The last few of months have not been a happy time for silversmiths and those who work in precious metal clay (PMC). On 22 August, the Perth Mint spot price hit AUD42.27. Other than a spike in April earlier this year, it is the highest price for 30 years. PMC is more than twice the price of ordinary silver so lately I have really questioned my future with the wonderful substance.
In search of evidence that the situation was temporary I sought out a silver time series. The Perth Mint has a great selection of historic data available for download. They even include exchange rates and the consumer price index (CPI).
The first graph I created was of the London fix monthly average silver price in US dollars. Yes, things are certainly bad, but silver has reached these levels before, around 1980. Certain market characteristics mean that it is possible for a single trader to significantly influence the price of silver. According to Wikipedia, the Hunt Brothers’ silver holdings and futures contracts caused the spike around 1980. Changed trading rules brought the price back down by 1982.
Silver Price (London Fix Monthly Average) USD
While at first glance, the precedence of the price spike gives hope, the current circumstances are very different. The global financial crisis and massive Government debt in many countries is devaluing currencies making precious metals more secure and attractive.
The Australian dollar is closely linked to commodity prices due to the nature of our economy – we are a large exporter of coal, iron ore and wool, so I is hoped the price in Australian dollars would show a rosier (or silvery) story.
Silver Price (Perth Mint Spot Monthly Average) AUD & USD
Other than dampening a few of the spikes, there does not appear to be much difference. The next thing to look at then was the real price of silver, adjusted for inflation. For this I used the Australian all groups CPI (with a base in Jan 1990).
Silver Price (Perth Mint Spot Monthly Average) Real (Jan 1990) AUD
First observation. I am really glad I did not have this hobby in 1980! Between 2005 and 2010 the price remained fairly constant, but the current spike is still visible.
The excel line graph tells a story, but a 3D rendering certainly adds something. And honestly, if I can’t play with the real thing, 3D modelling fills a gap. In the following (and the feature image) each rotation represents 12 monthly spot prices.
Pretty, don’t you think? Next up, a tangible version – digital fabrication – in sterling silver. Perhaps not until the price drops a little though.
Will the price of silver drop to pre 2011 prices? I hope so, but I won’t hold my breath. There are a few European economies to sort out first I fear.
