EDITOR: | September 19th, 2013 | 3 Comments

The New Silver: Why it will never close the ratio gap with gold (and why that’s good news)

| September 19, 2013 | 3 Comments
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silver brom 1Following Ty Dinwoodie’s very useful introduction to silver yesterday, allow me to follow with what I have called “The New Silver” — the fact that the white metal has an exciting range of new applications. In fact, the reason that silver will never again achieve its historic 1:16 price ratio with gold — that is, 1oz of gold being worth 16oz of silver  is a case of that was then, this is now. A century ago silver was primarily a form of money; China went further and was using the silver standard as backing for is currency. Now, however, silver is partly an industrial metal, hence the continuing high ratio against gold. Different time, different concept: and no better indicator is that this post is being filed on both the “Gold & Silver“ and Technology“ pages of this website!

Silver demand is rising from sectors involved in security, health care, clean energy and water purification. And the biggest growth will be in solar panels, where crystalline silicon solar cells contain silver. The use of silver in these cells is expected to rise from 570 tonnes annually at present to 2,000 tonnes in 2020.

India plans to increase its solar capacity from virtually zero now to 20 gigawatts eight years hence; China is looking to boost solar from 5GW now to 30GW; and the U.S. is aiming to become the world leader in installed solar capacity. Silver accounts for about 10% of the raw material cost for a solar panel and China has a huge photovoltaic effort under way. However, there is a global glut of solar panels at present so demand for that use of silver could slow — but that will have only a short-term effect. Nevertheless, 2015 is due to see 100 million ounces of silver bought for this industry.

Demand for silver is also promising regarding radio frequency identification tags, with a forecast sixfold rise in silver use to 367 tonnes a year by 2020. These tags are rapidly taking over from the bar code system. China is now using the technology for ID cards for its populace while European Union passports also include the tags.

In the longer term, the manufacture of wood preservatives could become a significant market for silver.

silver brom 3In health care, silver is used as a biocide — an agent capable of destroying organisms — in wound care, catheters, pacemakers, heart valves and feeding tubes. Silver interrupts the bacteria cell’s processes that allow it to survive: when a bacteria cells meets silver, it disintegrates. Johnson & Johnson and other healthcare companies routinely apply silver as an active ingredient to bandages and ointments.

Silver-imbedded equipment (surgical tools, catheters, needles, stethoscopes and door handles) may prove the answer to the so far persistent “superbug”, or “Staph”, which is a big worry in hospitals around the world. Bandages often now include silver ions to combat bacteria growth. By 2020, around 600 tonnes a year of silver could be going into the health market.

Clean water is another big market. Silver is replacing chlorine in filtration (and the metal’s use in this regard also eliminates Legionnaire’s Disease lurking in pipes and water tanks). Silver as a component of water purification in helping to remove bacteria, chlorine, lead and particulates. Annual consumption of silver in this sector should reach 1,400 tonnes by 2020. Moreover, future use in the developing world could be enormous, given that so many diseases which afflict people there are water-borne.

silver brom 2Silver prevents bacteria and algae building up in filters. Silver ions are being added to water purification systems in hospitals, pools and spas. The use of silver in water is a science that is still in its very early stages.

As the Silver Institute points out, silver’s antibacterial qualities have applications that reach far beyond the medical world. Washing machines, refrigerators, air-conditioners, air purifiers, and vacuum cleaners all depend on silver nanoparticles to sterilize up to 650 types of bacteria.


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Comments

  • Jim S.

    Great follow up article to the Silver primer provided by Ty Dinwoodie. The market rarely thinks of silver and it’s use in modern technology….very interesting Robin.

    September 20, 2013 - 4:29 PM

  • vacuum

    i.e.., it could be inferred that the Au:Ag ratio goes to 1:16 due to humungous industrial demand for Ag, rather than due to monetary considerations involving Au. And any pragmatist would say, goody.

    There is, though, an argument that has been stated by one blogger that silver’s manifold and ever increasing techno-industrial applications are what’s behind its price suppression that the CFTC pretends doesn’t exist. Keeping the silver price down is like keeping interest rates artificially low — both as an attempt to stimulate, assist industry. In this sense, the rising applications for silver would be detrimental, for a while, to the ratio reasserting itself.

    October 7, 2013 - 4:22 PM

  • vacuum

    there’s also a credible soybean:silver ratio that people follow. Silver never has had a role as a foodstuff. And lately, ZeroHedge has ratio’d AAPL with silver.

    October 7, 2013 - 4:26 PM

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