Silver, Rock, Paper, Scissors
Silver Price and Investment
According to the Silver Institute, The silver price has more than doubled in two years, from an average of $14.67 in 2009 to $35.12 in 2011. How many other investment strategies can say the same? An investment in silver does not carry any dividends or interest perhaps, but in these days of deteriorating paper money returning a negative interest, the importance of preservation of assets comes to the fore.
Silver investment achieved a historic high last year (2011) of over 282 million ounces (Moz) in silver investment including silver bars, coins and medals. This was equivalent to around ten billion dollars on a net basis, figures not to be demised. In fact silver bar investment grew sixty seven percent in 2011 to 97 Moz and global coins and medals fabricated by nearly twenty percent to over 118 Moz.
China is not just after gold. There was a 60 percent rise in their silver bullion coin output also.
Here is the world silver supply and demand expressed in millions of ounces, as per the Silver Institute. Note that the totals may not add due to rounding.
Mexico produced the most silver in 2011 followed by Peru, China, Australia and Chile. Global production continues to drop apparently due to a fall in processed grades
“Primary silver mine cash costs rose to $7.25 per ounce last year, driven by higher labor costs and lower grades, despite an increase in by-product credits. Nevertheless, with a significantly higher average annual silver price, simple cash margins grew by an impressive 89 percent to $27.87 per ounce” , according to the Silver Institute.
Long term, the silver price continues to be a sound investment and seems set to continue being a leader in asset preservation despite any volatility with the spot price.
Shanghai Silver Exchange
They are currently China's only officially designated exchange group on the silver market and is supported by the Chinese Commercial Federation, the Chinese Chemical & Mineral Trade Federation, the Gold and Silver Branch of the Chinese Association of Non-Ferrous Metals, the Chinese Non-Ferrous Metals Information Center, the Electrical Alloy Branch of the Shanghai Electricity & Science Research Center, the municipal government of Hunan Province's YongXing County, YongXing County's Gold & Silver Association, and Shenzhen Gold, Pearls and Jewelry Trade Association.
The Silver Institute engaged in a China Markets Development Program recently interviewed the CEO of the Shanghai Silver Exchange, Mr Gao Huijie, during a delegation hosted by the Silver Institute. In the interview Mr Gao stated, “The Shanghai White Platinum and Silver Exchange has been designated a spot silver market by the Chinese government. Essentially, we do the following:
a. We fix the price for the spot market. Our price affords a broad overall view of the industrial supply and demand in China. Over 1,500 firms, including miners, refiners, manufacturers and retailers, purchase or sell silver according to our price. We have our own Silver Delivery List of certified brands of silver bars that can be delivered in our market. Many refiners have come to us for their brands to be listed.
b. We provide an electronic platform for our members to buy and sell silver. We have both one-month and one-week contracts.
He also stated that they are one of the primary sellers of silver in China.
China is not just the third largest miner of silver but is also the third largest user of silver in the world. Chinese investors are more and more choosing to buy silver as a way to preserve their assets.
In conformance with Chinese Contract Law, Standard GB/T4135-2002, and Bulk Stock Electronic Transaction Specification, WPSE organizes all silver electronic transactions. In the online commercial network of WPSE, enterprises are able to develop contracts, determine delivery dates, and arrange for the shipment and reception of products. WPSE provides a comprehensive business platform for domestic buyers and sellers of silver in China.
The online booking trade for silver includes two forms: monthly trade and weekly trade. Both the buyers and the sellers are able to sign contract, make payment and get the goods through the online trading platform on site.
The monthly trade has the biggest trading volume and the longest time of implementation. Enterprises can make the payment on the determined price on whatever day within the next 6 months to purchase spot silver, and get the delivery and quality guarantees. In this way, enterprises will be able to control the material cost and improve the sales profit. It is favored by many traders since its implementation.
The weekly trade is tailored to investors and traders after researching on the periodic supply and demand characteristics. The traders quote, deal and signed contracts through the online trading system, and make the delivery or get paid within one week. It can shorten the trading period and meet the demand of various enterprises every week.
They also promoted an "online bidding" mode for participants to stimulate the market atmosphere, which incorporated many modern elements. After the sellers has offered a bid and put the selling instructions on the trading platform, the buyers can search for the items needed, make his bid, then deal it under the rule of "Time and price priority".
Exchange and transfer of warehousing bills online
In order to develop the supply and demand situation of warehousing bills for spot silver, the Shanghai Silver Exchange also promote a brand new system to exchange and transfer warehousing bills as well as selling the bills on behalf of the traders. The warehousing bills are the bills obtained from the traders in the weekly untransferable market.
Enterprises who want to purchase silver can submit the information of "I want to purchase silver" and the system will then collect information and show the sorted feedback. Enterprises can also use the telephone to make price inquiries.
