Silver
Silver has found a host of new applications in emerging technologies. 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 barcodes. Windows are being treated with a double layer of silver to reflect the sun’s heat, and in pharmaceutical, medical, electrical and water purification industries there are numerous high-tech applications. However, one of the greatest new demands for silver has been in the solder industry. In 2005 1.316 tons of silver was used in solder and braising, which was up 8% over the previous 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 but is second only to gold in malleability and ductility. It can rolled on a platen into silver leaf 1/100,000 of an inch (0.000025 centimeter) in thickness. Silver was once the standard in the world monetary system. Today, silver plays an equally important role as both a financial investment and industrial material.
Silver is in investment demand in emerging markets like China and India. These two countries represent the most important emerging markets for silver and may certainly rival the U.S. and Japan in the coming years. China’s industrial and fabrication demand, as well as India’s, which was 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 $950, the price of silver should be around $55. It’s not, of course. It’s around $14.50. Today then, the silver ratio is more like 65:1. What explains the difference between hundreds of years of history and today? Simple – demand for silver as money. During those periods in history when silver was used as a currency, it was almost always valued at about 1/16th the price of gold. When silver was “demonetized,” supplies soared as people sold their silver in exchange 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 a 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 (16:1) 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 again be worth 1/16th the price of gold. It is now worth only about 1/65th. Given this perspective, you see why silver’s recent move from around $8.50 last October (2008) to around $14.50 now (May 2009) is only the very early signs of a money crisis.
– Porter Stansberry, Standsberry & Associates (June 2009)
