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Saturday, March 12, 2016

Silver as an Industrial Commodity

 

Silver is among the most traded commodities in the world. It is a precious metal which has been used by humanity for millennia now. Silver is intrinsic to industrial demand in sectors such as electronics, medicine etc. in fact, more than half of all silver consumption is for industrial purposes.

Silver is primarily produced as a by-product in the production of other metals such as zinc, lead, copper and gold. Almost 4/5th of all silver production is as by-product, with exclusive mining accounting for only 20% of overall global silver production.

Silver, the poor man's gold, has seen an upthrust in the demands in the recent years. As the industrial sector in India matures, the silver demand increases. In fact, demand has been steadily increasing for industrial needs over the years. Compared to gold rates, silver rates in India have been relatively undervalued. This is evident from the high ratio of gold to silver prices as compared to the past. As such, investors are looking at the long term potential of this precious metal in terms of returns compared to its pricier cousin gold.

Silver as an Industrial Commodity

Silver is a very useful metal apart from being a precious metal. The primary demand for silver comes from industrial usage. Silver is used in production of almost every electronic device such as tablets or smartphones. It is also an intrinsic element in the production of photovoltaic cells which are used in automobile components and solar panels. Silver's industrial demand had risen four-fold through the early to late 20th century. Whether it is indoor plumbing, cars, electricity or aerospace technology, silver has become a mainstay in the production arena.

Silver has high thermal conductivity as well as electrical conductivity, making it ideally suited for the power generation sector. Silver is more versatile than copper, which has ingrained it in a large list of products that we use on a day-to-day basis. For instance, silver is used in alarm clocks, computers, cellphones, plumbing, wall switches, bathroom mirror, microwave, dishwasher and even in the manufacturing of polyester clothing. Silver use is driven by its multiple benefits compared to other industrial metals.

Silver is used as a cathode in batteries and also in membrane switches in TVs. Silver oxide cells can be found in the manufacturing of hearing aids, toys, cameras, calculators etc. Silver is more environment friendly than lithium-ion batteries and as such is used in electric cars as well as consumer electronics. Silver is used in soldering and brazing of metals also.

Silver Rates Affected by Industrial Demand

The industrial usage of silver thereby influences prices of the commodity in a big way. Any pickup in the economic activity worldwide spurs prices of silver. For instance, if there is a US led spur in global growth, then the demand for silver will proportionally rise.

Silver demand can even increase during times of severe recession. Silver is used in three of the most basic requirements for humans – food, energy and water. As such, silver tends to show decent demand even during low economic growth. From photovoltaic cells to water purifiers, silver is present in one form or the other to make the appliance better. However, silver is currently undervalued as compared to gold. Experts are of the opinion that this mismatch in price trends points toward oncoming high rates in the future. This is good news for long term investors hoping to hedge against inflation through holdings of the metal. Gold is also a great choice, however gold prices are at good levels and increments will likely be smaller than those of silver rates in the future. You should always consult with your financial advisor before investing in precious metals such as silver.

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