There is an extensive site in Chinese of course with a translation on line in English from which much of this data is obtained.
There are a lot of Chinese interested in buying silver and the The Shanghai Silver Exchange seems to be one of the best ways to buy silver in China.
Silver long vs silver short
According to the Silver Institutes recent press release, "Globally, silver-based exchange-traded-funds (ETFs) account for 586 million ounces (Moz) of silver, up from 576 Moz at the end of 2011. Demand for physical silver bars is also strong. According to several precious metals dealers silver bar sales continue to be brisk."
Investor demand for silver on the commodities exchanges around the world continue to be strong and net silver long positions, the difference between total long positions and total short positions, continue to steadily increase showing a much more confident bullish attitude to buying silver for investment.
Silver investors are also looking at accumulating coins, such as silver eagles and maple leafs for example as an easy way to build up a silver stock over a period of time.
According to "The Future of Silver Industrial Demand," a report commissioned by the Silver Institute and released last March, silver industrial demand is expected to grow by 36 percent to 666 Moz from 2010 through 2015 and silver industrial demand continues to "…remains positive primarily because of the lack of substitution and the wide range of established and ever-growing new uses of silver that are vital to industry."
It is very likely then that even if the occasional shorting of the price of silver, occurs, a practice employed by a few bank, it will only be a temporary halt to the onward and forward march of the price of silver.
By trend the silverprice is showing increasing stability as a result of demand. There will be the occasional hiccup and it would be a mistake to check the silver price on a day by day basis. Look at the trend as that will tell the real story and demonstrate the logic of buying silver on a regular basis.
Silver may be considered as the poor man's gold by some but it can potentially make those 'poor men' well placed in the wealth stakes over time.
Diamond Jubilee Silver Coins
The Pobjoy Mint has announced the issue of 12 new coins on behalf of Ascension Island, British Indian Ocean Territory, British Virgin Islands, Falkland Islands, Isle of Man and South Georgia and South Sandwich Islands.
Each coin features an image from her Majesty’s life.
- A portrait of the Princess Elizabeth with the infant Prince Charles in her arms 1948
- Features a portrait of Her Majesty following her Accession in 1952.
British Indian Ocean Territory
- Design features a portrait of Her Majesty and Princess Margaret as children on a rocking horse.
- Depicts Her Majesty and H. M. Queen Elizabeth the Queen Mother.
British Virgin Islands
- Features a portrait of Her Majesty in her Golden Jubilee Year
- Shows Her Majesty Queen Elizabeth II mounted on horseback for the Trooping the Colour Ceremony.
- Features a portrait of Princess Elizabeth in the uniform of Colonel of the Grenadier Guards
- Design is of a portrait of Her Majesty in her robes as the Sovereign of the Order of the Garter.
Isle of Man
- A Portrait of Her Majesty Queen Elizabeth II on a State visit to Canada in 2010
- Features an image of Her Majesty at her Coronation
South Georgia and South Sandwich Islands.
- Depicts Her Majesty on Christmas Day in 2009
- Image of Queen Elizabeth the Queen Mother and the infant Princess Elizabeth.
All coins have been approved by Buckingham Palace. Each coin features a unique double effigy of the Queen on the obverse. The first effigy is an up to date portrait of Her Majesty, the second is based on a portrait by Mary Gillick that first appeared on the obverse of coins at the start of her reign. The coins are produced in Proof Sterling Silver and Uncirculated Cupro Nickel, with each precious metal coin struck four times to give a stunning proof finish.
Here is a list of the silver coins available:
Ascension Islands 2012 Diamond Jubilee 2 Coin Proof Sterling Silver Set £115.83
Ascension Islands 2012 Diamond Jubilee Infant Charles Proof Sterling Silver £58.29
Ascension Islands 2012 Diamond Jubilee Young Portrait Proof Sterling Silver £58.29
British Indian Ocean Territories 2012 Diamond Jubliee 2 Coin Proof Sterling Silver Set £115.83
British Indian Ocean Territories 2012 Diamond Jubliee Rocking Horse Proof Sterling Silver £58.29
British Indian Ocean Territories 2012 Diamond Jubliee With Queen Mother Proof Sterling Silver £58.29
British Virgin Islands 2012 Diamond Jubilee 2 Coin Proof Sterling Silver Set £115.83
British Virgin Islands 2012 Diamond Jubilee Golden Jubilee Portrait Proof Sterling Silver £58.29
British Virgin Islands 2012 Diamond Jubilee Trooping the Colour Fine Silver 12gm £45.79
British Virgin Islands 2012 Diamond Jubilee Trooping the Colour Proof Sterling Silver £58.29
Falkland Islands 2012 Diamond Jubilee 2 Coin Proof Sterling Silver Set £119.00
Falkland Islands 2012 Diamond Jubilee Grenadier Guards Proof Sterling Silver £59.95
Falkland Islands 2012 Diamond Jubilee Order of the Garter Proof Sterling Silver £59.95
Isle of Man 2012 Diamond Jubilee 2 Coin Proof Sterling Silver Set £115.83
Isle of Man 2012 Diamond Jubilee Coronation Fine Silver 12gm £45.79
Isle of Man 2012 Diamond Jubilee Coronation Proof Sterling Silver £58.29
Isle of Man 2012 Diamond Jubilee Visit to Canada Proof Sterling Silver £58.29
South Georgia and South Sandwich Islands 2012 Diamond Jubilee 2 Coin Proof Sterling Silver Set £115.83
South Georgia and South Sandwich Islands 2012 Diamond Jubilee Christmas Day Proof Sterling Silver £58.29
South Georgia and South Sandwich Islands 2012 Diamond Jubilee With Mother Proof Sterling Silver £58.29
No information is given on the silver content of each coin or of the weight and size.
