The most popular precious metal investment is gold. Compared with that, silver looks dull and cheap. Think of the fact silver products go black due oxidation and you left with no will to buy silver. Investing in silver, because of it’s low cost compared to investments into gold, even called “investments for poor”. It seems, there is plenty of silver in the world. However, it is not true.
Let’s remember where we use silver. First of all, silver used in electronics. Silver is the best current conduct, that’s why every modern microcircuit is made of silver.
Silver is also an antiseptic widely used both in medicine and textile industry. For example, socks with silver fibbers will never smell, because silver destroys all sweat germs. And that’s not all. Silver used in many other fields (remember silver water filters).
Of course, silver used for jewelry products, but jewelers are not main silver consumers.
Silver remains, that not used in industries go to investment field – investment coins and bars.
What’s else is worth mentioning about silver use? Most of the consumed silver is quite lost with time – mobile phones and computers go to junkyards, textile is worn out. Other products containing silver also go to reprocessing (what do you do with used water filters?).
It all leads to the fact, stock of silver needs to be refilled. That is the bomb: amount of silver all most gone – most part of easy to get silver is already extracted in 20th century. Nowadays, silver mine is a side product of other metal mines. As long as it is the side product, there are special demands to its quality in ore. Taking into account technology development and current silver prices – silver amount in ore is restricted, i.e. it can’t be less than particular minimum.
There are many myths about silver. For example, about silver’s wide accessibility. Yes, there are more silver mines in general then gold, but gold is not that much used in electronic industries due it’s bigger price and worse conducting features. That means, most of gold extracted is not used, but saved. You can not tell the same about silver.
One more popular misconception: if crisis comes, silver (as other metals) will loose it’s role and will be less consumed due general product demand fall. Remember, that we all entered new digital era, peculiar by wide spread of electronics. And every electronic product is based on microcircuit made of silver. Electronics were insignificantly affected by last crisis. Several companies got losses, bet generally, the field remains the same.
Another myth skeptics talking about is if silver price grows, electronics grows, which leads to slowing down the demand. Results could be negative for field and silver in particular. Again, that’s not true. There is very little amount of silver in the final product, that even silver double price raise will not affect the consumption. Talking in economic terms, we can definitely say that silver demand for electronic industry is not elastic because it is not connected to the price.
What conclusions can be made? It is easy: silver is running out, at least easy to get (low-price) resources; electronic development taking up demand of silver and most of the investors don’t find silver being a profitable investment. That mean, at the moment, silver is underestimated. Look at the chart.
Silver and Gold prices per ounce 2006 – 2012 (percentage)
If you think about long-term investments – it makes sense to buy physical silver (bars, coins…). Other investment possibilities for short-term (1-2 years) – precious metals accounts, futures, silver mine companies’ shares have risks like infrastructure risk, government risk, issuer’s risk etc. Bear in mind, these investments are cheaper, but in long-term period it can bring to absolute loss of the investment.