright for buying silver — and no matter the current state of the market, investors will no doubt be watching to see how the metal fares this year and beyond.
This is an updated version of an article first published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, currently hold no direct investment interest in any company mentioned in this article.
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