"Is silver's salvation upon us?"
Allen Secombe points out some often overlooked points about the decreasing levels of recycled silver and the increasing use of silver in water and food purfication, RFID tags, and solar panels, and the general idea that silver demand will outpace silver supply as well as the out of whack gold to silver ratio.
What he misses is the point that silver continues to be supressed; trading at about 1/6th of its inflation adjusted high and largely held down by one mega primary dealer who is short silver. Ironically, that super concentrated short appearts to me to be primary custodian for the silver of the largest silver ETF, JP Morgan.
Eventually, that short position will be exposed for what it is, and the long term gold investors with deep pockets will start taking the physical silver off the COMEX and force a commercial signal failure and allow silver to move towards its inflation highs and beyond.
Here is the article and an excerpt: Is silver's salvation upon us?
Allan Seccombe | Fri, 13 Nov 2009 15:23
[miningmx.com] — ADVANCES in technology, increasing focus on reducing human interaction with bacteria, and tracking goods and people are all good news for silver and the price of the industrial metal, which has lagged for so long, says Jessica Cross, CEO of VM Group. Long regarded as the poor cousin of gold, the metal, which is mainly used in industrial applications as well as to make jewellery, has bright prospects, with off take in a spectrum of new products put at just below 350 million ounces by 2020 (see graph below), Cross argued in a presentation at the LBMA Conference earlier this month.
The silver price is currently trading around $17.30/oz, a level that it traded around in the first half of 2008 when it broke up to just shy of $21. These two spikes were unparalleled, certainly since 1985, with the metal touching slightly north of $8.50 just once since then.
Looking at the history of the silver market, Cross said about two thirds of the mined metal is a by product of other minerals like copper, gold and lead, making it difficult to determine a price at which silver production would fall in a natural supply and demand scenario. Being a by-product, the metal will come onto the market almost regardless what the price is for it.
One of the major users of silver, the photographic film sector, is being particularly hard hit as consumers turn to digital cameras. A graph of silver demand by the sector shows a steady decline since a peak above 200 million ounces in the early 1990s to well below 150 million ounces in 2009.
Another anchor on silver prices, which tend to take direction from the waxing and waning gold price, is that a lot of silver used in a range of applications – like photographic film, electronics and batteries — tends to be recycled, bringing back about 400 million ounces a year of the metal to the market.
But the days of huge recycling could be drawing to an end, Cross said, pointing to a host of technological advances needing silver, including wound care, food hygiene and water, wood preservatives, textiles, solar panels and radio frequency identification tags…."
“These new end uses for silver are set to pick up the demand slack left by the shrinking photographic industry,” she said. “But, unlike photographic film, these end uses do not generate vast amounts of recycled metal. In general… the metal is going to be taken off the market for good.”
Silver’s time has come, she said.
“The change is coming about as a result of silver’s unique properties as a biocide as well as is superior conductivity,” she said.
“The interesting thing is that many of the world’s worries and woes today are playing right into the hands of silver and this metal appears to be in the right place at the right time in a number of applications.”
Radio frequency identification tags, used in identity documents, passports and stock controls, are growing in use. China, for example is spending $6bn to install these devices in identity documents for all its citizens and in transport tickets, she said.
London-based metals consultancy VM Group estimates use of these tags will grow to more than 30 billion by 2020 from around seven billion now. Each tag contains about 10 milligrams of silver on average, absorbing nine million ounces of silver from the 2.3 million ounces currently.
Solar panels and mirrors could absorb another 50 million ounces by 2020 compared to 18 million ounces now. Wood preservative coatings could account for up to 100 million ounces a year as chromate copper arsenic, the existing wood preservative is phased out.
There were no estimates of the amount of silver that could be used in plasters and bandages, which use silver for its anti-bacterial properties. These properties also feed into the clothing and textile sector where body odours and bacteria are eliminated.
Silver is also used in water purification devices and to store food. It could take up around 95 million oz by 2020.
“Superimpose this good news on the tonnages of silver that have gone into the ETFs (silver-backed exchange-traded funds) and you have an underlying strength within this market to justify its current price strength,” Cross said.
The gold:silver ratio is expected to narrow. At current prices you can buy 64.4 ounces of silver for the price of a single ounce of gold…."
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Comments on "Is silver's salvation upon us?"
Duff,
I was just about to go over to MSN Money to see what you had to say about the Saudi families buying/hiding gold when I found you here.
I have some CDE stock and noticed that they showed a loss last quarter due to some derivitives. Do you have any idea how much more loss they will take from the derivitives? Any way I can find out?
Have you thought about the ramifications of silver hitting $200/oz and gold at $3500/oz? Or to put it plainly, what would the ramifications be when the dollar crashes?
Imported oil will be way to expensive for most everyone. Natural Gas (a domestic resource) would most likely replace gasoline over time.
