Why Silver is so Important
CymorFund Stock Picks Investment Letter in describing investing in silver has previously highlighted the many industrial and commercial uses of silver. Investing in silver is much more than an alternative to gold investing. Our blog of March 15, 2012 on silver investing gives an understanding of the many uses of silver and how its importance keeps increasing in modern society.
The Trading Price of Silver
With the exception of the early 1980’s when the Hunt Brothers tried to corner the silver market, in recent decades silver averaged between $4 and $7 per oz. In 1980, it jumped to almost $50 per ounce, then retreated to its previous average. When the commodity boom started in 2006, silver started rising again, reaching a high again in 2011 of almost $50. Since then it has moderated and seems to have found a base in the $20 range.
The balance between supply and demand is dynamic, as the cost of finding and extracting the metal keeps rising, while the demand for silver keeps growing. If you wish to learn more about this metal, you can visit “The Silver Institute” website, which is an industry association and which gives many details on the uses and historical values of silver investing. Reprinted below is an extract from a recent article posted on that website, detailing the increasing use of silver in the medical world.
Silver: an important weapon against ‘superbugs’—Silver Institute
Combating antibiotic-resistant superbugs and suppression of hospital-acquired infections have increased the importance and number of uses of silver-infused products, says The Silver Institute.
Recent advances in biotechnology have brought a renewed focus on silver’s centuries old history as an important medical weapon.
In a news release issued Wednesday, the Silver Institute observed that the medical use of silver has helped reduce the growing threat of antibiotic-resistant germs spreading through a hospital.
“Today, advances in coatings technology has enabled medical equipment producers to introduce silver-coated instruments and hospital equipment for use in treating patients—eliminating, on contract, almost every bacterial or fungal exposure,” said Michael DiRienzo, executive director of the Silver Institute.
Because silver breaks down cell walls and interferes with respiration and reproduction, bacteria have great difficulty in developing immunity to the metal, The Silver Institute noted.
“Today, the need to combat antibiotic-resistant superbugs and to suppress hospital-acquired infections has increased the importance and number of uses of silver-infused products,” the Institute observed.
“The ability to coat materials such as polyurethane, silicone and textile fibers with either metallic silver or ionic silver compounds now provides clinicians with efficient means of overcoming difficult wound care and device-related infections, which have long proved costly and difficult to manage in terms of hospital care,” said the Institute. Earlier this year, an in-vitro laboratory study conducted by Smith & Nephew, a global medical technology company based in London, found a silver-coated antimicrobial dressing, ACTICOAT, could kill “superbug” organisms that were the most difficult to treat.
The article continues describing more medical advances in the use of silver recently.
What is Important About Investing in Silver
Many investors believe in gold investing as a hedge against currency fluctuations and instability. This belief system extends to silver as the poor man’s cousin to gold. Essentially the theory is that if an ounce of gold is too expensive to buy, the alternative is to buy an ounce of silver as the relative value relationship between investing in the two metals has been somewhat consistent over history at roughly 50:1.
What is often not realized by investors, is that silver is in ever greater demand by modern society. Gold investing relies to a great extent on the rise or fall of the level of fear in society, but silver is more in demand for industrial and commercial uses.
Today’s cost of extracting silver from the ground by miners, and processing that extracted silver by producers, and selling that produced silver, continues to rise for many reasons. Some of those reasons are:
- Political instability and unrest in less developed societies that hinders mining for silver
- The cost of labor, equipment and energy at mine sites
- The continuing extraction of silver from previously discovered silver deposits
- The difficulty in finding new deposits as the difficulty of finding new large deposits keeps growing
How to Invest in Silver
Increasing in popularity are silver ETFs and Physical Silver Owning Funds. The issues here are that if silver increases in value, because these types of investments rely solely on the fluctuation in the price of silver, the investment will increase in value. But if the price of silver falls, the fund value also falls. What makes it more difficult, is there are management fees and expenses that the Fund has to pay, which means if the price of silver remains stable, the Fund decreases in value.
We have always believed that the best way to be in the silver investing market, is to buy shares of junior mining silver stocks. While the danger is that an explorer runs out of money before it finds the bonanza, the upside is that is a drill hole returns good grades of silver, that stock tends to jump in value. The more that drilling proves a larger deposit, the higher the price jumps.
Some Related Articles
An Evolution in the Precious Metals Sector, Stocks of Junior Silver Mining Companies
Silver – The Investment to Watch
Silver Thurs – March 27/80 Infamous “Silverfinger”: Nelson Bunker Hunt, Gets Smacked Financially
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Views expressed are opinions and not investment advice. You should retain a licensed professional to guide you and not rely on the opinions expressed herein. This report is neither a solicitation nor a recommendation to buy or sell securities. We are not a registered investment advisor nor a broker-dealer. The information contained herein is based on sources which we believe reliable but is not guaranteed as being accurate or a complete statement or summary of the available data.
