After gold, silver has been touted as the next big thing in global markets, so why is it still undervalued? Will it meet the expectations?
Throughout history, silver has been a versatile asset. Since thousands of years, men and women have been captivated by silver. For the ancient citizens, silver was an object of amazing beauty, instilled with the mystic qualities of the moon, whose dark and mysterious nature it seemed to mirror. Silver has played an important role in individuals' lives for centuries by serving as a medium of exchange and becoming an essential metal in today's world of high-tech consumer goods.
Over
the years, man has been using the metal for different
purposes like telephone, electrical contact, and photography
and even to treat human diseases. With unique properties
such as its strength, sensitivity to light, ability
to withstand extreme temperature and good electrical
and thermal conductivity, silver has withstood time.
Today, the demands of modern technology have revealed
the remarkable range of electrical, mechanical, optical,
and medicinal properties that have placed silver as
the key metal in many applications. However, demand
for silver is built on three main pillars: industrial
and decorative uses, photography and jewelry and silverware.
Together, these three categories represent more than
95% of annual silver consumption. On the supply front,
Mexico is the leading producer, followed by Peru, Australia,
USA and China.
In
most countries, silver is found in ores along with gold,
copper, lead, zinc and other metals. In many mines the
primary product is one of these metals, with silver
being a by-product. Going by this, most of the silver
production activity is, therefore relatively insensitive
to the price of silver, even though demand for silver
has surpassed supply for many years. This is encouraging
net disinvestments in mines, the trend which has fallen
over the years. However, silver analysts say this trend,
if it continues, will inevitably lead to higher silver
prices and investment demand. Over the years, the price
of silver has been closely related to the price of gold.
However, during the 1990s, the price of silver began
to deviate from the price of gold followed by investor
and speculators' adoption of different positions in
the two markets. |
