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Financial and industrial demand for silver


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Reasons why silver demand is on the rise

Precious metals have been on the decline as the Federal Reserve Bank has reduced and eliminated its last quantative easing stimulus program. Given gold prices today, many investors are convinced that the sentiment for gold and silver will mostly be bearish until next year. However, the price slump of gold and silver is not enough reason for some overseas central banks and US and overseas private investors to sell their precious metal assets. The People’s Bank of China, for example, is not concerned about amassing gold, since it wishes to be a major player in the precious yellow metal’s global pricing.

Silver’s industrial purpose

Silver is used in the manufacturing of semiconductors and photovoltaic cells in addition to its financial uses as legal tender and or real assets. The world, especially in Africa and China, is rapidly adopting solar energy as a renewable source of energy. With the rise of solar energy comes the rapid increase in silver demand from the photovoltaic industry. In 2012, it was reported that China raised its target for solar-generating capacity to more than 35 gigawatts in preparation for 2015 – an increase of 67% from China’s previous target. In July 4th of the same year, Casey Research reported that China was installing capacity for solar electricity that would grow by 10 gigawatts every year.

Investing in real money

Gold and silver bugs are taking the opportunity to increase their holdings, given that they perceive an environment with very low precious metals prices. For example, U.S.-based CPM Group’s managing director Jeffrey Christian reported that investors around the world could increase their total silver earnings by 50% in 10 years.

With these current trends in silver, Christian recounts a certain type of investor who isn’t affected by silver’s sharp decline more recently. He calls this kind of investor a “stacker” instead of an “investor.” “Stackers” are people who do not see silver as a speculative or short-term investment. Rather, these people see the commodity as a store of wealth and an alternative to holding one’s assets versus paper currency. By nature, stackers are like The Bundesbank, Germany’s Central Bank. Germany has the second largest gold holdings in the world next to the U.S., but according to investment site BullionVault, the country has no intentions of selling its reserves before 2020. In fact, Germany did not sell its gold even when hit by very low prices about a decade ago. Gold for Germany is a store of wealth and not just an investment for speculative or short-term gains.

Similarly, silver is a real money asset, and it can be a core part of an investor’s portfolio. Compared to gold, its demand has also experienced high industrial sector demand, and this is increasingly true since photovoltaic panels are quickly becoming the next big thing in developing countries.

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