Silver offers investment-seekers the opportunity to move away from fiat paper investments into “true money;” an investment that has proven itself to be a dependable store of value in any type of economy.
When it comes to investing in silver, the performance of the economy matters very little; thanks to its many industrial, medical, and technological uses. In a strong economic climate, rising industrial demand and depleted inventories are likely to create larger annual deficits and propel silver’s value higher. On the other hand in a weak economic environment, many base metal producers will slow production and the world’s silver supply will decrease, driving values higher.
Although investors seek out dependability, affordability is another important consideration, as it is often a barrier to entry. That said, the current affordability of silver makes it one of the most appealing investments and undervalued assets, in recent history.
In many languages, the words for silver and money are the same.
Aside from its affordability, silver is a dependable asset. The ever-increasing number of industrial applications for silver is certain to increase the value of this precious metal. So great is the industrial demand for silver that mine production and secondary recovery have fallen short of industrial demand since 1990. This discrepancy between silver’s supply and demand presents a profitable opportunity for investors.
Unlike gold, silver has hundreds of industrial and medical applications. The precious metal’s molecular arrangement and chemical properties make it unique among earth’s elements, and with new applications being discovered, the number of uses for silver is on the rise.
Of all the elements, silver is the indispensable metal. It is the most electronically conducive, thermally conductive, and reflective. Modern life, as we know it, would not exist without silver. – The Guide To Investing In Gold And Silver
In the last two decades alone, usage has increased significantly to include many more electronic and digital products, medical applications, and even clothing. The most popular consumer products, such as cellphones, cameras, laptops, mirrors, monitors, etc., all contain trace amounts of silver; which is never replenished or returned to stockpiles.
Because very little silver is ever recycled, it creates the need for a constant primary mine supply, which at the moment is struggling. According to the most recent reports (2015) scrap supply is down approximately 13 per cent to 168.8 million ounces, the lowest volume level on record since 1996, and marking the third consecutive year of decline.
Within the next decade, demand from some of the largest untapped markets for consumer electronics, and industrial usages for appliances and innovative technologies – which will require silver – is set to rise. In 2015, India was likely the greatest example of this.
Whereas gold is desired, silver is needed.
For much of 2015, India has been driving the rising demand for silver. In August of 2015 Indian investors imported silver with a value of $363 million; an increase of 48 per cent over the same time period in 2014. In September of 2015 the strong demand continued, as India’s investors imported more than $433 million worth of silver.
A strong and steady rise in the demand for investments in precious metals has also been seen in Europe, which saw silver demand grow 9.3 per cent, and in North America where demand increased 2.2 percent.
Overall, silver’s industrial and investment demand continues to rise significantly, while the world’s above ground supply of the precious metal is falling.
Currently, the available supply of mined silver is a fraction of what it was when silver hit its all-time high in 1980, and nowadays supply continues to be limited, even though applications in a broad range of fields continue to grow and demand is rising.
The major monetary metal throughout history is silver, not gold. – Milton Friedman
Further dampening efforts to meet investor demand is the fact that mining companies whose main purpose is to mine silver, only account for approximately 30 per cent of the world’s supply. The truth be told, according to estimates by Thomson Reuters GFMS, approximately 70 per cent of the world’s silver is produced as a byproduct of mining other metals.
One of the biggest challenges facing mining production’s efforts to meet demand is that a majority of the world’s silver comes from nations struggling with political turmoil, labor unrest, and an undeveloped economy. Mexico and Peru for example account for the largest share of production – both of which have fragile political systems and primitive infrastructures – and several Southeast Asian nations are also very volatile, and present similar issues with regard to the consistency of their supply of silver.
Regrettably, the slowed production rate is appearing in the world’s developed nations as well. In 2015, the supply of silver dropped approximately 23 per cent in Canada, five per cent in the United States, and four per cent in Australia. This shortage will undoubtedly be felt by industrial users in the near future.
Not only has production and secondary recovery failed to meet demand each year of the last fifteen years, but above ground supplies are critically short. Some analysts say that supply will fall far short of meeting demand over the next decade, and that much higher silver prices will be the result. According to accepted statistics, there is more gold resting in the vaults of the world’s central banks than there is above ground, available silver.
Silver is an Undervalued Asset With Great Potential
Without question, the challenges in meeting global investor demand for silver is very likely to have a major impact on the precious metal’s value in 2016. After all, basic economics suggest that when demand increases and the supply declines, prices will rise sharply.
Making an investment in silver even more appealing to investors is its relationship to the well-established gold-to-silver ratio; which is a widely recognized metric for valuing silver in relation to gold. Currently the ratio is above 60 and nearly at a record high, suggesting that silver is significantly undervalued and a great addition to an investors portfolio and alternative investment strategy.