Facts And Figures About Silver Investing

There are strong fundamentals in favor of silver. The metal is in short supply and demand is rising. With bullish signs in favor of silver,many prominent silver investors see the price of silver increasing several times and eventually hitting a 1:15 ratio against gold. Industry veteran Eric Sprott, called gold the investment of the last decade and silver the investment of this decade.

I have provided some facts and figures in this article to show why silver is undervalued and has a lot of upside potential. Part of the argument for higher silver prices in the future is shortages in supply and a growing usage in technology. Another reason is that silver is a monetary metal and will attract investors during what I believe will be an inflationary times ahead.

First, there is growing demand for silver in industry and the metal is used in a wide array of applications including electronics, solar panels, mirrors, and various medical devices. There are constantly new application found that can use silver, and demand for silver in electronics alone has more than doubled over the past decade, while demand in solar panels is up six fold. The chart shows demand for silver in different applications. Although, demand in photography and silverware is declining, the increasing demand in industry and investment is quickly rising, and the overall trend is up.



When it comes to supply of silver it gets more interesting. Although, supply from mining has been increasing it still cannot meet global demand. Only through recycling scrap silver has the industry been able to keep up with demand. The chart shows mine production versus total demand for silver.




Another interesting fact is that there is much more “above ground stock” of gold than it is of silver, despite silver being 16 times more available in the ground. Since silver is no longer used in money, Government stocks are all but depleted while the silver made available through mining gets consumed in industry and end up in different appliances. With virtually no stock and frequent shortages, silver is often in backwardation; a condition referred to when the price of a futures contract is trading below its spot price due to a shortage in the underlying commodity.

Conclusion

Silver is in a secular bull market and with strong demand and limited supply the stage is set for much higher silver prices in the future. In addition to supply and demand imbalances silver has a history of being a monetary metal and a safe haven against inflation, sovereign debt crisis and other looming threats. Silver has been coined the "poor man’s gold, and once gold gets too expensive for most people, the masses will turn to silver as the next best thing. With such a limited supply there is no limit for how high the price can go.  However, it’s worth noting that silver is much more volatile than gold because its heavy use in industry, so be prepared for a wild ride.

There are many ways for retail investors to invest in silver, and perhaps the easiest way is through an ETF like the iShares Silver Trust (SLV), although I prefer the safety of physical ownership and thereby avoiding any counterparties. For those that prefer leverage, I recommend Silver Wheaton Corp (SLW), which is the largest metals streaming company in the world. They generate its revenue primarily from the sale of silver it acquired from various minors at attractive prices.