The True Value Investors
A true value investor is always searching for an asset trading at the low end of the scale. Gold reached an incredible high during 2011 prior to becoming unfavorable for seven years. Gold still represents a bargain despite the fact it is currently trading at 35 percent less than in 2011. Many investors believe the only place gold has to go is straight up. As attractive as investing in gold may sound, there is something available that is even better. Silver has become an incredibly attractive investment.
The Benefits of Silver
When this was written, silver was still trading at less than $16 per ounce. In 2011, silver was at an all time high of $49 per ounce. In relation to gold, the attraction of silver has increased. The ratio is 76 to 1. During the past twenty years the ration was 62 to one and prior to that, 47 to 1. Silver is very important as an industrial metal and there are not many substitutes that are cost effective. The thermal and electrical conductivity of the metal is higher. This makes silver the crucial component for numerous high performance batteries, printed circuits and solar panels. As the demand for renewable energy increases, so does the demand for silver. Compounds with a silver base are capable of killing fungi, algae and bacteria. Silver is used to preserve, purify, filter and sanitize numerous types of liquids. Silver is also important for manufacturing mirrors, printing and photography. The demand for silver for manufacturing is predicted to be 680 million ounces by 2018. This is an increase of 27 percent since 2013.
The Limited Supply of Silver
The demand for silver may be increasing, but the supply is limited. The mining of silver reached the peak in 2015. Since then, silver has shown a decline of fifty million ounces. In 2011, silver scrap reached the peak at 260 million ounces. During the last three years, this has decreased to 140 million ounces. This is largely attributed to the cancellation of numerous projects for silver exploration. It takes years to provide new silver production. In addition, silver is generally produced as a by-product for zinc, copper or gold mining. This is why silver changes in price and becomes volatile when there is not enough supply to meet the demand. This is excellent news for investors because when the supply is constrained, the prices soar.
The Bargain of Silver
Silver is currently a bargain but this will change. According to history, as precious metals regain popularity, silver has a good chance of beating gold. Between the 1970’s and 80’s, silver prices increased thirty times and gold 24 times. Silver trends rise much faster than the trends for gold because the market is so much smaller. When the demand rises even a small amount, it often causes a shortage. This means the supply of silver is inelastic. When precious metals begin to rally again, it is reasonable to believe silver will be the metal investors should be holding.
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