Silver: Invest in the Metal of the Future

Includes: AGQ, DBS, SLV, USV
by: Hyperinflation

Like Gold, most people dismiss silver mostly because there is a stigma among the mainstream that label those who embrace this metal as having some type of fetish. This comes out of sheer ignorance, as silver is the metal of the future. Silver plays two roles, of which both are of great importance. To avoid the much talked about inflationary hedge aspect, I will write just a few sentences for those unaware of this characteristic.

Silver as a store of value - Like Gold, Silver is seen to be a store of value, and for good reason. It too has been used as a worldwide currency for well over 5,000 years. This is because it has always been chosen by the people as an ideal medium of exchange. (Gold for larger purchases and Silver for smaller denomination transactions). This was due the physical characteristics of these metals i.e durability, inability to replicate, an adequate level of scarcity, etc. So as we embark upon the era of unprecedented inflation, silver will be right next to gold as the ideal protectors of real wealth.

Silver For Industrial Use- Now and In the Future - what most people don't realize is that silver has become an essential metal in our everyday lives. This trend will continue at an increasing rate. Most people think of the common industrial uses, photographic uses, silverware, jewelry and coinage as capturing all that is silver, and that these uses will see little to no impact in the demand for them. On the contrary, as silver has recently caught the attention of the medical community for its ability to fight off bacteria growth and promote healing. Without getting into in depth terminology, silver interrupts bacteria's abillit to form chemical bonds, without which the bacteria has no choice but to die. To avoid an entire discussion about the numerous other applications that are being researched in medicine, I will leave it at that.

Before I get to the most important development and the biggest catalyst for silver going forward, it is also worth mentioning silver lenses have proved superior in fighting off harmful rays in addition to conducting light transmission in such away that people don't need to change glasses when moving from outdoors to indoors or vice versa. This is a rather new trend but is being used more and more, currently just under 15% of total production. Silver is also used as a component in solar panels.

Silver is starting to become a necessity in water purification, much for the same reason mentioned above (the ability to fight off bacteria). Silver is replacing harsh chemicals i.e. Bromine, Chlorine which are inferior for obvious reasons. Although the previously mentioned chemicals will continue to be used, the shift has slowly begun favoring silver, especially in building new water supply systems. Silver destroys legionnaires disease, which is caused via a buildup of bacteria in the piping of these systems. Not to mention the superiority it will have in personal water filters which currently use charcoal, among other things.

Now for what I believe will be the an enormous catalyst for Silver. I am referring to the new Silver-Oxide batteries (which have been developed and tested already) and will soon hit the market, most likely in Q4 09'.

Duracell has already developed basic everyday batteries, while companies such as Intel capital (investment arm of Intel (NASDAQ:INTC)) have developed those batteries to be used in laptops. Anyone who uses the computer for numerous hours a day has likely noticed the vast shortcoming in the currently used lithium-ion batteries. For example, they tend not to hold a charge as the life of the battery increases, which even in my personal experience has led to the death of the battery. The Silver- Oxide batteries, however, do not share these characteristics and last 40% longer. They are also recyclable, which should draw the attention of the green fanatics out there.

Imagine the implications of this fact, as they are incredibly telling for the future prices (more on the supply later). One just needs to imagine the widespread use it will have, especially as those societies in emerging countries begin to use battery intensive electronics such as laptops, or just your everyday cheap and simple electronics.

The Supply Side: To briefly summarize the results of a US geological survey concerning silver, no one knows how much silver is below ground... But there is a huge deficit when they measured the amount that would be feasible to sell at $15/oz. When I say huge, I mean a quantity that will prove unsustainable for the immediate future. Of course, this does not take into account the stockpiles above ground, but that has been dwindling as silver mining has been negligible the last 1.5 years.

Now don't mistake me for saying we are running out of silver, or something absurd like that. The previously mentioned survey determined there was ample amounts of silver but one big problem. This silver lies so far down in the earth, that even conservative estimates are projecting a selling price of $30/oz for this to be feasible. (This is not a well hidden fact, as it is very easy to find numerous surveys like this from a number of credible sources). I have also seen estimates nearly double that of the conservative projections.

Conclusion: Silver should not only be looked as an inflationary hedge, rather through fundamental supply and demand measures. The non-inflationist can merely look at this as a bonus and focus on the fundamentals, which is something you can't do with gold. As for Silver Miners, I think they are possible the best way to play this, should you believe in the silver story (barring futures).

Disclosure: long silver