Lear Capital: Another Quarter Made of Silver

By @ibtimes on

DaveAfter finishing Q1 '11 up 32% in just one quarter, it's hard to believe that just one year ago silver traded under $18 an ounce.  Where once big news was an anticipated breakout over $20 an ounce, now the $40 an ounce level seems inevitable.  Enter the geniuses again.

Now that silver has begun to capture a few headlines, the experts are all over the white metal with words of doubt and near disdain.  No way is silver supposed to play the role of alternative investment to dollar based assets.

Not so fast, though, says the silver institute.  Silver's industrial demand is skyrocketing while supplies are dwindling.  Many times I have referred to the U.S. Mint web site that tells the story of short supply.  Definitely, something is happening in the world of silver as more and more people take note. 

So why silver - why now?  Around the world, silver is growing in popularity as a monetary metal.  Some speculate that some day both gold and silver will be used again to support a currency or multiple currencies.  Herein lies a speculative element that may be contributing to a rise in price. 

Historically, silver has been tied to gold as being worth 1/15th the value of gold.  As gold began to reclaim its role as a monetary metal, the gold price rose and skewed the ratio way out of historical proportion.  Just months ago the ratio was 83 ounces silver to 1 ounce gold.  That appears to mark a moment in time when investors said, wait a minute it may be time to shift some emphasis away from gold and into silver.  Looks like they had good cause.

As more people paid attention to silver more information was sought.  News of a real silver shortage has began to surface as industrial demand skyrockets.  In the old days, when 35mm cameras were state of the art, silver was used extensively in photography.  Now, that process is viewed as something the Flintstones used as the process has gone digital.

With the advent of the digital camera, some viewed that as a death knell for silver.  In reality it was just the opposite.  It was the beginning of a new age in silver. 

Now, silver uses are exploding.  As each day passes, more evidence of silver's lacking supply surfaces.  Some predict silver could become more rare than gold as many of its uses prohibit recycling or reclamation. 

Let me share with you some statistics of usage as provided by the Silver Institute.

In 2010...

  • Cell phones used 404.35 tonnes of silver;
  • Computers consumed 684.29 tonnes;
  • Thick film PV consumed 1,461.90 tonnes;
  • Automobiles which used 1,119.75 tonnes;
  • Electrical and electronics demand for silver reached an all-time high of 7,555.21 tonnes;
  • Solar power demand in 2011 is expected to reach 2,177.29 tonnes, up 40% from 2010;
  • RFID tags in 2010 reached between 31 and 62 tonnes with a long way to go before reaching full market;
  • Water purification used 62 tonnes, and is set to grow to 74.65 tonnes;
  • Medical applications may grow strongly to reach 93.3 tonnes by 2015;
  • The use of nano-silver in goods packaging and hygiene combined would consume 124.4 tonnes of silver over the next five years.

With now one third of the world's population in India and China, entering the middle class and age of technology, it seems demand for silver will forever increase.  Add to this a growing need for alternative energy and speculation that silver will turn once again to money, and it's easy to see how we may be looking ahead to many new quarters made of pure silver. 

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