American Silver Eagle coin

Why Investors Buy More Physical Silver Than Gold?

If you’re in the market for a hot investment, and have some disposable income that you don’t need to have immediate access to right now, then you’re about to get in on a super-huge, massive tip that’ll have stupendously-positive repercussions in the coming years for your financial portfolio!

So what’s the deal with silver you’re saying? The silver standard ended in the latter half of the last century.

Where’s the demand? Jewelry?

There is a demand, just not for the things you’d normally associate silver with…

There’s a lot of really good data that makes this commodity more than just the element that makes up the American Silver Dollar, the Canadian $5 coin โ€“ or if you believe in that sort of thing: the makings of a werewolf-killing silver bullet!

Silver, since the end of the silver standard, has been considered a more of an emotional investment (source). It jumps around a fair bit, with glorious highs mixed with some scary and long-term lows.

The fact is that silver demand is on the rise big time! Silver is gaining momentum as the precious metal of choice for jewelry.

silver granules for industry

Fine silver granules for jewelery – photo credit: Mauro Cateb

But…

It’s also an important component in most modern electronic devices and industry.

Electronics, huh?

Hopefully you’re starting to salivate just a bit…

The fact that more and more devices are being made every year, and that many of those devices (smartphones, tablets, laptops, etc.) are made to be disposable makes investing in silver more attractive than ever.

Use in industry

Silver is irreplaceable, due to it’s thermo and electro-conductive properties. Basically, it dissipates heat quickly and allows electricity to pass through it with very little resistance โ€“ making for cooler running devices that use less power. This equals less warranty issues for manufacturers and consumers, and longer battery life which allows for more powerful and portable devices that are practical for everyone.

I included the example of portable electronics to get you thinking about the potential, as it’s an industry that’s booming. But that’s just the start of silvers uses.

Silver in EC

Silver in electronic circuit board – photo credit: AMagill

It’s used exclusively as a contact point in nearly all electrical switches in your home (in small quantities), microwaves, some toasters, solder that’s used on nearly all circuitry, electronic medical equipment, and each automobile has an average of about one ounce of silver in all its various switching mechanisms.

You might be thinking “this doesn’t seem like a lot of silver”. It is though, most applications requiring silver need 99.99% purity to get the thermo and electro-conductive properties needed. And think of how many phones, video game consoles, tablets, laptops, PC’s, automobiles and houses are being made, repaired, and tossed away for something newer every day?

Houses could be excluded from the “tossed away” analogy, but there’s still no shortage of new homes being built, or old electrical components that need to be updated.

Projections

Investor resources like Forbes, Market Watch, and Sprott were all predicting exciting investment potential of silver at 2013 year end.

Silver is currently at around $20 an ounce, which is down from a $35 high in September 2013. This could seem like a really bad downturn, if we weren’t such savvy investors…

Keep the following in mind before you say yay or nay:

  • Silver is an emotional market. Sometimes despite demand, the price will occasionally go up or down abruptly.
  • The bulls love this type of investment. No matter how low it goes, it’s always going to rise eventually.
  • You’ve already learned that the demand can’t possibly go down with technology advancement being on the path it’s on. At least until an alternative is found. It would have to be a synthetic, because no metal can offer the thermo and electro-conductive properties silver can โ€“ something to look for, but not a scenario that would blind side a silver investor.
  • A strengthening global economy (primarily the US and Europe) means that more silver will be needed for industry (see “Use in industry” up the page).
  • One major con to the “do or don’t” of investing in this metal is that it has seen some major lows, with the average price in the 90’s at less than $4 an ounce โ€“ only slowly climbing to a little over $7 as of 2005.
  • Disposable technology will continue to be mass-produced.
  • The jewelry market for the white metal is rising.

The biggest reason to buy right now?

The demand far exceeds the supply. Demand of silver also closely follows that of gold.

Look at this quote from Eric Sprott, from Sprott Asset Management LP:

“How long can investors continue to buy silver at the current ratios when the availability for investment is only 3:1? We are surprised that the price of silver has remained at such a depressed level compared to gold. Historically, the price ratio between gold and silver has been 16:1, when both were currencies. Today the ratio is 55:1, so what are the numbers telling us? We believe this is one of those times when smart investors will be well rewarded to Follow the money.”

Sources:

http://en.wikipedia.org/wiki/Silver_as_an_investment
http://www.forbes.com/sites/kitconews/2013/12/24/investors-expected-to-continue-absorbing-silver/
http://www.wikihow.com/Invest-in-Silver
http://www.marketwatch.com/story/why-investors-like-silver-more-than-gold-2013-09-06
http://www.sprott.com/markets-at-a-glance/why-are-%28smart%29-investors-buying-50-times-more-physical-silver-than-gold/

Cover photo credit: sirqitous

Ivan Widjaya is a wealth building/personal finance lifelong learner who is running an online marketing company and several business-related online magazines. He secures his hard-earned currency in real assets. He says no to paper assets and considers his house as a liability. Article disclosure

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2 comments

  1. Martin Lindeskog

    Ivan,

    Thanks for giving sound arguments for Argentum! ๐Ÿ™‚

    Best Premises,

    Martin

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