Silver - Looking good longer termThe second is the New Scientist, which pretty much sums up the reason why the price of almost everything is on the up with its headline: World Stripped Bare.
The basic premise here is that we are using up the world’s resources, and its minerals in particular, at a most alarming rate. If the world keeps consuming metals at its current rate we have a mere 45 years of gold left, 46 years of zinc, 29 years of silver and 59 years of uranium.
If the rest of the world catches up with America and starts consuming these minerals with the same enthusiasm, things look worse: there is only 19 years’ worth of uranium, less than 10 of silver, 36 of gold and 34 of zinc.
Read this article on moneyweek magazine today.
Silver investment: why this metal's looking attractive
The first thing these figures make me want to do is rush out and buy silver. The price of the metal has risen threefold since I first started writing about it here, having been told in 2001 that Bill Gates and Warren Buffett were pouring money into silver miners. It has already risen another 6% this year, but as these figures make clear the supply-and-demand situation is so tight that it is still worth owning.
Silver has a long history as a monetary metal and as a safe haven in difficult times so, given the inflationary environment around the world, it makes sense to hold it – along with gold – as a way of protecting your capital.
However, there is a lot more to the story than this. Unlike gold, silver is indispensable to a huge number of industrial processes. It has the highest thermal conductivity of all metals. It is very strong but also malleable and it can put up with extreme temperatures with no change in its properties.
It also has disinfectant attributes. Only last year there was talk of making NHS patients wear pyjamas with silver streaks running through them to try and stave off the MRSA super bug. Silver has always been considered to be good for health: rich babies aren’t said to have been born with silver spoons in their mouths for nothing.
Add all this to the fact that silver looks very pretty (despite my passion for investing in gold, I really only wear silver) and you’ve got the perfect metal.
It is used in computer keyboards, in mobile phones, washing machines, batteries, TVs, cameras, photography, medical devices and a large number of the other things you own. Look round you: every gadget you see will have a tiny bit of silver knocking about in it somewhere. Industrial demand for silver is forecast to rise at some 6% this year.
Silver investment: supply shortages
Herein lies the problem – and the opportunity. Like most perfect things, silver is in short supply.
Until recently this hasn’t been much of a problem as inventories have been high and government stockpiles have been there for the taking. No more. Most official stockpiles are all but gone – certainly sales from them have fallen off fast – and estimates suggest total stocks of refined silver are about 300m ounces, less than a seventh of what they were only a decade or so ago.
It is possible to recycle some silver, but most is lost for ever after use. To me this says that the silver price is going to keep rising for a while yet and that buying into it, probably via the iShares Silver exchange traded fund, is a good idea. Silver currently trades at about $14 per ounce. The real bulls think it will hit $20 by the end of the year.