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Silver a Strategic Metal?

Commodities / Gold and Silver 2011 Jun 02, 2011 - 06:55 AM GMT

By: Anthony_David


The global demand for silver has exceeded annual production since 1990. In fact, demand has grown by close to 26% since 1995. The demand for silver originates from both industrial and investment sources and that gives the metal a high potential for growth.

Emerging technologies have brought silver to the limelight once again. As most of the new uses have become available for mainstream use only recently, therefore making the market global promising. Silver is used in the electrical, medical, pharmaceutical, and water purification industries. In fact, the technology sector was the driving force behind the 18% growth in the industrial production of silver in 2010.

The metal is becoming an important component of solar panels, cell phones, and computers. Silver zinc batteries may soon replace lithium ion batteries in laptops and cell phones. Such batteries have a 40-50% higher longevity than lithium ion batteries. The technology is already being promoted by Apple Inc. Display screens and plasma TV use about an ounce of silver in every screen.

Mechanical uses of silver include the treatment of windows with double layers of silver to reflect heat from the sun. Silver is a natural biocide and has many bio medical uses too. It is used in medical devices, bandages and clothing. In recent times, the highest demand for silver has come from the solder industry. The annual demand from the industry has grown by almost 100% over the last decade.

China may soon become the leading market for silver with increasing demand from the country’s industrial and fabrication sectors. In fact, China may soon compete with USA and Japan in terms of requirements. China has seen a 20% increase in its demand for silver. Whereas the country earlier exported 100 million ounces of silver, it now imports 112 million ounces.

Statistics show that the amount of silver available per capita is at its lowest today while the investment power is at its highest. In China and India, the demand from the investment industry is quite significant. Analysts are of the opinion that as the economic crisis continues to plague nations and civil unrest becomes more common, citizens will continue to lose faith in their governments’ abilities to manage crisis situations and in such cases, prices of precious metals such as silver and gold will always increase.

While banks around the world deal with fiscal issues, more and more paper currency is expected to flood the global marketplace. Silver is one of the few goods that this excess money will chase and that will also hike up the price of silver.

There is already a supply shortage that large investors are experiencing. According to Sprott Asset Management and others, the forward looking prices indicate a shortage too. The price ‘backwardation’ observed is also an indication of supply shortage.

Silver prices gained over 77% between February and the end of April this year, most likely as a result of loose monetary policies and low interest rates. On the positive side, silver prices are undergoing a correction. Between April 25 and May 12, silver prices fell by 32% from $49.79 to $32.65. However, in spite of the correction, the fundamental outlook for the silver market in the long-term is still very positive.

By Anthony David

The mission of the Critical Strategic Metals Web Site

is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course. Each month we will research and provide, in as short and concise a manner as possible, the most applicable information available on resources that will have the biggest impact on our day to day lives. Click here to sign-up for our FREE monthly report.

© 2011 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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