The Role of Silver in Industry
Silver is used in great diversity in industry from automobiles to electronics to health to solar cells and much more. This is very much a good excuse for investing in silver quite apart from the jewelry, coin and silver bullion aspect.
Some of the vital uses for silver in industry include the following:
DVDs and other data storage devices
Electrical and electronic switching
Electronics, including computers, screens, cell phones
Paints and lacquers
Personal care, cosmetics etc.
Photon voltaics and solar devices
Silver coated Ball bearings
Surgical appliance and sterilization procedures
Textiles & shoes
Water filtration, Purification, sanitization
Although in many industries the amount of silver used for each application can be quite small, the quantity used means that several tons can be used very easily. Take cell phones for example. Although there is only a fraction of an ounce of silver in each phone, average of .35 grams, nevertheless as there are over 5 billion cell phones on the planet that amounts to almost 60 million dollars worth of unrecoverable silver (only about 1 percent of the silver used in discarded cell phones is recovered).
According to the Silver Institute, the total fabrication demand for silver grew by 12.8 % to a 10-year high of 878.8 Million ounces in 2010. In the previous year silvers industrial use grew by 20.7 % to 487.4 Million ounces.
Silver mine production only rose by 2.5 % to 735.9 Million ounces in 2010 however and this was only because it was aided by new projects in Mexico and Argentina.
Mexico, Peru, China and Australia were the biggest producers of silver in 2010. Top silver producing companies in millions of tones were:
BHP Billiton Australia with 46.6,
Fresnillo plc of Mexico 38.6,
KGHM Polska Miedź Poland with 37.3 and
Pan American Silver Corp Canada with 24.3.
Fresnillo and Pan American being the only primary silver producer (Primary means they have mines that mine exclusively silver as distinct from mines that produce silver as a by-product of mining other minerals).
Catalysts are one of the biggest users of silver in industry. A catalyst is a substance that is used to create a chemical process without itself being changed. As such silver is a very important catalyst in the production of ethylene oxide and formaldehyde, essential in the production of plastics, as the silver itself is not affected by the process and can continue to be used over and over again.
Nevertheless it still takes over 150 million ounces to produce the worlds supply of ethylene oxide and formaldehyde. 90 percent of the silver is used in the production of ethylene oxide from ethylene which is the foundation for such things as polyester, used in the textile industry and plastics used for insulation from electrical conductivity and heat (Handles for stoves, pots, keys for computers etc). In addition 25 percent of the ethylene oxide produced is used to manufacture antifreeze coolant for the auto industry.
Formaldehyde is the other chemical used extensively in plastics. Produced by a catalyst reaction from methanol, using silver, formaldehyde is used in adhesives, laminating resins, plywood and particle board. It produces surfaces that are scratch resistant, good for such products as buttons, dinnerware, appliances, handles etc. Also automotive parts and even toys, so silver plays a very important part here also.
Silver is also used in soldering and brazing. It offers safety, strength and high quality joints which other metals cannot match.
Brazing is the term used for joining materials at temperatures over 600 degrees Celsius while soldering is the term for joining at under 600 degrees Celsius. Silver is added to provide a smooth corrosion resistant joint. You can find these joints in many areas such as air conditioning, refrigeration, power distribution as well as the automobile and aeronautical industries.
Silver is a natural antibacterial and so is more frequently used in homes these days to bond copper piping and eliminate the propagation of bacteria as well as replacing the harmful lead based solvers of yesteryear.
In automobiles well over 36 million ounces of silver are used each year.
Silver forms a very significant part of industry and, with the expansion Photon voltaics or solar devices and silver nano particles we can expect a continuing expansion of silver being used in industry. This will only contribute in no small measure to the value of silver over the coming years. Let's hope that enough silver will be produced out of the ground to support that demand.