Investing in silver with a three year horizon will be a good move: Analysts

Investment

oi-Shoaib MD

By Shoaib Md

Published: Tuesday, July 19, 2011, 13:58 [IST]

Silver has corrected it self. But that doesn't mean it has lost potential to go up. The prices of silver has been range bound between $32-36 per ounce (about Rs 50,000 to Rs 55,000 per kg) after crashing from $50 per ounce ( Rs 75,000 per kg).

But despite all this it is still a good investment proposition.

The best part about silver is that half or more than that is half of the demand, for silver, is derived from industrial uses. Its sought after by the industrial sector because it is the best conductor of electricity, the best heat transfer agent, the best reflector of light. This gives the advantage of being a good lubricant and a versatile catalyst along with being an alloy.

Even if there is a fall in demand from traditional areas of silver use, more demand will come from several other industrial uses of silver.

Solar Power

Solar panels also make use of silver. And considering that solar energy sector is one of the major benefactors of the emphasis of renewable sources of energy. A study titled The Future of Silver Demand, carried out by GFMS, a precious metals, base metals and steel research consultancy has come with some interesting information on the silver.

Silver is used in 'thick film' solar panels in which crystalline silicon is used to covert solar heat to energy. The use of silver in these solar panels has grown from 3 Moz in 2004 to 50 Moz in 2010. The report forecasts the demand for silver in these types of solar panels to grow to double by 2015. However, the report also covers the growing use of 'thin film' or CIGS solar panels that do not use silver in the production. This new solar panel design could reduce the total amount of silver demand in the solar industry.

On the other hand, the tsunami in Japan brought the world on the brink of a nuclear disaster, after this the demand for solar power is expected to go up because of this.

Medical Use of Silver

Silver is put to use catheters, pacemakers, valves, feeding tubes as well as medical appliances inserted in the human body. This opens up a unique and yet important opportunity in this medical space.

Anti-Bacterial Agent

Silver is used in anti-bacterial sportswear to reduce odour, anti-bacterial clothing for soldiers and medical personnel to reduce infections, and in food packaging, anti-bacterial upholstery, etc. According to analysts the demand from this segment segment is approximately 38 million ounces of silver per year.

"New uses for silver are being found almost every day, particularly in the biocide arena," says Jeff Clark who authored The Casey Research 2011 Silver Investing Guide. In fact, the Food and Drug Administration in the United States has approved the adding of silver to bottled water to helkill bacteria.

Is There Enough Silver?

The study by GFMS expects that industrial demand for silver will increase from 487.4 million ounces to 665.9 million ounces by 2015. Now the question would be: where will the silver come from? Demand has out-stripped mine production since 1999.

Silver demand is met through a combination of mine production or reclaiming silver from products where it is already used. But it is not easy to recycle silver.

More than half of all silver in cell phones, TVs, computers and other electronics manage to ends up in landfills. Therefore, analysts expect a deficit situation which will boost up the price of the silver.

This will bring up many opportunities in the silver market. Therefore if you can sit on the silver for some time and have the risk appetite for it and keep track of the development in the silver market. Then it would be prudent to invest in Silver.

(Investing in Silver the E-way)

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