China being the biggest buyer of gold in 2012, is set to increase it’s silver demand by 10% in 2013 (as reported by Bloomberg News). The big motivation by Chinese investors is to ‘preserve’ their wealth. This comes as no surprise to me, as the Chinese government has been advising it’s citizens to invest in gold and particularly in silver since as early as 2009 as per the following ‘eye-opening’ Chinese news segment:
Silver Demand: Industrial & Investment Sources
Research from Beijing’s Metal Information Network ‘Antaike’, says that 33% of Chinese silver demand comes from jewelry and coins, while the rest is used in photography, solar panels electrical appliances. The Beijing Antaike states: “Many producers and investors have hoarded the precious metal in the form of ingots or unwrought silver.” The Chinese solar industry is also apparently going to be in a major development upswing. Having installed 2.6 gigawatts in 2011, the government is aiming to produce 21 gigawatts from solar-power installations by 2015, according to Bloomberg New Energy Finance. This dynamic will increase demand for the shiny white metal considerably, which will affect price.
Global Production Not Keeping Pace with Silver Demand
The Silver Institute’s ‘Supply & Demand’ data for 2011 shows that global production from mining operations clocked in at 1040.6 million ounces. This production data is derived from mostly global mine production, but also net government sales, old silver scrap and producer hedging. However the demand for silver in 2011 was also 1040.6 million ounces. Demand includes industrial applications, photography, jewelry, silverware and coins/investment metals. Data is yet to be released for the annual result of 2012, but is already widely known that the supply and demand is similar to the previous year. Signs of this cropped up earlier in the year as major private investors of deliverable silver were having trouble getting their orders fulfilled in a timely fashion (think orders sized over ten million dollars).
Another contributing factor to the current price of silver would be the US quantitative easing (QE) program. After the US Federal Reserve’s QE1, (December 2008-March 2010) the spot price of silver skyrocketed 53%, almost twice the as much as gold, and for QE2, (ending June 2011) silver went up 24%. Investment banker Morgan Stanley predicts that silver will once again return higher yields than gold after QE3 was implemented this past September.
Be well until next time,
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