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It's just a matter of time before the price of silver explodes

by , 26 May 2014

The supply of silver has remained buoyant due to central banks dumping their holdings and investors cashing out of silver-backed exchange traded funds. But with the streams from both of these sources diminishing, less silver is coming available. The demand for silver is another story. The uses of silver are boundless. It's such a versatile metal. So where does all this leave silver? Let's take a closer look…

The market for silver is extremely dynamic

In the past, the main use of silver was in photography, Bengt Saelensminde in The Right Side explains. Silver compounds in the camera film made the image when exposed to light. Now digital cameras and memory cards do this.

And that’s perhaps the main reason that central banks and other holders of silver got rid of it. It didn’t have a purpose any more.

But, the electronic and electrical industries now use almost half of the available industrial silver. The amounts per unit are tiny, but the volumes are huge. Practically all electronic products have a bit of silver in them.

Also fuelling demand are the battery manufacturers. They use silver to try and improve battery performance. And solar panels need silver for production. By 2014, forecasts put demand at over 100 million ounces just for solar panels.

It’s not just the electronics industry using silver

Silver has amazing antibacterial properties. So it’s now appearing in liquid soap, socks, towels, food packaging and sheets because of these properties. You can even find it in food packaging.

Not only that, using silver in water purifiers helps prevent algal and bacterial build up. In areas like the Middle East, purifying dirty water back to clean is in huge demand, fuelling further demand for purifiers.

Silver is now also replacing chlorine in hospitals, pools and spas.

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So why hasn’t the price of silver skyrocketed?

It looks like the fundamentals surrounding the supply of silver have overwhelmed the market. And the supply side of the equation was heavy.

But with new applications for silver rapidly growing, it’s just a matter of time before the price responds.

It's just a matter of time before the price of silver explodes
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