1 00:00:02,360 --> 00:00:08,360 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:08,760 --> 00:00:11,400 Speaker 2: I'm Stephen Carroll and this is Here's Why, where we 3 00:00:11,440 --> 00:00:13,680 Speaker 2: take one news story and explain it in just a 4 00:00:13,720 --> 00:00:19,919 Speaker 2: few minutes with our experts here at Bloomberg. Silver is 5 00:00:19,960 --> 00:00:22,560 Speaker 2: up sixty three percent in January. Now it's down almost 6 00:00:22,600 --> 00:00:25,320 Speaker 2: three percent in the year. This is just getting started. 7 00:00:25,680 --> 00:00:28,800 Speaker 1: In terms of commodity price, we saw price one. 8 00:00:28,760 --> 00:00:31,760 Speaker 2: Up and down and up. You know, a lot of volatility. 9 00:00:31,840 --> 00:00:34,760 Speaker 2: Doesn't matter whether it's crude oil or gold or silver. 10 00:00:35,080 --> 00:00:38,160 Speaker 3: You have to think about silver's use in the buildout 11 00:00:38,280 --> 00:00:43,080 Speaker 3: of AI, silver's use in the buildout of electrification, and 12 00:00:43,159 --> 00:00:45,920 Speaker 3: so when you think about it in that context, silver 13 00:00:46,080 --> 00:00:49,760 Speaker 3: does start to look really attractive. On the long term. 14 00:00:49,680 --> 00:00:53,280 Speaker 2: Front, silver is having a moment, or rather a series 15 00:00:53,320 --> 00:00:56,480 Speaker 2: of moments. The precious metal almost tripled in value in 16 00:00:56,480 --> 00:01:00,840 Speaker 2: twenty twenty five, far out shining gold record breaking rally, 17 00:01:01,280 --> 00:01:04,000 Speaker 2: but January though, it's worst day on records, when it's 18 00:01:04,000 --> 00:01:07,520 Speaker 2: plunged by as much as thirty six percent. Silver is 19 00:01:07,560 --> 00:01:10,760 Speaker 2: often bundled together with gold as a haven asset, but 20 00:01:10,800 --> 00:01:14,959 Speaker 2: assessing its value is more complex. Here's why silver is 21 00:01:15,000 --> 00:01:19,960 Speaker 2: on a wild ride. Our reporter Charlie Wells joins us. 22 00:01:19,959 --> 00:01:23,080 Speaker 2: Now for more Charlie. First of all, how similar an 23 00:01:23,080 --> 00:01:25,480 Speaker 2: investment is silver to gold. 24 00:01:25,720 --> 00:01:28,000 Speaker 1: Well, they often get grouped together, and that really is 25 00:01:28,040 --> 00:01:31,240 Speaker 1: because you know, they're both precious metals. They have played 26 00:01:31,319 --> 00:01:34,320 Speaker 1: a role in finance really since antiquity, and that really 27 00:01:34,360 --> 00:01:38,520 Speaker 1: comes down to the sort of essential nature of these 28 00:01:38,560 --> 00:01:42,480 Speaker 1: two shiny things. Right throughout history, humans who have been 29 00:01:42,520 --> 00:01:44,680 Speaker 1: kind of trucking and bartering for a very long time 30 00:01:45,080 --> 00:01:48,480 Speaker 1: have effectively found with both of these metals, you can 31 00:01:48,520 --> 00:01:51,400 Speaker 1: basically say, hey, look this is rare, this is pretty. 32 00:01:51,720 --> 00:01:53,320 Speaker 1: You can use it to look at, you can use 33 00:01:53,360 --> 00:01:55,520 Speaker 1: it to make jewelry, and I'm going to trade this 34 00:01:55,680 --> 00:01:58,760 Speaker 1: with you if I want to get something else. So 35 00:01:58,800 --> 00:02:02,040 Speaker 1: that's the kind of long, very long running story there. 