Silver in industry7 Oct 2021 22:05
Silver Has Higher Industrial Use
About 12% of gold supply goes to industrial uses. But due to silver’s unique characteristics, a whopping 56% of its supply is used in industry. Silver has so many applications that believe it or not, you don’t go one day without using a product that contains it.
From electronics and medical applications, to batteries and solar panels, silver is everywhere, whether you see it or not.
As Mike Maloney says in his book, “Of all the elements, silver is the indispensable metal. It is the most electronically conducive, thermally conductive, and reflective. Modern life, as we know it, would not exist without silver.”
Why is this important? Because the state of the global economy can have a greater impact on silver demand than gold. Silver is thus more susceptible to economic booms and busts.
Investor Implication: Demand for industrial uses of silver is high in a strong economy, and weaker in a recession or deflation.
But that’s only part of the story… unlike gold, most industrial silver is consumed and then thrown away (and in some cases destroyed during the fabrication process). It’s just not economic to recover every tiny flake or grain of silver from most products. As a result, when the product gets discarded, that silver is gone for good. This limits the amount of silver that can return to the market through recycling.
Investor Implication: Unlike gold, millions of ounces of silver are lost every year. New supply must keep up in order to meet demand.
But won’t the silver price fall in a recession or any serious economic slowdown?
Fair question. Let’s take a quick look at a one of the worst economic periods in modern history and see what happened…
It’s hard to imagine a worse economic environment than the 1970s, especially the second half of that decade: two recessions, a 14% inflation rate, high unemployment, an energy crisis, the Russian invasion of Afghanistan, and ongoing cold war tensions. As for silver itself, industrial demand fell, and global supply rose. Does this sound like an environment where the silver price would rise?
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