In Ted Butler's Archive


A review of silver’s fundamentals points to much higher prices to come. Unless you are a bona fide short-term trading crackerjack, your best bet for investment success is a long-term approach based upon value and facts. The most important long-term facts in silver are those that relate to its actual supply and demand.

Silver was a highly sought-after precious metal used as money and adornment for thousands of years. A century ago, it was discovered that silver had important and unique industrial applications in a wide variety of uses considered vital today. Silver was well-known and highly valued long before its most important uses were discovered. For example, who could have known silver was the best conductor of electricity before electricity was discovered? Because it was the best electrical conductor, the best reflector of light and because of new applications, in photography and medicine, silver came to be heavily utilized. Around 1940, the world began to consume more silver than it mined. That depletion continued until 2006, resulting in world silver inventories reaching the lowest levels in hundreds of years. By 2006, modern industrial consumption had used up 90% of world silver inventories which fell from 10 billion ounces in 1940 to just over 1 billion ounces today.

According to the Silver Institute, industrial consumption, plus demand for jewelry and silverware consumes just about every ounce of newly mined silver currently produced. Let me repeat that, the Silver Institute indicates that silver consumed in these three categories is nearly equal to total world mine production. Effectively, this means that the only silver available for investment demand comes from recycled metal. The amount of metal available for investment is less than 150 million ounces a year. This represents the total amount of silver for investment in all forms, including small bars and coins, 1000 ounce bars, the key form of silver. Considering the small amount of silver that exists compared to 75 years ago and how closely that metal is held, it’s not unrealistic to expect significantly higher prices of $100 or more.

The future supply and demand fundamentals in silver point to shockingly higher prices. The modern world is becoming more electronic and electric as every day passes. Everything from electronic devices of all types, electric cars, new battery technology, to solar power involves electricity. I’d like to reference a video with a fascinating vision of the future – While this video never mentions the word “silver,” it is a seminar about silver usage in the future. From the demise of Eastman Kodak due to silver halide film being displaced by digital photography, to the coming rise of electric vehicles and solar power generation, silver has and will play a key role in what’s to come. As the world’s best conductor of electricity, silver is destined to be required in greater quantities. In those applications where top performance is required, silver is indispensable. And in just about every new electronic and electrical technology, peak performance is critical. If the world was moving away from electrical and electronic advances, I suppose the future use of silver might be questioned, but nothing could be further from the truth.

Insufficient actual supply in the face of industrial and investment demand is what led to silver rising to nearly $50 in 2011, up ten times from a few years earlier. Subsequently, industrial and fabrication demand have remained strong. It’s just a matter of time before the new electrical demands and renewed investment demand kick in. World silver inventories are still depleted and indications of big increases in future industrial demand make it only a question of time before investment demand kicks in. If silver could rise ten times in value over a fairly short time frame not too long ago, it’s hard to see why it can’t rise that much again. The facts look more compelling now than ever before.

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