2013 brought one of the best bull market in equities since the mid 90′s. At the same time, to fund equity purchases and flee ‘safe assets,’ there was a huge sell-off in silver & gold. This selloff gives investors an excellent chance to accumulate a long-term position in physical holdings and silver companies.
Gold and Silver seem to have found a floor around $117 and $18.50 only trading below these levels briefly. I think while prices are depressed it is a good time to buy for the long-term investor. Silver especially...
In 2013 there was a significant 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) as a direct result of record high demand. Further, demand for the metal as a precious holding is there from physical investors, and has helped get silver hold the $19.00 mark per ounce. Aside from silver being a precious metal, it also has many industrial and technological applications. Therefore, there will always be some level of demand, but such demand should pick up significantly when the global economy comes fully out of recession.
Industrial Demand
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 of the factors driving the forecast improvements is demand for ethylene oxide, an intermediate chemical in industrial processes that requires silver.
Industrial processes have been intentionally designed not to consume gold (and silver is a better conductor), and at the high prices gold has commanded for decades, it is nearly all recycled. It is said that 99% of all gold ever mined is still in existence above ground. For these reasons, silver stockpiles as a percentage of all silver ever mined is so much smaller than gold stockpiles as a percentage of all gold ever mined.
Demand for silver is really near all-time highs, not just for precious metal investment, but in industry, particularly in technology. It’s not some manipulated statistic. The plain fact is, the laws of supply and demand will eventually catch up to silver prices. It bears repeating, in smart phones alone, over $1 billion worth of silver is utilized annually. Add a few another billion dollars for all of the computers, tablets and televisions sold each year. Now think about all of the other industries using silver (jewelry, dentistry, nanotechnology, etc). It is in finite supply with ever increasing demand. Eventually, this needs to normalize, and when it does, silver prices stand to benefit, and I believe that tremendously.