36 00:02:02,400 --> 00:02:04,200 Speaker 1: They've really kind of come together to be known as 37 00:02:04,200 --> 00:02:06,720 Speaker 1: something of a haven asset because they do have that 38 00:02:06,840 --> 00:02:10,480 Speaker 1: long history. They predate fiat currency, They of course pre 39 00:02:10,560 --> 00:02:14,400 Speaker 1: date stocks, bonds, even bitcoin. They tend to see the 40 00:02:14,520 --> 00:02:16,639 Speaker 1: price go up in the market during times when there's 41 00:02:16,680 --> 00:02:19,360 Speaker 1: a lot of concern about geopolitical risk. 42 00:02:19,840 --> 00:02:21,920 Speaker 2: So let's talk a little bit about the differences. As 43 00:02:21,960 --> 00:02:24,080 Speaker 2: you say, both metals can be stored of value they've 44 00:02:24,080 --> 00:02:27,280 Speaker 2: been around a long time. But silver also has some 45 00:02:27,440 --> 00:02:29,919 Speaker 2: practical uses that gold doesn't. 46 00:02:30,240 --> 00:02:33,520 Speaker 1: What are they so, Stephen, Silver has the highest known 47 00:02:33,639 --> 00:02:37,480 Speaker 1: electrical and thermal conductivity of all metals, so it's not 48 00:02:37,520 --> 00:02:39,960 Speaker 1: just something that looks pretty. It's also something that is 49 00:02:40,160 --> 00:02:43,480 Speaker 1: very valuable in a lot of industrial use cases, and 50 00:02:43,560 --> 00:02:47,040 Speaker 1: particularly in a lot of the sort of infrastructure of 51 00:02:47,080 --> 00:02:51,000 Speaker 1: the future type businesses and types of products that have 52 00:02:51,040 --> 00:02:53,640 Speaker 1: been coming down the line. So silver gets used in 53 00:02:53,720 --> 00:02:58,720 Speaker 1: photovoltaic cells for solar panels, it's used in semiconductors, and 54 00:02:58,760 --> 00:03:01,440 Speaker 1: as we know, there's been so much much excitement about 55 00:03:01,480 --> 00:03:04,040 Speaker 1: the build out of these AI data centers, and you 56 00:03:04,080 --> 00:03:07,200 Speaker 1: really need those semiconductors and you need silver for that, 57 00:03:07,680 --> 00:03:11,200 Speaker 1: and also electric vehicles. So you get this twin phenomenon 58 00:03:11,320 --> 00:03:15,520 Speaker 1: happening where you've got geopolitical risk questions increase the price 59 00:03:15,840 --> 00:03:18,960 Speaker 1: of precious metals in the market. But then with silver 60 00:03:19,160 --> 00:03:22,480 Speaker 1: different from gold, you get this industrial use case that 61 00:03:22,520 --> 00:03:24,960 Speaker 1: a lot of traders, at least until recently, have been 62 00:03:25,040 --> 00:03:26,760 Speaker 1: latching onto silvers. 63 00:03:26,760 --> 00:03:29,280 Speaker 2: Did a fraction of the price of gold, though, given 64 00:03:29,320 --> 00:03:31,960 Speaker 2: the fact that it has these more practical uses with 65 00:03:32,120 --> 00:03:35,880 Speaker 2: parts of the economy that are growing, shouldn't that make 66 00:03:35,920 --> 00:03:38,680 Speaker 2: it more valuable? Should be expecting that to be reflected 67 00:03:38,720 --> 00:03:39,200 Speaker 2: in the price. 68 00:03:39,600 --> 00:03:41,680 Speaker 1: Well, that's a really good question, and you might think 69 00:03:41,720 --> 00:03:44,440 Speaker 1: that given a lot of the excitement recently. I think 70 00:03:44,600 --> 00:03:47,160 Speaker 1: one of the key issues is just the factor of 71 00:03:47,160 --> 00:03:50,480 Speaker 1: supply and demand. So one research house put out a 72 00:03:50,480 --> 00:03:54,440 Speaker 1: report recently talking just about the prevalence of these precious 73 00:03:54,480 --> 00:03:57,200 Speaker 1: metals in the Earth's crust. And so if you think 74 00:03:57,240 --> 00:04:00,480 Speaker 1: about gold that is estimated to occur at a about 75 00:04:00,520 --> 00:04:03,960 Speaker 1: four parts per billion in the Earth's crust. Compare that 76 00:04:04,040 --> 00:04:07,280 Speaker 1: to silver, it's seventy five parts per billion. So this 77 00:04:07,440 --> 00:04:10,200 Speaker 1: just kind of feeds into that narrative about gold. It's 78 00:04:10,360 --> 00:04:14,000 Speaker 1: rarer and so therefore the price is higher. There's also 79 00:04:14,040 --> 00:04:16,080 Speaker 1: the issue of the economy. So there's a flip to 80 00:04:16,120 --> 00:04:18,400 Speaker 1: the story that I was telling you about this industrial 81 00:04:18,480 --> 00:04:21,440 Speaker 1: use case about how it's needed in data centers and 82 00:04:21,480 --> 00:04:23,839 Speaker 