Silver prices hit their highest level in nearly 31 years Friday, on expectations of stronger demand and the metal's appeal as a relatively safe investment in times of uncertainty. It was the highest price since silver settled at $32.90 an ounce on March 7, 1980, but well below the price after accounting for the interim inflation.
Silver has been rising consistently since late January on more evidence of global economic growth in emerging markets. Besides its popularity as a safe haven investment, the metal has a variety of uses, from jewelry and silverware to consumer electronics, solar energy and medical applications.
Silver has a long history of use in medicine and was commonly used by doctors as late as the 1930s before the advent of antibiotics. Silver nitrate being the prevalent form, while silver lodide was used in babies eyes upon birth to prevent blinding as the result of bacterial contamination.
"One of the most promising applications is in silver-embedded bandages for burn and wound victims. Currently we're seeing a surge of applications for silver-based biocides in all areas: industrial, commercial and consumer." http://www.silverinstitute.org/medical_applications.php
It is now estimated that 54% of the annual global silver supply is used for industrial purposes. At present most of this silver is lost with very little recovered. Current global silver inventories are at low levels, estimated to be around 600 million ounces. Whereas just 22 years ago, in 1989, the global silver inventory stood at about 2.3 billion ounces. As a comparison of supply versus ever increasing demand, above ground silver bullion in 1950 was over 9 years worth of demand. At present this global silver supply now sits at a little over 10 months (pdf) of demand.
At one time in history silver was once valued at over $800 (present day $) per ounce in the late 16th century because of it's rarity. Before the New World silver of the Spanish conquests flooded Europe. Silver is once again becoming rare, and with this rarity coupled with ever increasing demand, will come higher prices.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Long silver in physical form.