Get your silver while it's hot

May 13, 2015 11:30 AM

Moreover, demand for silver is set to grow substantially in the coming years, according to the Telegraph, due to increasing demand for solar energy, and indeed other electronic, industrial and medical applications.

Renaissance alchemists like Isaac Newton associated silver with the moon. Its light – the energy which it transmitted to the earth – was harnessed from the sun.

Interestingly, in our modern endeavours to harness the sun’s energy, the moon’s metal plays a crucial role. As the Telegraph reports “Silver is a key component in crystalline silicon photovoltaic (PV) cells.”

The Telegraph continues:

“According to IHS, demand for solar power is set to increase by 30pc to 57 gigawatts of electricity in 2015. China alone is expected to install something in the region of 17 gigawatts of solar capacity by the end of the year, creating huge potential demand for silver.”

The case will look even more favourable “should a binding agreement be reached among major nations in Paris this year on climate change.”

The article says that 70 million ounces will be used just in the manufacturing of photovoltaic cells this year. That amounts to almost 8% of last years mine production.

Artificially low prices for the metal have forced mines to close in recent years. The Telegraph notes that supply may not be able to match increasing demand in the coming years, writing:

“Analysts fear that a lack of investment by silver miners could see production plateau over the next few years at a time when demand from the fast-growing solar power industry is expected to pick up rapidly.”

Critchlow concludes that silver “is a commodity that will grow dramatically in importance as the world searches for new sources of renewable energy.”

It would appear that the fundamentals in the case for owning silver are as strong as ever. It has been subject to the same ongoing price suppression that has beleaguered gold in recent years which has scared many safe-haven and store of value investors out of the market.

However, the tide may now be turning as large industrial users – for whom falling prices are a bonus – come into the market.

We recently covered JP Morgan’s rapidly increasing stockpile of over 55 million ounces (either in behalf of the bank itself or clients) and rumoured JP Morgan silver acquisition of an enormous hoard of 350 million ounces of physical silver. Indeed, the blog was picked up very widely and we received much feedback – mostly positive but some critical.

We intend looking at this more closely next week but in the meantime here is Ted Butler’s latest blog on this important development.

Conclusion

Unlike gold – almost every ounce of which was ever mined is still usable – silver is like oil and has been steadily consumed over the course of the last hundred years in non-recyclable industrial applications such as photography and, more recently, in electronic appliances including iPhones.

Nobody is really sure how much above ground silver is still in existence, however estimates are that there are around 1 billion ounces of above ground refined silver. This would mean that the entire silver market is worth approximately a tiny $17 billion today.

To put this in perspective, there are thousands of companies today with $1 billion plus market capitalizations – including companies that most of us have never heard of. Central banks globally print $17 billion in a few hours.

Throughout history, one ounce of gold could be exchanged for roughly fifteen ounces of silver. By that metric, silver, at over 70 ounces to 1 ounce of gold ($1,195/$16.77), is greatly undervalued today. In order to come back into balance, silver will likely outperform gold in the coming months and years.

Page 2 of 2
About the Author

Mark O'Byrne is executive director of Ireland-based GoldCore.