Imbalance in silver supply cannot meet growing demandAfter 60 years of deficit consumption, the amount of silver available per capita is the lowest in history. At precisely the same time the amount of investment buying power is the highest in history.
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With emerging technologies silver has found a host of new applications. Plasma TV and display screens can use up to an ounce of silver per screen. Smart tags are being used on retail products rather than bar codes. Windows are being treated with a double layer of silver to reflect the suns heat, and in the pharmaceutical, medical, electrical and water purification industries there are numerous high tech applications. However on of the greatest new demands for silver has been in the solder industry. In 2005 1.316 tonnes of silver was used in the solder and braizing, which was up 8% year over year with annual increases of 3.2% and 1.7% in the preceding years suggesting that the rate of demand has been nearly doubling every year. A lot of these technologies have really only recently become available and commonplace for mainstream use and the market for these technologies is truly global and expected to grow exponentially.
Silver is somewhat harder than gold and is second only to gold in malleability and ductility. It can be beaten into silver leaf 1/100,000 of an inch (0.000025 centimeter) in thickness. Once a standard in the world monetary system, today silver plays an important role as both a financial investment and industrial material.
In emerging markets like China and India, investment demand for silver also is vibrant. China represents the most important emerging market for silver and may rival U.S. and Japan in the coming years. China’s industrial and fabrication demand, almost of no concern a decade ago, puts tremendous demand pressures on the silver market today.
“Historically the price of gold has been around 16 times the price of silver. So, for example, based on the long-term historical average ratio, with the price of gold around $650, the price of silver should be around $40. It’s not, of course. It’s around $12.50. Today then, the silver ratio is more like 50. What explains the difference between hundreds of years of history and today? Simple – demand for silver as money. During periods of history when silver has been used as a currency, it has almost always been valued ~ 1/16th the price of gold. When silver has been “demonetized,” supplies soar as people sell silver for gold and currency. On the other hand, during periods of monetary crisis, the price of silver tends to increase far more than the price of gold as demand for silver is once again created by monetary needs.This influences the silver to gold ratio heavily in silver’s favor. For example, the ratio returned to its historic range (16) during World War I. It happened again in the early 1970s when Nixon abandoned the gold standard. It also happened most famously in 1979/1980 when gold briefly soared to $800 an ounce and it seemed as if America was really entering a severe money crisis. Silver is the best hedge against a money crisis because its price will increase many more times than gold, as the silver-to-gold ratio reverts to its historic average. Silver will once again be worth 1/16th the price of gold. It is now worth only about 1/48th. Given this perspective, I hope you see why silver’s recent move from around $7 to around $12.50 is only the very early signs of a money crisis. “
- Porter Stansberry
“The ratio of silver to gold is now 65 to 1. Historically it was 16 to 1 for hundreds of years. Very few people in the world appreciate the extreme under valuation in silver compared to gold.”
- Theodore Butler
“There’s around four billion ounces of gold above ground and around one billion ounces of silver. All that gold is worth 200 times the silver. Yet 150% of each year’s silver mine production is necessary for vital industrial purposes. Most of the silver ever mined is used up and gone forever. There’s been a silver shortfall every year for 20 years but the price has failed to reflect this, despite the fact that a shortfall is one of the most powerful influences in establishing a price.”
- James Cook
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