The new electronic age couldn't be better for silver investors. As consumers swap out their cell phones every two years and Apple releases a new product meant to bridge the gap between cell phones and personal computers, silver has plenty of room to prosper.
The New Digital Age
During the early 2000s, analysts screamed that silver was sure to reach its deathbed, as its use in photographic development dipped to new lows. However, most analysts at the time failed to see what was the future.
While we're no longer developing nearly as much film, we're also consuming silver in new ways never once imagined. In the year 2000, to think that every middle class family would have at least one mobile phone (loaded with silver components) was outlandish. Today, kindergarteners sport the newest electronic gizmos on their first day of school. Silver is out for some, but in the future, it is nothing but in.
Although our industrial sector today produces nothing compared to its volumes in history, especially in the United States, more and more products are relying on precious metals for basic operations. Yesterday's washers and dryers were simple industrial equipment, but today they're more like computers. Yesterday's phones were simple and had to be plugged in to a hard line. Today they can be used everywhere, and more and more people are using them to do more than just make phone calls.
To be able to have so much computing power requires a steady source of quality silver, a commodity that is quickly drying up in the digital age.
Don't Ignore the Practical
Investors should be careful not to get caught up in the macroeconomic trends that have pushed silver higher. Although industrial demand for silver has waned through the recession, it will stage a comeback and likely drive silver higher than inflation. The drivers of growth behind silver are mostly in the form of industry and electronics, which act to reduce the amount of available silver, while the amount of demand continues to increase. This paradigm will prove to be dually profitable in this regard, as with each unit of silver demanded, another unit is lost forever in the production process.
To put it simply, silver is going extinct – and quickly – but the good news is that there exists inelastic demand in the production processes, even if there isn't in investing circles.
Physicals vs. Paper
While the paper metals market continues to explode in value, the physicals market is shrinking, as silver is consumed in the production of electronics. This creates an even greater chance for growth when manipulation and over supply in the paper market are eventually uncovered.
With each passing day, more and more silver escapes into oblivion, while traders leverage up with larger doses of paper metals. When the day of reckoning comes, either tomorrow or 10 years from now, physicals will explode with force never seen before.
Dr. Jeff Lewis
Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com