Precious metals such as gold, silver and nickel are the most valuable commodities worldwide. The value of those metals is determined by their scarcity. Every week we will analyse each precious metal commodity separately to see what their uses in our modern society are, will the demand grow in the future and whether the supply of the commodity will meet demand. These factors will influence the investment attractiveness of the precious metal industry.
We will begin by looking at the world’s most undervalued metal in history - silver.
Today, undoubtedly gold is more valued than silver but what about tomorrow? For every 10 ounces of silver mined, only 1 ounce of gold is pulled out. However, the majority of mined silver is used for industrial consumption whereas most gold is added to the global inventory and stored in bank vaults.
Research into silver consumption shows that it will become a scare resource in the next 20 years.
In 1950, there were 10bn ounces of above ground available silver. In 1980 it shrank to 3bn ounces and in 2010 there were 500m – 700m ounces available. For comparison purposes, gold was 1bn ounces in 1950 and 7bn ounces in 2010.
Other economy related factors revealed in 2010, were the following.
Population increased by 176%
Global GDP increased by 500%
Above Ground Available Gold increased by 600%
Above Ground Silver decreased by 90%
Spot price for Silver decreased by 46%
The silver market has been in the state of supply deficit for over thirty years. Unlike gold, silver is disappearing due to its consumption. Over the last century more silver-based patents have been created than with any other metal on the planet.
In 2017 global silver output fell by 4.1% to 800m ounces, whereas industrial demand was 1.02billion (Reuters). At the current supply/demand rate, there is less than 22 years of silver reserves remaining in the world.
Silver’s price is inelastic, meaning that an increase in the silver price will not translate into consumption decrease as silver in used in fairly small quantities. The US government will not be able to control the price of silver should it increase, as it no longer holds physical silver stockpiles. In 1950s the US government held 10bn ounces and has been steadily feeding this into the market.
Today there is no more silver surplus to sell in the US government stockpile.
Without silver, modern life would change
Silver is not only used for jewellery. We use silver is technology, health care and medicine. It is an important part of our lives and will continue to be tomorrow. Silver is used in just about everything that you use in your daily life, such as switches, glass, alloys, circuit boards and inks. Actually, silver is what makes our gadgets work. It also helps our technology to be clean, it cleans our wounds and our water. Silver is a slightly harder metal than gold and has the highest electrical and thermal conductivity of all metals. Silver is an important component in your car and the aircraft you fly in.
For over 120 years silver has been used to sterilize bacteria in refrigerators, air conditioners, air purifiers, washing machines and vacuum cleaners.
Even with the world turning to green technology and energy, silver will still be in high demand. It is used in solar panels and thermal windows as it helps to reduce up to 95% of sunlight.
Investment - 12 Month Precious Metal Plan
If you have an implicit trust in your government and company to provide you with a financially safe and comfortable retirement, then putting extra funds aside for a rainy day is not for you.
However, if you have any fear or doubt that your company could face difficulties and therefore use your pension fund for other purposes, or the government may not able to pay you out what they promise, then perhaps you need to set up your own private plan, which cannot be affected by any of the above.
The 12-month precious metals and rough diamonds plan will provide you with a short-term solution that will give you an income of 3% per quarter. This will be paid directly to your bank account.
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