Historically, silver has been considered a second-tier precious metal. Valuable for sure, but not as prized as its yellow cousin.
Yet according to recent market trends, precious metal investing seems to have a new silver lining.
In a recent forecast of the 2013 and 2014 markets published by the Silver Institute, financial consultancy Thomas Reuters GFMS predicted that “Physical demand [for silver coins] surged this year, and is expected to grow by 19% year on year.”
Some dealers even foresee American Silver Eagle sales topping the 2011 record of 39.868 million troy ounces. In fact, as of October 31, silver coin sales totaled 39.17 million troy ounces — already shattering 2012’s total of 33.74 million troy ounces.
Why Is the Physical Demand for Silver So High?
That’s the million (or billion) dollar question — one cautious investors are asking as the base price for silver struggles to climb above and maintain $22.
The answer? For one, the spot silver trade rate on the New York Mercantile Exchange fell to $18.24 per troy ounce as recently as June. This record three-year low made it almost impossible for many investors to resist the risk.
Secondly, the demand for silver is supported by both financial and industrial sectors. Unlike gold — which is primarily used for investment portfolios and as a hedge against inflation — silver has many practical uses in a number of computer technology fields.
Silver is used in everything from jewelry, healthcare technology, solar power and electronics, and more uses for the precious metal are discovered on a regular basis.
For instance, one revolutionary new application for silver involving memory storage in smartphones and tablets suggests that the future of silver may be even brighter than gold. In fact, the industrial sector accounts for nearly 50 percent of global silver consumption. And with demand expected to rise even more, along with a sharp fall in the price of the precious metal, investors are scrambling to stock up.
Coins, as opposed to bars, are experiencing the largest upturn since they are more convenient to store, sell and transport. By far the most popular silver coin is the American Eagle, which is on track to surpass last year’s totals.
Of course, there remains lingering fear about where silver will ultimately go.
For example, if the Federal Reserve began cutting stimulus, some analysts worry it would completely offset the boost silver gets from industrial and physical investment demand.
Even still, analysts encourage investors to add silver to their portfolios.
With the price of silver at its lowest in years — and its value poised to skyrocket — there’s no better time to expand your investment portfolio with silver coins like the American Eagle.
What Are Your Thoughts?
What do you think is driving the record-high demand for physical bullion?
If the Fed withdraws its stimulus, what effect do you think it will have on silver?
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