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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Another Reason Silver Prices Could Roar Higher

Commodities / Gold and Silver 2011 Dec 03, 2011 - 01:39 PM GMT

By: DailyWealth

Commodities

Best Financial Markets Analysis ArticleMatt Badiali writes: Silver is an amazing metal... which is why it's likely to soar over the coming years...
 
You see, silver has more than 10,000 uses. It's one of the world's best conductors of heat and electricity. Inventors filed more patents on silver uses than any other precious metal in the world. And when silver is used for most industrial and technological purposes, it is used up forever... It simply costs too much to try to recycle the tiny bit of silver from every cell phone or casino chip.

I'm not saying industry is going to use up all the world's silver. That simply can't happen. But scarcity is a real issue.
 
Our rapid consumption of silver leaves very little to meet any uptick in demand from investors. A spike in interest will send prices spiraling higher...
 
Here's a breakdown of the silver market. The table below shows the percentage of the total amount of silver consumed by each category over the past four years...
 
Silver Supply Consumed By Sector
 
2007
2008
2009
2010
Industry
53%
54%
45%
49%
Photography
13%
11%
9%
7%
Jewelry
18%
17%
18%
17%
Silverware
6%
6%
7%
5%
Coins and Medals
4%
7%
9%
10%
Surplus for Investing
10%
11%
21%
12%
Total
100%
100%
100%
100%
 
As you can see from the table above, only 12% of the silver supplied to the market made it to bullion in 2010. That means only a little more than 100 million ounces of silver became bullion for the entire investing world.
 
That's a tiny fraction to sop up all the investment interest in the world.
 
Of that silver, about 43 million ounces went to exchange-traded funds like the iShares Silver Trust (SLV) and the Sprott Physical Silver Trust (PSLV).
 
That means you could buy all the extra silver bullion for about $2 billion. We could buy all the surplus silver bullion from the last four years for about $10 billion.
 
That's the same as the market value of the iShares Silver Trust today. If you wanted to build another silver fund, you couldn't. There just isn't enough silver bullion out there to fill the order.
 
Even trying to amass that much physical silver would send the silver price soaring. It's a simple market fact... When there is more demand than supply, it drives the price up.
 
And the economic problems confronting Europe and the United States have increased interest in precious metals... Silver gained a colossal 174% from August 2010 to April 2011.
 
In May 2011, however, the price collapsed 31% in just four weeks. The bull market simply ran up too far, too fast... and the decline wiped out many highly leveraged silver traders.
 
As I showed you on Wednesday, this has temporarily dampened sentiment toward silver. The "big money" – commodity trading advisors, pool operators, and hedge funds – isn't interested in silver at all...
 
The current bottom in sentiment is a great signal for us to add silver positions. The big money will eventually return to silver... The economic forces (namely Western debt) driving people away from paper money and toward precious metals aren't going away any time soon.
 
As those big traders come back into the market, they have the capital to tie up all the excess silver production in the world. Remember... you could buy all the extra silver production over the last four years for less than $10 billion. Those traders could invest far more money than that.
 
When they do, the silver market will tighten up, and the price will roar upward. That's what we see EVERY TIME sentiment bottoms. When those big traders stop being bearish, they put enough money into silver to move its price. Sometimes it's 28%... Sometimes it's 405%... But it always goes up. (You can find the full story on that here.)
 
If gold and silver prices are nearly certain to rise over the next few years (and probably rise dramatically), the simplest way to play that trend is to buy bullion... real, hold-in-your-hand silver coins.
 
And I recommend everyone do just that... Buy some silver and store it away.
 
Good investing,
 
Matt Badiali
P.S. If you've already built your bullion position... there's another way to ride this trend to much larger gains than bullion is likely to offer. I just completed a full report on the opportunity. I wouldn't be surprised to see every dollar you invest in this opportunity turn into $10 or more. Get the details here.

 

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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