SilverInstitute has published a report titled The Chinese Silver Market and it is available for download here. It is a 26 pages report fulled with small text and jargon, so I will explain it in a simple to understand manner.
China’s retail investment demand for silver has great potential to grow robustly over the short to medium term, as a wider population base gains access to silver bars and coins. The demand for silver in industrial application and jewelry are main drivers for the consumption. Silver investment demand has exponentially growing since 2008 – 2011. With a rapid development in the Chinese silver market, both silver demand and supply are expected to achieve even further growth in coming years. (Click on image to view full size).
Silver fabrication (industrial use) is set to rise across most sectors in the coming years, the strength of industrial demand will remain the key driver behind this growth. In the olden days, silver is a monetary metal first, then being used for other jewelries and utensils. However in the modern days with technological advances, silver is an industrial metal first, then only is a monetary metal.
The following chart will show you the difference between Fabrication Demand and Silver Supply. But what is “fabrication”? In layman terms, silver fabrication means making use of silver to produce goods. The silver is being used up and the silver is usually gone and cannot be recovered.
So, where did the fabrication demand use the silver for? The following diagram will answer the question. Silver is being used up in Industrial Applications, Jewelry, Silverware, Coins & Medals and lastly Photography.
If you remember what I mentioned earlier, in modern days, silver is an industrial metal first, then only is a monetary metal. We seen the industrial usage, now let’s take a look from the investment / monetary view.
In July 2009, restrictions to own silver were lifted by the government of China. The government now allow the people to invest in silver bars. China introduced its first ever investment opportunities for silver bullion bars in 2009. The people in China are buying silver for many reasons:
- China’s high household savings rate. That means domestic investors (rich local investors in China) have a large amount of cash that urgently needs to be parked.
- Investment options are still rather limited. Immature financial markets in China. Hence they invest into something proven to have value for the past thousands of year – gold & silver.
- The property market has been volatile and controls have been implemented to control speculation. At the same time, the stock market has seen heavy losses. Hence, focus shifted to silver.
- Interest rates for savers have remained low and, in fact, are close to zero in real terms. China government encourage the people to take out money to invest rather than saving the cash in bank.
Notice investment demand for silver has increased drastically since 2008 till 2012. (Year 2012 is not ended by the time this chart is drawn, so the final number is expected to be even higher.)
Investment demand for silver has posted a spectacular increase in China in recent years. From a small player just a few years ago, China has already become the world’s leading market for physical silver investment. One of the most famous physical silver coins from China is Silver Panda Coins that you can start investing as low as RM130/oz.
The legendary investor, Jim Roger said:
“If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia.”
If we put it into a Malaysians’ investment context, it would be equivalent to:
“If you were smart in 2006 you parked your money to Bursa Malaysia, if you were smart in 2008, you park you money to property, if you are smart in 2013 you park your money to silver.”
Practical Guide For Investing Silver In Malaysia is an eBook specifically for Malaysian. You will learn different strategies in silver investment that anyone can apply. You will even learn how to invest silver below market price in Malaysia! Click here to find out more.