Folks will not be able to afford to drive to work. Business will struggle. Crime will drastically increase. Etc,etc,
Will we be allowed to payoff any outstanding loans in worthless greenbacks? Or will they have a bank holiday and announce hence forth all debts will be paid in ameros or something else based on some ratio favorable to the banks?
At what price in gold or rate on the dollar index would you peg as a sign for our last chance to ditch the dollars we have accumulated?
Hi Kent,
I'm so sorry for the delay in getting back with you. You ask a lot of good and difficult questions. I had five days off and decided to almost not look at the computer as I played with my family. If I'm going to do this blogging thing I guess I'll need to pull up my boots and get going.
No one knows precisely how this will play out. If I were in the current position of the monetary authorities, I'd start with the basics, which are how do we maintain a humane living standard for all people so that we can have social and market stability and create enough time to ring out the massive imbalances. I believe that the Federal Reserve in conjunction with other banks is basically doing a controlled burn for re-entry.
There is more food produced than consumed and yet people are starving. Millions of homes sit empty and yet people are freezing to death. What the world needs now is Love sweet Love. Yes, that is the title of song I believe. However, Love and market Wisdom correlate here. Some form of supperior family planning and better birth control to slow down the number of mouths that need to be fed and then despite currency, we need to make sure that humans get there basic needs met and then are provided the means of using creativity to make our existence on this beautiful planet far more efficient in resources utilization and in how we live and work together as a one species. The means are available to create energy practically for free if we are willing to develop the requisite knowledge with a large enough commitment. Basic high efficiency heated salt based solar plants coupled with new energy storage systems via gas compression as well as increased geothermal and tidal and wind energy operations in large enough scale could provide long term very low cost energy, independent of the melt down in currencies and bonds.
It is really clear that a new currency needs to be created and that the huge unsustainable debt load needs to be evaluated and a reasonable very long term solution to finally bring balance needs to be put in place. I imagine this involves he creation of a new global currency that is backed by something without unlimited growth potential. Will the debt be paid in that currency or the original? Probably the new currency.
The problem with fiat currency is that it designed to enable governments to finance war and war is not only inefficient but destructive in almost every way accept in the profits made by the arms industry and the sustaining of the entire military industrial complex. Right now if the US didn't have but 1/4th of its current military budget, we could probably pay down our national debt in lets 30 years. As it is, I don't see us every paying it down.
I believe that a new currency which is acceptable to the world will be phased in and the individual currencies of nations will very slowly be phased out.
If Silver hits $200 anytime very soon it will be because of a commercial signal failure in the COMEX in my opinion. If the new head of the CTFC, former Goldman executive, Gensler actually enforces reasonable position limits, which includes the massive short concentrated short position of Goldman's comrade in service to the Fed, JP Morgan, then silver should climb fairly quickly towards $100 in my opinion and then settle into a range of around $70. The other thing that could drive gold and silver to the levels that you speak about are of course hyper-inflation and or the adoption of gold and silver as the backing metals for a new global monetary standards. Of course it is logical to me that this should be so.
These two questions go together in my opinion:
"Will we be allowed to payoff any outstanding loans in worthless greenbacks? Or will they have a bank holiday and announce hence forth all debts will be paid in ameros or something else based on some ratio favorable to the banks?
At what price in gold or rate on the dollar index would you peg as a sign for our last chance to ditch the dollars we have accumulated? "
Not likely to have a bank holiday in my opinion. I think that the top indebted currencies like the dollar and yen will be paid off in dollars in yen and that the values will be in substantially lower values than they were borrowed in. There will be plenty of moaning and groaning along the way but the "monetary authorities" are giving the smart money plenty of time to move into other stores of wealth like gold, silver and oil, alternative currencies like the yuan and the cando and swiss franc or whatever you might choose.
We are just starting to see the migration. I think its almost a certainty that goods will go up in all fiat currencies over time. The dollar relative to the current basket of currencies may not fluctuate that much since some of the other currencies are also heavily indebted and while there isn't as much press on it, the yen has a lot more associated debt when measured as a function of GDP.
I don't really know what the debt to GDP ratios is in China but certainly its not zero and given the recent stimulus, even the yuan has some debt burden.
Hi Kent,
Your question in regard to the derivatives position of a company is a good one. In smaller companies you might be able to make a phone call and talk to the CEO or the CFO and get some answers. Unfortunately, the reporting requirements on derivatives are not very clear. I think I would post this question on the "Start Investing" board. One of those guys probably knows about the SEC / FASB regulations on what must be disclosed about the nature and risk of the derivatives that a public corporation has purchased or issued. Since CDE is a Canadian company there may be some variance there as well. If you find the answer I would greatly appreciate knowing myself.
Here is a great PBS Documentary on the subject of Derivatives and What Went Wrong: Why Derivatives Were Created and What Went Wrong