Traditionally in unsettled times, investors unload stocks,shares and paper currency and buy into commodities which hold real value. What factors then particuliarly favour a rise in silver prices now?
Silver has become a vital important metal in manufacturing industry. While there is less call for silver jewellery and ornaments and use (as a silver salt) in photographic film, there is far more demand in electronics, and for coins and medals. Unlike gold, considerable quantities of silver is lost during and after use and cannot be reclaimed.
Additionally in industry, silver is generally used in relatively small quantities – as in reliable non corroding contacts, and circuit breakers – so a price rise wouldn’t much alter industrial processing costs.
Furthermore, there is no indication of this increasing industrial need for silver being cut. Silver usages as varied as catalysts, water purification, solar cells,motor controls and minature batteries continues to climb.
Every developing nation including the two main industrial giants, China and the US are going to need more and more silver.Already they cannot get enough. Silver reclaimed from disappearing scrap or photographic waste can’t begin to meet this shortfall,, so they will be competing with each other – and the rest of the world – for new silver. Not just for immediate use but to stockpile.
There are very few pure silver mines. About three-quarters of all new silver appears as a by product from lead , zinc and copper mines. This means that a sudden rise in silver price cannot not lead to extra output from these mines. However a price hike may push companies into carrying out new exploration, locating new lodes of silver-bearing ores,re opening old mines, and more efficient and novel silver recovery methods.
(These would in turn indicate some of the best new investments for 2007 , 2008 and beyond.)
Also look out for news of serious delays at silver refining sites,or mining disasters that again would tend to shoot silver prices upwards.
Because nearly all the world’s silver output is being swallowed or or stored by huge financial institutions , there is less and less left available for private investment. This will drive prices sky high as currencies dive and people lose faith in currencies no longer backed by precious metals.
Follow The Trend
Silver prices tend to shadow gold, the prices usually fluctuating over 22 year peaks. On this basis silver as not peaked yet. While gold has gone up about 26% over each of the last five years, silver prices over the same periods have achieved better annual gains, averaging 36%. Silver is still below its previous 1984 peak of over $48/oz! As gold rockets, silver prices look relatively more attractive, and again up go silver prices as investors buy in.
It looks as if silver has become massively undervalued and the combination of uncertainty/increasing demand, price wars and dwindling silver availability could push silver prices up to $17.38/oz. Also, many experienced silver traders now seem to think silver has the potential to go much higher.
Trading In Silver
The most reliable -and most physically least convenient method-of holding sterling silver, is as silver bullion (coins and bars of sterling silver of certified purity like the American Silver Eagle), followed by easier but potentially more risky silver ‘paper trading’ – in approximate order, you have silver certificates, exchange traded funds (ETFs), shares in silver mining companies, or derivatives like futures contracts and spread betting on the future price of silver.
While no investment is totally free of risk, putting some of your reserve investment into silver now as it surfs skywards does look a very attractive option.