Precious metal prices have been on a rollercoaster ride.
Early in the week, gold and silver were pushing record highs but they later pulled back.
It comes as lines of precious metal enthusiasts snake along the streets of Melbourne and Sydney, trying to stake their own gold claim, raising the perennial question that accompanies investment frenzies: Is it worth the hype?
Customers queue outside ABC Bullion in Sydney’s Martin Place on Wednesday. (ABC News: David Taylor)
“It is worth what someone thinks they’ll be able to sell it for at some point in the future,” independent economist Saul Eslake said.
“Some people say that when ordinary retail investors are jumping on a bandwagon like this, that’s the time for the professionals and the big players to be getting out.“
But central-bank buying of precious metals remains strong.
Despite the elevated gold price, for example, central banks added 10 tonnes to global reserves in July, according to the World Gold Council.
While gold continues to be viewed as a safe haven for investors due to its status as a store of wealth, the less valuable precious metal, silver, has enjoyed a run for other reasons.
Silver has been increasingly sought for its use in military hardware, like jet fighters and artificial intelligence, and applications in renewable energy.
Mr Eslake told The Business there was simply not enough silver to go around.
“There’s industrial demand for silver,” he said.
“Silver has a role in certain types of advanced chips that gold doesn’t and there’s more demand for those coming from, among other things, the AI revolution.
“Silver has some applications in military purposes as well, which gold doesn’t, and governments are spending more on their militaries.”
Silver has had quite the journey over recent decades.
A silver boom during the 1970s ended with the so-called Silver Thursday crash.
Decades later, the years leading up to and during the global financial crisis saw another silver price boom and bust.
But fast-forward to this month, and the price of silver is back near record highs.
“I think it’s this combination of a safe haven in times of uncertainty, a hedge against fears of inflation and growing industrial demand that’s behind this extraordinary rise in the price of silver,” Mr Eslake said.
The price of silver plunged 8 per cent earlier this week.
While that sparked fears the silver bubble may be popping, analysts who spend their days looking at silver price charts, trying to forecast the next move in the precious metal market, say the so-called technical analysis suggests the price has further to climb.
Technical analysts examine charts of price movements to discern patterns and trends in the market.
“Silver [has just] broken out above that key $US50 ($77) level that it hit first in 1980 and then again in 2011,” Liberty Bullion’s Samuel Lawrie said.
The longer-term decline of the US dollar this year, partly due to lower interest rates and soaring government debt, has also pushed the silver price higher.
Can Australian economy ride latest silver boom?
Gold is one of Australia’s more important exports, behind other well-known commodities like iron ore, coal and LNG.
“We don’t have anything like the reserves of silver that we do of gold,” Mr Eslake said.
Silversmiths like Paul Smith have seen the metal’s price climb amid growing industrial and tech demand. (ABC News: Daniel Irvine)
“We’re not going to be as big a player in global markets as, for example, Mexico, Peru, Argentina and the like will be in silver …
“It’s not going to underwrite another boom of the sort that iron ore has for WA, it is not going to be as important as coal or LNG has been, and probably not as important as gold has been.”
Saul Eslake says the AI revolution is adding to demand for silver. (ABC News: Jordan Young)
Despite its lesser role in the Australian economy, Mr Eslake noted silver provided a point of diversification.
“Given that iron ore prices and coal prices are probably declining and that over time global demand for coal and LNG will decline, in a sense, having something to offset it even a little bit is not to be sniffed at,” he said.
For those who fancy a bit of bling, jeweller Kate Reid has been carving out new products to meet rising demand.
“Our jewellery is turning over pretty rapidly,” Larsen Jewellery’s Ms Reid said.
It is the second major demand boost for the jeweller in recent years.
“Obviously during COVID, a lot of weddings were cancelled, weddings were postponed.
Jeweller Kate Reid says demand has increased.
“So as we came out of COVID, there was a huge boom, So loads of people coming in, buying their wedding rings for their weddings that they hadn’t had for the last year and a half.
“So we did see a real uptick there [too].”
And the rising price of silver and gold is boosting her business valuation.
“So the value, I guess, of what we have is increasing,” she said.
Although, increasingly expensive silver-coated wedding rings has meant some men are opting for more affordable options, like graphite.
But the Sydney-based jeweller has high hopes for demand as the holiday season draws near and the numbers of weddings increases.
“They’re at a wedding, they’re with their family, with their friends and celebrating love.
“And they’re like, ‘Oh, we should do this too,’ and then we’ll get the wedding ring uptick straight after that.”
It’s a silver lining in a turbulent market.