Silver is indeed a gentleman’s currency. However, it has been two years of downside pressure for investors in silver, but I have recommended accumulating it heavily once it dipped under $23 an ounce and almost took to the streets to encourage buying at $18 an ounce. I have been buying silver at a strong clip. Prices have now come back and stabilized around $21 and it is likely just the beginning. Inflation is slowly — very slowly — starting to creep up in corners of the world, and that is a nice source of upward pressure for the metal. Still, we are a long way from $50 per ounce. Is now a good time to buy silver? There are key supply and demand issues that you need to be aware of and several ways to play the metal.
Let me be very frank with you. The demand for silver is strong. I have mentioned before in prior work that last year we saw a shortage of both American Silver Eagles from the U.S. Mint as well as junk silver available (that is, pre-1965 U.S. dimes, quarters, and half dollars.) This year, there isn’t a shortage, but there is steady high demand. In addition, silver ETFs continue buying silver coins and bullion at a record pace. Thus, demand for the metal is there, and has helped keep silver above the $20.00 mark.
We should also face facts. Despite the stock markets in the U.S. setting new highs, the broader economy is still just limping along. Our GDP is barely showing expansion and may reflect some contraction. Further, the jobs picture seems to look better, but much of this is from reporting wizardry. The fact is less people are working full-time, more are working part-time, and millions have simply given up looking for work. Yet those who cook the books report unemployment has come down, albeit slowly. Take this with a grain of salt. We have had industrial demand for silver, but much of the demand for silver comes from the Fed, which bolsters the precious metal side of the metal.
When the economy rebounds, there will be a spike in demand in many areas. The demand will not be just in coin and bullion form, but also in jewelry, silverware, and dentistry. On the technology front, silver is one of the most conductive metals out there, and thus is utilized in photography, electronic devices, optics, medical devices/tools, and most recently in nanotechnology. One lesser known growth area for silver use is in technology, and that is where a lot of demand will be generated as we further delve into an era dominated by Apple (NASDAQ:AAPL) iPhones, iPads, and its competitors’ similar products. Apple with its millions of iPhones sold has created massive industrial demand for silver. As its sales are strong, this demand will continue. It is clear that new phones will always be in demand.
There is also demand for over $1 billion worth of silver in just new mobile devices alone. There is a lot of silver in old cell phones, photography chemicals or medical devices that already have been taken out of the market. Although there is a push to recycle electronics and reclaim costly elements like silver within them, in situations where silver is used in very small portions (such as new smartphones), it is not cost-effective or even practical to recover the silver. Thus, new silver will be utilized in these devices and Apple is a huge source of silver demand.