Friday 21st October 2016

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Speaking of silver

Demand rose while prices fell; emerging uses depart from tradition; the fix is out

by Greg Klein

The metal of investment, currency, jewelry, manufacturing and even odour prevention is the subject of an annual report released this week by the Silver Institute. 2013 turned out to be the year silver demand rose 13% to an all-time high even as prices plummeted 23.6% in the worst plunge since 1985. But the institute’s year-in-review also offers news about some relatively recent but lesser-known high-tech applications for the luminescent stuff.

Thomson Reuters GFMS prepared the World Silver Survey 2014 for the institute, a non-profit “that draws its membership from across the breadth of the silver industry.” Researchers found silver’s price fell thanks to investors dumping futures, options and large inventories. But unparalleled demand, most of it from bargain-hunting smaller investors, kept prices from falling farther.

Demand rose while prices fell; emerging uses depart from tradition; the fix is out

Smaller retail investors cushioned the fall last year
as big players dumped their silver supplies.

Indeed coin and bar purchases soared 76%. Jewelry demand rose 10%, the biggest increase since 1999. Silverware rose 12% but industrial demand fell slightly (less than 1%) in its third consecutive decline. Industry accounts for 54% of physical demand, a surprising figure when the precious metal’s compared with gold although not when platinum and palladium are considered.

Silver might have first inspired wonder because of its luminescence, especially when the world lacked steel, glass and the rest of today’s shiny objects. Historically, the institute points out, silver was more widely used for currency than was gold. But the report lauds silver’s strength, malleability and ductility, its electrical and thermal conductivity and its reactivity. “This versatility means that there are few substitute metals in most applications, particularly in high-tech uses in which reliability, precision and safety are critical.”

Among emerging uses, some call only for small amounts of silver but those applications might, collectively and over time, “amount to substantial volumes.”

As an example the report notes an exponential increase in antimicrobials containing silver, which are used “in textiles for odour and discoloration prevention, bandages, hygienic plastic and a host of other applications” including Corning’s antimicrobial glass used in some touchscreens.

Touchscreens can also use silver’s conductive properties, as do silver oxide batteries and solid state lighting. In fact the metal’s “a good candidate for a superconductor,” the report maintains.

Nanosilver—tiny particles of silver between one and 100 nanometres—“is also gaining increased commercial recognition, appearing in a wide range of products including textiles, food packaging and medical uses.” With a higher ratio of surface area to size, these little specs enhance silver’s practical properties, giving nanosilver the potential to replace regular silver in those applications.

The report has its flaws. In most cases it attributes a 12% rise to silverware fabrication but in at least one instance the number is given as 15%. Graphs and most of the text indicate that bar sales represented a more dramatic increase than coins. But that’s contradicted on at least one occasion. More reassuringly, maybe, the report mostly refrains from predictions.

They didn’t work out well for last year. Speaking on behalf of the Silver Institute in November 2012, Thomson Reuters analyst Philip Klapwijk forecast silver’s average price ranging between $40 and $42 in 2013, possibly hitting $50, Mineweb reported. He also projected a 24% drop in coin purchases.

World Silver Survey 2014 came out the same day that London Silver Market Fixing Ltd gave three months’ notice of its own demise. The first recorded silver fix took place in 1676 at 63 pennies per ounce, the company states. By 1897, if not earlier, the daily fix was in. As the process developed it “proved to be the most acceptable pricing mechanism for producers, consumers, arbitragers and speculators.”

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