The Conversation (0)
Analysts say that silver is continuing to attract investor attention away from gold, with the gold-to-silver ratio dropping to levels that have not been seen since 1983. But as investors continue to put funds into the precious metal, concerns are surfacing that there may not be enough of the physical silver to go around.
By Damon van der Linde – Exclusive to Silver Investing News
Analysts say that silver will continue to attract investor attention away from gold, with the gold-to-silver ratio dropping to levels that have not been seen since 1983. But as investors continue to put funds into the precious metal, concerns are surfacing that there may not be enough of physical silver to go around.
Eric Sprott, the CEO of Sprott Asset Management is one of the most vocal advocates of this theory. He has appeared at numerous natural resource investing conferences and media outlets including CNBC and BNN, saying that there is a looming silver shortage that is not yet reflected in its climbing, but still comparatively low value.
“[In January], it traded 500,000,000 oz in a day on the COMEX when we only produce 800,000,000 in a year. Who the hell is buying and selling this stuff. It’s a paper market,” said Sprott, speaking at the Vancouver Resource Investment Conference.
As with gold, many analysts attribute the rise in silver prices to growing uncertainty in many global markets, particularly that of the United States and some European nations. As with many metals, much of the growing demand is also coming from emerging markets like China and India.
“Chinese net imports of silver are 112,000,000. In 2005, they were net exporters of 100,000,000 oz. That’s a 200,000,000 oz shift. The denominator is 800,000,000 oz, that’s what the world produces in a year,” said Sprott. “Where’s it all going to come from?.”
Interest in silver ETFs is also rising as the price of silver climbs. ETF Securities reported that its physical silver exchange-traded commodity holdings hit a new record of 53.6 million ounces last week.
“The key driver of this performance has been the rebound in global manufacturing demand and continued strong investor demand for alternatives to holding paper currency in an environment of rising sovereign risk, reflecting silver’s mix of industrial and precious metal characteristics,” the ETF provider said in an article for the Dow Jones Newsire.
“”One of the statistics that I fully agree with is the availability of gold versus silver. I use the number $6 trillion as the amount of gold that’s available in the world. And the amount of silver that’s available in the world is about $22 billion. A billion ounces of silver at $22, of which the ETFs already own half, and between you guys and us, we probably own the other half. Which means there’s nothing left,” said Sprott at the Fall 2010 Casey Research Gold & Resource Summit.
To further put a strain on world silver production, silver has a wide array of applications causing a growing industrial demand. As reported by Michael Montgomery in Silver Investing News, a new report commissioned by The Silver Institute, from research firm GFMS, titled “The Future of Silver Industrial Demand.” The report projects a 36 percent growth of industrial fabrication for silver through 2015, noting applications such as electronics and photovoltaic solar cells, and as an antibacterial agent assure the metal new and expanding markets above and beyond the more traditional jewelry, photographic and silverware markets.