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Jake
1st May 2010, 15:32
Is Silver Coming Into Its Own?
http://seekingalpha.com/article/202042-is-silver-coming-into-its-own
By Lara Crigger
When it comes to precious metals, silver frequently gets short shrift. The metal is often seen as the "poor man's gold" a cheap entry point into precious metals investing for those who can't afford to buy its posher yellow cousin.

But silver's hybrid personality half precious metal, half industrial workhorse means it can be used in a much wider array of applications. And it's silver's increasing use as a biocide and antimicrobial agent that may be the most promising demand sector of all, says Jessica Cross, CEO of VM Group. Working in conjunction with Fortis Bank Nederland, VM Group provides research and analysis of the metals and broader commodities markets, including precious and base metals, energy, agribusiness and renewables.

In this second of two interviews, HAI Associate Editor Lara Crigger sat down with Cross to discuss the outlook for silver, including whether faith in the gold/silver ratio is well-founded, why silver recycling is set to decline and how silver's being used to purify water and gym clothes alike.

Crigger: In a recent speech to the London Bullion Market Association, you said silver had been "typecast" by investors. What did you mean by that?

Cross: I think it's been typecast by two completely separate markets. In India, you have a large population of rural-based people, who aren't very high on the income ladder. They'll tend to invest in silver, as far as they can invest in anything, and when they get more wealthy and affluent, they then tend to "trade up" into gold. So silver is the first point of entry, but gold is what they really aspire to, when their income allows them. But you see this in the US as well. There, I think you have a sector of investors who say, "Well, we can't really afford gold, but we will take silver." So silver is seen as the poor man's gold which I think is completely wrong, as silver has a huge role to play as part of an investment portfolio.

But apart from that, people also watch the gold/silver ratio. And when the ratio deteriorates out of silver's favor, it's used as sort of a secondary investment opportunity. A lot of people put a lot of faith in the gold/silver ratio.

Crigger: Is that faith well-placed?

Cross: Over time, I think there's certainly been a place for that perception. I much prefer to look at them as completely different, even though they're both precious metals. Gold has very limited industrial end use, while silver offers an array of end uses, which are becoming increasingly more interesting. At the end of the day, that silver supply/demand balance is going to get increasingly healthier. So although the prices will sometimes move in tandem, they're really very different.

Crigger: What are some of the more interesting new end uses for silver, now that silver-based photography is on its way out?

Cross: There are a number of them, but I think the one that's most going to benefit is using silver as a biocide. So then you're looking at a lot of medical issues, water purification; using silver in food containers to keep things hygienic, and in fabrics, not just for the sporting field but also the leisurewear field. Silver could be used in bandages for hospitals. So there's a huge range of diverse applications for use, just on the biocidal side. I think these are going to be coming into their own soon.

The beauty is, of course, that you eventually throw these items away. And even though the silver in that product that's going into the dustbin is only there in minute quantities, you're still not recycling it.

Crigger: That's very different than in the past, where photography led to a lot of recycling of silver.

Cross: It's interesting silver for photography has dropped quite sharply, of course, because everyone's going to digital. Digital, of course, tends not to use silver in its process. But where you do still see silver used in photographic is for medical and industrial X-rays. That really is a firm growth area.

Still, that means the whole nature of silver going into the photographic industry is changing. You're not seeing 35 mm film being the predominant product in that sector. You now have more silver going toward medical and industrial X-rays instead, and that means less generation of recycling. If you're not using 35 mm film, you're not sending it out for processing; that silver's not coming out in the wash as they develop it, and so there's no silver being generated for recycling.

So it's a double-edged sword: There's less silver going into photography in the first place, but there's also less recycling going on as a consequence. There's obviously a time lag in there, though.
Crigger: Many people think finding potable water will be the next big issue we as a world will need to confront. How will silver's antimicrobial properties play a role in this?

Cross: Silver, as a biocide, can help purify water containers, or act as a purifier. So you can buy a portable water purifier and lo and behold, there's silver in it. Yes, I do think clean water's going to be an issue. Our water system is a closed one, throughout the globe, and we're seeing our quality of water decline, as we pollute it and reuse it. I'm horrified to hear that if you drink water in central London, it's actually been through seven people before it goes through your kidneys.

Crigger: That's kind of gross.

Cross: This is the problem. Our water is declining in quality, and silver can play a role in improving that quality throughout the world. I think it's an extremely important usage that will come into its own quite quickly.

Disclosure: No positions

Ardent Listener
2nd May 2010, 03:33
Jake, it is nice to see you back and posting articles like this. - A.L.

Jake
2nd May 2010, 16:39
Thanks----------