What Brought Silver to $50 in 2011?

BullionVault’s Miguel Perez-Santalla explains in an article published today the factors that led silver prices to hit $50 three years ago this week. He also looks at what happened after that.

As quoted in the market news:

Not only was the US economy still reeling from the mortgage crisis and 2008 Lehman Brothers collapse. Now the Eurozone faced break-up as Greece, Ireland, Portugal, Italy and Spain all reported serious problems with their finances.

In the United States confidence in the economy continued at record lows. The news out of Europe only heightened concerns of another financial crisis. Then the Fed announced another round of Quantitative Easing beginning in November 2010. Silver coin sales by the US Mint hit a monthly record, surpassed only by early 2011′s surge in private-investor demand. Because this new QE meant printing more Dollars (or rather, their ‘electronic equivalent’ as then Fed chair Ben Bernanke had said). So in the minds of many investors the Dollar was under the gun. Seeking safe-haven assets, likely to hold or grow their real value during a prolonged inflation, became of paramount importance.

Internal to the silver market, meantime, there were reports that seemed to support a bullish long-term view on silver’s industrial demand. The photovoltaic industry for one began consuming silver in much larger quantities than in previous years. Solar panel production starts with silver paste, and that requires a finer grade of silver than the main wholesale market trades. As the sector’s growing demand sucked in these 0.9999 fine bars, it drew a lot of attention. Because while there was no shortage of the more common 0.999 bars, there was a shortage of immediate supply of this higher purity. And because of the growing demand, and the coincidental rise in the silver price, the story stuck.