Soaring Past Gold and Bitcoin... The Safe Asset That Has Already Jumped 33% This Year

Silver Up 33% So Far This Year
Silver Bars and Silver Banking Also See Sharp Growth

Source: Korea Gold Exchange

As gold prices reach all-time highs and attract attention as an investment destination, interest in silver is also surging. The international price of silver has hit its highest level in 13 years since 2011. This year, silver has shown a higher rate of increase than either gold or Bitcoin, and sales of "silver bars" and "silver banking" through domestic banks have also risen.

According to the financial sector on September 18, the cumulative sales of silver bars at KB Kookmin Bank, Shinhan Bank, Woori Bank, and NH Nonghyup Bank-which are the commercial banks selling silver bars-reached 5.69603 billion won as of September 16. This is about seven times higher than last year’s total sales of 799.81 million won. Each bank has already achieved more than double last year’s sales in less than three quarters.

Shinhan Bank, the only domestic bank to offer the silver banking product "Silver Issue," recorded 22,180 accounts as of September 16, surpassing the 20,000 mark. This is an increase of 3,661 accounts in one year, up from 16,557 accounts on September 1 last year. The balance also rose by 95%, from 43.4 billion won to 84.7 billion won.

The main reason silver-related products are gaining attention as a financial strategy is the rise in international silver prices. According to the New York Mercantile Exchange, the international price of silver stood at $42.92 per ounce as of September 16 (local time). This is the highest since 2011, and since the beginning of the year, silver has risen by 33%, outpacing gold (29%) and Bitcoin (22%). Expanding the time frame to the past year, silver prices have climbed by as much as 55%. Domestic silver prices are also on the rise. According to the Korea Gold Exchange, one don (3.75g) of silver is currently priced at 8,190 won.

Typically, silver prices tend to move in tandem with gold prices, but recently, industrial demand has fueled a sharper rise in silver than gold. Unlike gold, more than half of all silver is used for industrial purposes, and steady demand is being generated as it is essential in eco-friendly energy, electric vehicles, and artificial intelligence (AI)-related fields. According to Hana Institute of Finance, industrial demand for silver has increased by nearly 40% over the past decade.

Supply conditions are also a factor driving up silver prices. Only a quarter of silver is produced directly from silver mines, while about 70% is produced as a by-product of non-ferrous metals such as gold and copper. With such low supply elasticity, and as environmental regulations and the spread of ESG (Environmental, Social, and Governance) management restrict silver mine development, the inelasticity of silver supply is increasing.

There is a prevailing outlook that silver prices will continue to rise. This is due to the perception of silver as an undervalued safe asset compared to gold, as well as growing moves by countries to strategically utilize silver at the national level. The gold-to-silver ratio, which measures the value of silver relative to gold, is currently around 1 to 90, a historically very low level. The Central Bank of Russia, for example, has officially announced plans to include silver in its national reserve assets by the end of 2024, expanding its use as a strategic asset.

Hwang Sunkyoung, a researcher at Hana Institute of Finance, stated, "As interest in safe assets grows and gold prices continue to soar, silver is gaining attention as an alternative. Technological advancements, the expansion of AI-based infrastructure, the spread of electric vehicles, and the transition to eco-friendly energy will further accelerate the growth in silver demand going forward."