Why Buy Physical Silver?

Physical silver is more scarce than gold
A lesser-known fact among investors who buy physical silver is the scarcity of silver on the market. Despite an increase in silver production from 400 million ounces to 700 million ounces since 1990, demand for physical silver has been structurally larger than the supply in the past 15 years.

It’s estimated that there is 17.5 times more silver in the earth than gold – this corresponds closely to the 16:1 monetary silver to gold ratio that has existed for centuries. However, the quantity of available above-ground silver is in reality many times smaller than gold. The question is: where are the 700 million ounces of mined silver annually?

A huge amount of silver ends up as scrap every year. Silver is used in a number of products which are often thrown away after use, such as CDs, phone batteries, hearing aids, TV screens, computers, and RFID chips.

Recycling of physical silver
Only a small part of the silver used in industrial applications is recycled. Silver for industrial purposes is often used in such small quantities that it makes no economic sense to recycle it. Recycling silver does not become interesting until the silver price increases enough to make it economic to do so.

Gold is different; 98% of all the physical gold that has ever been mined is still available in the form of gold bars, coins, jewellery or objects of art, and almost all industrially processed gold is recycled.

Inventory of physical silver
Governments have sold their silver reserves in huge quantities to industry over the past two generations. The US alone has brought 5 billion ounces of physical silver onto the market since WWII. In 1950, there were still 10 billion ounces of silver available above the ground; in 1980 this figure had decreased to 3.5 billion. Nowadays, there is no government that holds significant stores of silver any longer.

Industrial applications of physical silver
Despite the decreasing inventory of available physical silver, new applications for physical silver are continuously being developed. No other material has as many patent applications associated with it as silver.

A good example of new silver applications can be found in the photovoltaics industry. In China, production of photovoltaic solar panels has doubled every year since 2003, which has greatly increased the industry's demand for physical silver. Many expect that by 2015 the worldwide requirement to buy physical silver from the photovoltaics industry alone will be around EUR 150 billion. The Silver Institute expects the total demand for physical silver for industrial applications to increase by 36% between now and 2015.

Asian demand for physical silver
According to the 2011 World Silver Survey conducted by the Silver Institute, the total demand for silver for investment purposes has increased by 40% to a new record of 279.3 million ounces. This demand is primarily driven by silver-related ETFs and the physical market, with a large part of this increase being sharply rising demand for silver from Asian countries. .

The growing Asian middle class is buying silver in ever-greater amounts, thanks to its strong appeal as a more affordable “safe haven.” According to the Hong Kong Mercantile Exchange, activity in the silver exchange and demand for silver in China increased by 67% between 2008 and 2010. It has also been possible in China since mid-2011 to trade in silver futures, allowing the stock market to respond to the great demand in silver as an investment.

Given that Asian investors have a strong preference for physical property in the form of silver bars and jewellery instead of futures, it is this market that is expected to buy physical silver in ever-greater amounts from now on.

Scarcity on the physical silver market
Silver mines are being exhausted, above-ground silver is being processed and not recycled, above-ground reserves have been used up in recent decades and industrial demand is rising.

It is clear that serious shortages will occur on the silver market. The question is where should the silver come from? A large part of it will come from investors. Investing in the metal has not yet been discovered by the masses, which is creating interesting investment opportunities for you to buy silver.