The Icelandic flag never had any actual silver colour in it and was never meant to contain any silver.
In the quote argent is meant to convey just white. It is used in an outdated and imprecise form of traditional descriptive language.
While it's true that:
The word for white in Latin is "albus", not argentum. Argentum means silver.
In heraldry the proper word for red is not rouge but gueules, which now designates as a French word the mouth of an animal. This is Medieval tradition, not modern linguistics.
The Icelandic flag has always been red, blue and white like snow. White, white alone, always white and nothing but white, the actual colour, not silver:
The civil national flag of Icelanders is blue as the sky with a snow-white cross, and a fiery-red cross inside the white cross. The arms of the cross extend to the edge of the flag, and their combined width is 2⁄9, but the red cross 1⁄9 of the combined width of the flag. The blue areas are right angled rectangles, the rectilinear surfaces are parallel and the outer rectilinear surfaces as wide as them, but twice the length. The dimensions between the width and length are 18:25.
The usage of the term argent is here mixing the terminology of vexillology with that of the older and more traditional heraldry. Vexillology is a sub-field of heraldry now, but does not really conform to all those overcome standards there.
Insisting to all what is white and meant to be white as argent?
Can be done, is not forbidden, but a bit outdated and pretentious when applied to flags instead of coat of arms –– and leads to confusion, as evidenced here.
Unlike the German flag that really has to be described as containing (ideally) gold the Icelandic one is properly just white like snow. (Compare the German flag again with that of Belgium to see the distinction).
As the above Wikipedia page states: Vexillology rarely distinguishes between gold and yellow; in heraldry, they are both Or. For the German flag, such a distinction is made: the color used in the flag is gold, not yellow. And for the Icelandic flag it is white.
In heraldry the tincture white is commonly described as argent
The metals are or and argent, representing gold and silver, respectively, although in practice they are often depicted as yellow and white.
Or (Ger. Gelb, Gold, or golden) –– derives its name from the Latin aurum, "gold". It may be depicted using either yellow or metallic gold, at the artist's discretion; "yellow" has no separate existence in heraldry, and is never used to represent any tincture other than or.
Argent (Ger. Weiß, Weiss, Silber, or silbern) –– is similarly derived from the Latin argentum, "silver". Although sometimes depicted as metallic silver or faint grey, it is more often represented by white, in part because of the tendency for silver paint to oxidize and darken over time, and in part because of the pleasing effect of white against a contrasting colour. Notwithstanding the widespread use of white for argent, some heraldic authorities have suggested the existence of white as a distinct heraldic colour.
So, in classical heraldic terms argent really always means silver, it's just that because of cost or material availability or some other restrictions they came to use white as an almost equivalent substitute. Thus paving the way for the synonymous quality of silver and white in heraldry. In modern heraldry white became also arguably a distinct colour.
With regard to the other metal, silver, or, as it is always termed, "argent", the same variation is found in the usage of silver and white in representing argent that we find in yellow and gold, though we find that the use of the actual metal (silver) in emblazonment does not occur to anything like the same extent as does the use of gold. Probably this is due to the practical difficulty that no one has yet discovered a silver medium which does not lose its colour. The use of aluminium was thought to have solved the difficulty, but even this loses its brilliancy, and probably its usage wall never be universally adopted. This is a pity, for the use of gold in emblazonments gives a brilliancy in effect to a collection of coat-armour which it is a pity cannot be extended by an equivalent usage of silver. The use of silver upon the patents at the College of Arms has been discontinued some centuries, though aluminium is still in use in Lyon Office. Argent is therefore usually represented either by leaving the surface untouched, or by the use of Chinese white.
I believe I am the first heraldic writer to assert the existence of the heraldic colour of white in addition to the heraldic argent.
A. C. Fox-Davies: "A Complete Guide to Heraldry", TC & AC Black: London, 1909, p 70.
In modern flag design however there is now a clear distinction to observe between calling a colour silver or white, yellow or gold. As evidenced in the text of the Icelandic law for the flag: the Icelandic Flag is a modern design (it was officially described in Law No. 34, set out on 17 June 1944): Therefore, for Iceland this was always not the metallic silver of a knight in shining armour on his coat of arms, but the blinding white of the snow on that island.