1: the build out of those data centers, in solar panels, 83 00:04:23,839 --> 00:04:27,560 Speaker 1: in evs. That's great when the economy is going up, 84 00:04:27,600 --> 00:04:29,679 Speaker 1: when there's a lot of growth, but when there starts 85 00:04:29,760 --> 00:04:32,839 Speaker 1: to be concerns about a deceleration, when maybe you know 86 00:04:32,920 --> 00:04:36,200 Speaker 1: companies are backing out of say they're ev plans. Maybe 87 00:04:36,200 --> 00:04:40,080 Speaker 1: there's less investment being made in those photovoltaic cells that 88 00:04:40,200 --> 00:04:42,440 Speaker 1: can dampen the price of silver. So it's got that 89 00:04:42,640 --> 00:04:46,039 Speaker 1: upside tied to the economy, but also the downside. And 90 00:04:46,080 --> 00:04:48,520 Speaker 1: I think something else that's really important here around the 91 00:04:48,520 --> 00:04:49,880 Speaker 1: world is just culture. 92 00:04:50,080 --> 00:04:50,240 Speaker 3: Right. 93 00:04:50,279 --> 00:04:53,279 Speaker 1: Culture plays a huge role in asset prices, you know, 94 00:04:53,279 --> 00:04:55,760 Speaker 1: whether we're thinking about it or not. And over that 95 00:04:55,920 --> 00:04:59,440 Speaker 1: long period of history, from antiquity to now, society really 96 00:04:59,480 --> 00:05:03,159 Speaker 1: has just for many reasons valued gold more than silver. 97 00:05:03,680 --> 00:05:07,760 Speaker 2: So what role do smaller individual or retail buyers play 98 00:05:08,040 --> 00:05:09,719 Speaker 2: in the price moves that we've seen. 99 00:05:10,000 --> 00:05:13,200 Speaker 1: That's been one of the interesting trends that has fed 100 00:05:13,320 --> 00:05:16,120 Speaker 1: into a lot of the volatility over the past few 101 00:05:16,160 --> 00:05:20,320 Speaker 1: months has been this real unprecedented demand from retail investors. 102 00:05:20,320 --> 00:05:22,960 Speaker 1: That's kind of what makes the past few years so 103 00:05:23,040 --> 00:05:26,640 Speaker 1: much different from previous times when we've seen big swings 104 00:05:26,640 --> 00:05:28,920 Speaker 1: in the price. Right, So you get this cult following 105 00:05:29,000 --> 00:05:32,120 Speaker 1: among retail investors. They are connected with each other on 106 00:05:32,160 --> 00:05:36,440 Speaker 1: the likes of Reddit, on discord, talking about silver, feeding 107 00:05:36,560 --> 00:05:40,000 Speaker 1: each other themes and stories about it. And you've also 108 00:05:40,080 --> 00:05:43,279 Speaker 1: got more products that's different from previous cycles where you 109 00:05:43,320 --> 00:05:46,640 Speaker 1: may have had bullion just say stored in vaults or 110 00:05:47,040 --> 00:05:51,120 Speaker 1: people keeping coins or bars in safe places. You've now 111 00:05:51,160 --> 00:05:54,920 Speaker 1: got ETFs. So you've got these ETFs, some of which 112 00:05:55,120 --> 00:05:58,200 Speaker 1: hold physical silver, and that makes it a lot easier 113 00:05:58,240 --> 00:06:01,599 Speaker 1: for retail traders to get involved. You've got silver mining 114 00:06:01,680 --> 00:06:04,960 Speaker 1: companies either you know, retail traders buying and selling individual 115 00:06:05,000 --> 00:06:08,039 Speaker 1: stocks or as part of ETFs as well. So it's 116 00:06:08,040 --> 00:06:11,800 Speaker 1: a much broader church getting involved now. But that can 117 00:06:11,880 --> 00:06:14,359 Speaker 1: actually lead to a lot of this volatility, right because 118 00:06:14,400 --> 00:06:17,840 Speaker 1: you have more people, maybe more people with less experience 119 00:06:18,360 --> 00:06:21,560 Speaker 1: getting into the market and maybe less risk tolerance, despite 120 00:06:21,600 --> 00:06:24,520 Speaker 1: the fact that silver is known to be very volatile, 121 00:06:24,960 --> 00:06:26,720 Speaker 1: and some of the new products that I was talking 122 00:06:26,760 --> 00:06:29,840 Speaker 1: about