Why Silver in Malaysia (and around the world)
For the past couple hundreds of years, silver has been used primarily as an industrial metal and not a precious metal. Unlike most industrial metals like steel and copper which are used in large amounts and can be recycled, silver is used in such minute quantities that it is rare recycled when it is used industrially. As our world advances technologically, more and more uses for silver will be seen and its value as a industrial metal will appreciate even higher. At today’s spot prices, it simply isn’t worth recycling silver. You might recover like 23 cents worth of recycle-able silver after spending an hour or two. This is different with gold, because gold is valued at more over $1800 an ounce even in today’s market. We will see the day when silver is truly appreciated in the free market for what it is worth, and silver prices will rise to a level where it becomes worthwhile to recycle silver.
Silver is a very widely used industrial metal and has more than thousands and thousand of uses. Because of silver’s unique properties and its priceless value to many industries, its price is inelastic. What this means is it doesn’t change much in response to changes in demand. Most commodities have self correcting price mechanisms. For example, as the price of a commodity goes up people begin seeking alternatives or substitutes. This causes a correction in demand and thus price. For silver there are no substitutes for the majority of its applications.
What this also means is as silver becomes harder and harder to acquire, big industrial powers will be buying it out to save on costs later on when they need to buy silver at higher prices. These big companies are aware of their need for silver; these are major industry players that will drive the price of silver up in a free market.
It is used in :
- Silver Jewelry
- Silverware and Table Settings
- Brazing and Soldering
- Medical Applications
- Mirrors & Coatings
- Solar Energy
- Water Purification
- and thousands more!
The demand for physical silver is up tremendously in the past few years, but more important it is continuing to rise and it WILL CONTINUE to rise
. In a market of 800 million ounces, the Chinese who used to export 100 million ounces a year are not important over a 100 million ounces a year. That’s a huge shift in just demand from China. Wait til the major buyers really get into the market. The physical market is already suffering from difficulties in meeting demand. Eric Sprott, who started his own physical silver trust has difficulty acquiring just 10-15 million ounces. This is in a market that trades 20-30 times this amount EVERY DAY. You can see from these numbers alone the discrepancy between the physical market and the paper market for silver.
What this means is there is an abundance of paper silver (which will eventually collapse when all that paper comes back chasing the same amount of physical silver) and that there is a shortage of physical silver. One huge sign of this is that the silver market is currently in backwardation, which means it costs more to acquire the item now than it does to get it later.
Backwardation rarely occurs in these metals markets; the opposite condition—contango—usually is in effect, as buyers and sellers must factor in the cost of storage and insurance for deliverable stocks. The supply of silver in warehouses like Comex’s have been steadily declining, and demand is rising at the same time. These two things spell one result – silver prices MUST go higher.
Silver used to trade on a 15 to 1 or 16 to 1 ratio with gold. It was trading at almost 60-70 to 1 with gold a while ago but now that has decreased to about 40 to 1. This trend is one of the reasons why dollar for dollar silver is a better investment than gold today. Silver should close the gap with gold to at least its historic ratio of 16 to 1, but this time around there is a lot more industrial demand for silver that is causing the worldwide supply of silver to constantly shrink (because silver is used up and discarded while gold is primarily held as wealth and recycled when it is used). We have much more industrial applications for silver now than before and they same cannot be said for gold.
The federal reserve and most central banks around the world are continuing to print money and sell debt as their means to their money problems. The more money there is out there chasing the same amount of goods and services leads to inflation. You cannot print more bills and expect their value to remain the same. Silver and gold are the best protections against inflation (QE3, QE4, QE5……QE9999).