When most people think about silver, the first thing that generally comes to mind is bright, shiny coins or large bullion bars held by precious metal investors.
But coins and bars account for a lot less of overall silver demand than you might think.
In fact, in many ways, we can really consider silver an “industro-precious” metal.
That’s because industrial fabrication actually accounts for a little more than half of the world’s silver demand.
The other half of demand comes from investment and luxury items. So in many ways, silver is both an industrial metal and a precious metal. This is an extremely important dynamic that most investors seem to overlook.
Silver and Gold
Silver is often compared to gold. But considering both metals’ end uses, they really couldn’t be any different.
Whereas silver’s end use is roughly split between industrial and precious metal demand, less than 10% of gold supply is finally used in an industrial application.
And that’s led some to call silver “the most important metal in the world.”
Of course, gold is extremely important to global finance, among other things. But as far as the number of end uses goes, silver certainly has gold beat.
Whether you know it or not, you rely on silver every day. The metal is all around you right now. It’s in your laptop, television, printer, scanner, fax machine, keyboard, etc.
In fact, you can’t even see yourself without silver. Mirrors are produced by the wet deposition of silver onto a glass substrate.
And a cell phone or camera that you’d use to snap a shot of yourself… that would contain silver, too.
Okay, you probably could figure out a way to see yourself without silver. But my point is that the metal is heavily involved in your life — you use silver every day for something even as basic as looking at yourself.
And it’s a metal the world needs more and more of every day.
Right now, nearly 3 million ounces of silver are required daily to meet demand. To put that into perspective, that would produce a single seven-foot cube weighing over 200,000 pounds. (So you might want to get a hand truck or something.)
But believe it or not, most of this silver will end up becoming irretrievably lost, perhaps never to be used again. Here’s what I mean…
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With its near-religious appeal and historical value, gold is very rarely not recycled. Some studies suggest that up to 98% of all the gold ever mined is still actively being used in some capacity today.
Silver, on the other hand, is different.
Most of silver’s industrial demand comes from the electronics industry. And it’s actually quite uncommon that these things ever get recycled.
Last year, the world produced over 40 million metric tonnes of e-waste. That’s old laptops, cell phones, televisions, printers, scanners, fax machines, keyboards, etc. But less than 15% of that got recycled.
Silver is one of the world’s most important metals, and it’s getting tossed out in the trash. Moving forward, this is clearly unsustainable, as silver is finite like every other resource on Earth.
At some point, we are clearly going to have to start recycling a lot more if we want to have access to silver. But before that happens, the price of silver is going to rise.
Trading under $14 an ounce right now, I think silver is a steal. I expect to see silver moving into higher territory this year.
Good Investing,
Luke Burgess
Energy and Capital