actually use leverage, and so that can just make 123 00:06:29,880 --> 00:06:33,560 Speaker 1: the swings even more dramatic. So that contributed to a 124 00:06:33,560 --> 00:06:35,840 Speaker 1: lot of the upswings that we saw where you had 125 00:06:35,880 --> 00:06:39,000 Speaker 1: retail traders getting into some of these levered products. But 126 00:06:39,080 --> 00:06:42,120 Speaker 1: again because of force selling, that can lead to the 127 00:06:42,200 --> 00:06:43,320 Speaker 1: downdraft as well. 128 00:06:43,960 --> 00:06:46,919 Speaker 2: Okay, so we have history, we have the new industrial 129 00:06:47,040 --> 00:06:49,800 Speaker 2: use cases for silver. We have these new investment products 130 00:06:49,839 --> 00:06:52,440 Speaker 2: that are allowing us to invest in silver in a 131 00:06:52,440 --> 00:06:54,800 Speaker 2: different way. What are the other risks and rewards, and 132 00:06:54,839 --> 00:06:57,400 Speaker 2: we're thinking about silver and how it performs. 133 00:06:57,839 --> 00:07:00,200 Speaker 1: Part of this is just the silver market is thiner 134 00:07:00,279 --> 00:07:03,679 Speaker 1: than the market for gold, so that just makes volatility 135 00:07:03,920 --> 00:07:06,560 Speaker 1: more striking, and that can lead to these really high 136 00:07:06,600 --> 00:07:10,320 Speaker 1: and really low price wings, especially compared to gold. So 137 00:07:10,360 --> 00:07:13,000 Speaker 1: when gold is down, silver can be down a lot 138 00:07:13,120 --> 00:07:16,240 Speaker 1: more because of some of those levered products. There's also 139 00:07:16,280 --> 00:07:18,800 Speaker 1: the economic issue that I talked about that because you 140 00:07:18,920 --> 00:07:22,480 Speaker 1: have this use case for silver when the economy is growing, 141 00:07:22,880 --> 00:07:26,360 Speaker 1: when there are concerns about the economy maybe contracting, when 142 00:07:26,360 --> 00:07:29,840 Speaker 1: there are concerns about geopolitics playing into the economy, you 143 00:07:29,920 --> 00:07:34,000 Speaker 1: can see a pullback on the price of silver, exacerbated 144 00:07:34,040 --> 00:07:36,520 Speaker 1: by a lot of the retail sentiment. And then there's 145 00:07:36,560 --> 00:07:39,480 Speaker 1: also this issue of interest rates. Right, one of the 146 00:07:39,520 --> 00:07:42,840 Speaker 1: issues that investors see when interest rates are going higher 147 00:07:43,120 --> 00:07:47,040 Speaker 1: is that silver doesn't pay interest, So the opportunity of 148 00:07:47,200 --> 00:07:51,320 Speaker 1: holding precious metals, of holding silver, of holding gold, that 149 00:07:51,360 --> 00:07:53,760 Speaker 1: goes up. And then I just also need to mention 150 00:07:53,920 --> 00:07:58,320 Speaker 1: just the cost of maintaining these physical goods as opposed 151 00:07:58,360 --> 00:08:01,160 Speaker 1: to say financialized products. Right, if you're going to hold silver, 152 00:08:01,560 --> 00:08:03,000 Speaker 1: you got to keep it safe. You have to make 153 00:08:03,040 --> 00:08:04,920 Speaker 1: sure that no one comes in and takes it from 154 00:08:04,960 --> 00:08:07,440 Speaker 1: your home. You have to think about how you transport that, 155 00:08:07,840 --> 00:08:10,160 Speaker 1: and so again a lot of these risks start to 156 00:08:10,160 --> 00:08:13,120 Speaker 1: come up, particularly when interest rates start going up. 157 00:08:13,520 --> 00:08:16,360 Speaker 2: Okay, Charlie Wells, our reporter, thank you very much. For 158 00:08:16,480 --> 00:08:19,360 Speaker 2: more explanations like this from our team of three thousand 159 00:08:19,560 --> 00:08:22,480 Speaker 2: journalists and analysts around the world, go to Bloomberg dot 160 00:08:22,520 --> 00:08:27,440 Speaker 2: com slash explainers. I'm Stephen Carol. This is here's why. 161 00:08:27,800 --> 00:08:30,240 Speaker 2: I'll be back next week with more. Thanks for listening.