Unlike gold, silver is enjoying a growing use in manufacturing, the medical and other high tec industries, more than offsetting the diminishing use in photography.

Demand from the jewelry industry remains constant, the gold /silver ratio is out of historical synch (15:1) at around 60:1 and the premium over the silver content in the coin collectors market is said to be near its highest at up to 15%. It is also reported that the physical metal is in short supply but that is likely to be a short-term situation.

Silver enjoyed a surge in after hours dealing in New York last night following in the footsteps of gold. Most of the factors relating to gold mentioned above apply to silver.

However, on balance, mainly due to its growing industrial use, we are buyers of silver at this level. Our preferred vehicle is Ishares Silver Trust (SLV:NYSE) an ETF and holder of the physical metal.

Please remember that we hold positions in these metals and remain optimistic in the medium to longer term. Do please draw your own conclusions, particularly your outlook for the US economy and dollar, and the effects that your expectations will have on gold and silver bullion prices.

Although demand is expected to be low for the next month it is expected to pick up when the June to September monsoon period is over.

Rural India mainly accounts for silver demand so much depends on a successful agricultural season. The average annual Indian demand for silver is in the 3-4000 tonnes range.

The prospect of continuing improvement in the nation’s standard of living and the growth and increasing affluence of the middle classes should sustain upward demand from this major user over the long term with the consequent affect on the metal’s price.

Now Marks and Spencer are selling pyjamas made of a fabric containing silver that they claim has been clinically proven to kill on contact the bacteria causing MRSA.

The correction that has taken place in the last week or so is nothing more than a blip as precious metal prices have followed the general market see saw.

The problem is that the wall of worry about the US and other economies is growing higher week on week so it is hardly surprising that many nervous investors who have seen fat profits in their silver and gold positions have cashed in.

Of course this is true of other nervous investors in the wider stock market but the major difference is that the precious metal market and its producers are an unknown quantity to the vast majority.

The sector suffered from a twenty one year bear market, only emerging from the doldrums in the last four/five years, that translates into two generations of investors who took no interest in the gold and silver and mining side show, it was reserved, if you like, to a few dedicated specialists who have now become long in the tooth.

But this is due to change very soon

With the world still awash with dollars, euros and sterling and a host of other fiat currencies without solid asset backing, by this we mean principally gold, with worldwide inflation rearing its ugly head, and with stock markets looking increasingly vulnerable, the big dogs will be looking for alternative opportunities to keep their profits rolling in.

And what better opportunity than putting money into a market where demand exceeds supply and is likely to continue to do so for years ahead, has a growing use in the high tech field and in the medical industry, is continuing to show growth in the traditional jewelry market of the increasingly affluent societies of the East, and next to gold is considered as a store of value, not forgetting its historic use as money.

Compare this week’s price of below US$12.50 per oz. from the price seven years ago of just US5.00 per oz., an increase of just two and a half times, with the price of other hard commodities in the same period.

Uranium up thirteen fold, Zinc, Lead and Copper all up nearly five fold, Nickel seven fold, Selenium, Indium and others ten fold and more.

If you compare the price of silver at $50 per oz when the millionaire Bunker Hunt attempted to corner the market in 1980 and adjust for inflation you would be looking at circa $100 an oz. More realistically, when the price stabilized for a short period later in 1980 at around $16 an oz. the adjusted price today would be in the mid $40´s.

There are some gurus predicting a price of over $50.00 per oz. within twelve months and we believe that this target is not far fetched.

However severe the economic downturn may become in the West, and lets all hope that it will only turn out to no more than a mild short term blip, the economies of the East are becoming less and less dependent upon the rest of the world for their growing prosperity so it is probable that their demand for silver will be sustained.

The high tech, medical and other industries are not going to fade away whatever the circumstances so they will continue to need silver and lastly the plethora of hedge fund and mutual fund managers, Wall Street and London brokers, ETFs etc., will be turning to the remaining under exploited markets of which Silver has all the right credentials.

Please note and be aware that while we are extremely bullish in the medium to longer term and have begun to fill our boots at this weeks silver prices, it is only our own call and biased opinion.

Please do not take any action in the silver or allied markets (miners, recyclers) without doing your own research and making your own judgements. Lotsa luck!

At one time “silver” coins actually contained a considerable amount of silver, 50%-90% depending upon the issuing country.

Up to 1965 US dimes and quarters were minted with 90% silver and half dollars contained 40%. 

In the UK coins minted between 1920 and 1946 had 50 % silver. Coins minted prior to 1920 also contained quantities of silver but these have become somewhat rarer and many have a collector’s value that does not relate to the value of the silver they contain.

As an investment vehicle “silver bags” can be purchased for the value of the silver they contain plus a low premium over the ´spot´ silver price.

In effect you are buying silver bullionwith an in built hedge against the price of silver, as the face value of the coins is a constant.

For example you may buy a ´silver bag¨ with coins to a face value of US$ 1000.00 for US$3500.00, the price being the value of the actual silver contained in the bag of coins at the time of purchase.

Assuming the price of silver goes down dramatically it could be that the silver value contained in the coins is then only US$500.00 however you would still be able to cash in your coins for their face value as legal tender for US$1000.00 thus minimizing the loss that you would have sustained if your investment had been in silver bullion or an ETF.

Over the last 20 years the fluctuation in the price of silver has been extreme so discount this scenario at your peril!

If on the other hand silver remains in demand and production continues to be unable to keep up with demand then you could still be able to realise a handsome profit for cash with possibly no tax implications.

Note that in the UK silver and other precious metal bullion purchases are subject to VAT with the exception of gold for investment purchases so silver bags might be an answer for the British investor who has a bias towards collecting and wants to enjoy his investments, such as a postage stamp collection, by keeping them at home where he can keep an eye on them.

Whilst we prefer US$ denominated silver bags the problem for those who are non-US domiciles is delivery and/or storage cost expenses.

Who knows you may get lucky and find your silver bag of mixed coins contains a rare collectors item like a ¨Morgan¨or other collectible coin.

Go to Google search and type in ´silver bags´.

Check out the websites that come up to compare the deals that are offered and be sure to check out the tax implications for your location before making a commitment.

Also keep in mind the old dictum of ´caveat emptor, the buyer should beware of any dealers outside the jurisdictions that he is familiar with.

Consumer safeguards should be watertight when parting with money for a package that depends upon its value on the trustworthiness of the seller.

Don’t let this warning put you off, as in all things to do with your money, just practise due diligence.

Finally this is a relatively inexpensive way to gain exposure to a specific market within the commodity sector that we think has a decent chance of a long term bull run along with other precious metals over the medium term.