Learn All About Gold and Silver Investment
Silver investment confuses many people because the demand for silver far exceeds the supply of silver. For example, new mine production at companies such as Pan American Silver and Hecla mining only account for about 75% of silver demand. Most that make silver investments overlook the fact that scrap and stockpile sales fill the gap between supply and demand.
Scrap silver is constantly returned to the market through recycling of photographic paper and electronic devices. About half of the photography use of silver’s recycled. There are even kiosks that take in your electronic devices and can estimate the silver value in your components. Before making a silver investment one must always remember that silver is constantly being returned to the market because it is largely an industrial metal. Silver is different than gold because it is not hoarded and stashed in central bank or private vaults. Over 50% of the demand for silver is industrial, with about 12% of the demand being photographic paper. This creates tremendous supply as silver is recycled back into the market.
It is interesting to note that in the 1990s when the price of silver rose from three dollars an ounce to $50 amount many investors traded in their antique silver in order to take advantage of high prices. That means today there is less silver available to trade in for cash was in the 1970s. Even if silver prices reach $100/oz as hedge fund managers like Eric Sprott predict there will not be mountains of antique silver ready to be traded in.
Prior to making a silver investment one must remember that over the past 40 years the stockpiles silver have also been depleted. Many countries such as Russia, China, and Mexico have enormous silver stockpiles. For example, in 1970 there was an estimated 350 million silver ounces that governments stockpiled. The current number is most likely less than 50,000,000 ounces. This is a significant factor because it means that there is less silver supply that can come on market and depress the price making a silver investment more secure these days.
In conclusion, anyone considering silver investment should understand the supply demand balance for silver is favorable. Scrap silver and silver stockpiles have dwindled over the last 40 years. Clearly, mine production cannot make up the gap. One must remember that it takes 5 to 10 years in order for a company like Pan American Silver to bring silver mine on stream. This means that silver demand can exceed silver supply for several years before new production brings about lower prices.
Any silver investment requires proper due diligence. Since one is investing in a commodity, the most crucial analysis revolves around the supply/demand equation. Since most of the scrap and stockpiled silver has been depleted, silver mine production will be called on to fill the gap. If silver mine production slows due to political unrest in mining jurisdictions such as Peru or Argentina, the price of silver will most likely rise quite dramatically in the next five years.
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Mike Clemson is a professional investor who can help you learn more about the differences between gold vs. silver Browse our gold investment tips at http://goldinvestmentnetwork.com/
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